www.cardsinternational.com Issue 557 / july 2018

BUBBLING OVER

CRYPTOCURRENCIES COURT THE BANKS, BUT WILL THEY SCORE?

ANALYSIS PRODUCTS COUNTRY SNAPSHOTS

The rise of millennial Starling Bank flips The inside track on card consumers buying gift consumer and business payments in the Czech cards for their own use debit cards on their head Republic, and Japan

CI July 2018 557.indd 1 02/08/2018 10:07:06 contents this month

COVER STORY NEWS 05 / EDITOR’S LETTER 06 / DIGEST • Global Bank and Ecard to offer UnionPay prepaid cards in US • Mastercard to roll out card fraud detection device in Singapore • Chase and Hyatt partner to launch new credit card • Bahrain Islamic Bank introduces new card loyalty programme • Barclays and Frontier Airlines upgrade World Mastercard • National Bank of Canada rolls out contactless card • Nearly 5 million transactions failed during Visa’s network outage • SIX Payment Services renews contract with Belgian Bancontact • AmEx and Amazon unveil new co- branded credit card CRYPTOCURRENCY 11 • UK Finance: card use soars past cash

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

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2 | July 2018 | Cards International

CI July 2018 557.indd 2 02/08/2018 10:07:28 contents July 2018

COUNTRY SNAPSHOTS 16 / Czech consumers generally use cash for day- to-day, low-value transactions. However, its use declined during the review period due to a growing preference for payment cards and a rise in contactless transactions 18 / GREECE Government initiatives to revive the economy, including cuts in public sector employment, defence and other state spending, meant the country registered real GDP growth of 1.0% in 2017, up from -3.2% in 2013 20 / JAPAN Cash accounted for 78.1% of the overall Japanese payment volume in 2017. However, the upcoming 2020 Olympic and Paralympic Games are expected to provide impetus to the cards and payments industry

16 ANALYSIS DISTRIBUTION 10 / SELF-GIFTING 14 / EMIRATES NBD Gift cards are an often-purchased present; Emirates NBD has partnered with Diebold they are flexible and can be given to anyone, Nixdorf to deliver a new digital kiosk that the no matter the personal relationship. However, bank hopes will increase onboarding. It looks consumers have now started to purchase them like a futuristic ATM, but it can in fact do for themselves. Patrick Brusnahan reports much more. Patrick Brusnahan reports 20 FEATURES PRODUCTS INDUSTRY INSIGHT 11 / CRYPTOCURRENCY 15 / STARLING BANK 22 / TOKEN Cryptocurrencies are courting conventional Starling Bank’s vertical card has launched. The The Open Banking revolution is here, banks, reports Ivan Castano. To really take off, digital-only bank has rotated the debit card but there is a lack of excitement, and not however, the new players still need to win the by 90 degrees to reflect the way consumers everyone seemed prepared for what was set to approval of the payments establishment such interact with their cards at checkout counters ‘revolutionise’ the financial sector. Steve Kirsch as Visa and SWIFT. Can they succeed? and ATMs. Briony Richer reports writes on how to make Open Banking work

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Page 2 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580 editor’s letter

Biometric payments set to take off

Douglas Blakey, Editor

uly kicked off with a trip to Mastercard for a hugely to some contactless transactions, as a check to ensure the card encouraging demonstration of its biometric card is being used by its owner. J featuring an inbuilt fingerprint sensor. Crucially, the biometric Mastercard will not require any The biometric card has already proved itself in South Africa. upgrades to be made to existing payment terminals at shops. The potential game-changer is remote enrolment. Mastercard However, in-store chip-and-PIN transactions are already teamed up with clever folks from fingerprint biometric smart compliant and use two factors. card experts IDEX to enable consumers to register their The end of passwords fingerprint data on their payment cards from the comfort of Although the biometric payment measures are designed to their own homes. The ability to onboard customers remotely is protect consumers and businesses from being defrauded, surely the key to its success. Mastercard is working with banks and the rest of the industry There has been talk for years of a biometric card to launch to ensure they are implemented without ‘disrupting’ the in the UK that would enable consumers to pay by fingerprint. convenience of payments for consumers. Finally, we may see some real progress, thanks in part to new As Mastercard has argued, the use of passwords is outdated; EU regulations come into place in September 2019 with the customers forget them and retailers want to avoid consumers aim of tackling online fraud. abandoning shopping baskets. Strong Customer Authentication Mastercard said that UK banks are interested in the The regulations, known as Strong Customer Authentication, technology; let us all hope that the talks said to be underway will tackle online fraud by increasing the number of prove to be constructive. transactions subject to two-factor authentication by the payer. Count me out With regards to card payments, currently just 1-2% of Another month brings another bundle of news stories online transactions require cardholder authentication. This about increasing interest in crypto-cards. CI is, of course, is set to rise to up to 25% or one in four payments from next enthusiastically covering developments including a market September. update from Ivan Castano (pages 11-13). Authentication for online payments and account access will From an editorial point of view, it is all very interesting. be based on the use of two or more different factors: From a personal viewpoint as a consumer, however, the writer • Something you know, such as a password; remains sceptical bordering on hostile. Quite why anyone • Something you have, such as a phone or card, and wants to hold funds or credit card denominated in such a • Something you are, such as a fingerprint. volatile currency as Bitcoin or even more obscure crpto- currencies beats me. This will mostly impact card payments made over the An anonymised currency backed by no government remains internet – be it a desktop or mobile purchase. It will also apply a great source of interest, but as a punter, count me out. <

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

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CI July 2018 557.indd 5 02/08/2018 10:07:38 News | Digest

news digest

Global Bank and Ecard to offer Chase and Hyatt partner UnionPay prepaid cards in US to launch new credit card US-based financial services technology cultural attractions, and just about anywhere business Ecard has revealed plans to market payment is accepted. UnionPay prepaid cards issued by Global “Asian-Americans who visit the Pacific Bank for Asia-bound US travellers. countries regularly for business or personal The reloadable general-purpose cards can travel can return time and again with their be used at more than 51 million merchants card and not worry about making special globally, including all Chinese businesses arrangements.” that accept payment cards. Expected to be available in the third quar- Cardholders can add funds to the cards ter of this year, Ecard will allow US consum- either at retail locations or online. On re- ers to open accounts online and service them turning to the US, customers will be able to through a mobile app. use remaining amounts on the prepaid cards UnionPay’s international Americas at retailers across the country. general manager, June Chen, said: “With its Chase Card Services has partnered with Ecard CEO Wayne Tsao said: “Ecard broad utility in Asia, smart travellers will get Hyatt Hotels to introduce a new rewards- allows one-time or regular travellers to Asia and load a UnionPay card before visiting the based credit card. to enjoy the convenience of card payments region. That way, the traveller doesn’t need The new World of Hyatt credit card < in restaurants, hotels, ATMs, gift shops at to worry about having cash available.” offers reward points on everyday purchases for fitness, transport and dining. Cardholders can earn a total of 9x points Mastercard to roll out card fraud on Hyatt stays and bonus points on fitness club and gym memberships. Transactions made on the new card will also enable detection device in Singapore users to elevate their status and gain free Mastercard has collaborated with the of new ways to bypass security systems, nights at Hyatt. Singapore Police Force’s commercial affairs industry-wide collaboration has never been The card also features various additional department to implement its Mastercard of greater importance when staying one benefits, such as zero foreign transaction Forensic Reader (MFR) device for the step ahead of the game. fees and no expiration of points if the detection of payment card fraud. “The Mastercard Forensic Reader credit card account is kept open. MFR is similar to an in- is a practical example of how World of Hyatt senior vice-president store POS terminal, and is we’re putting our expertise Amy Weinberg said: “This new card offers designed to quickly and and resources to innovating more ways for card members to enjoy accurately investigate new ways to fight fraud, bonus points, free nights and elite status, fraud using chip, magnetic partnering with like- including a new Bonus Points category stripe and contactless minded organisations such focused on rewarding members for cards. Piloted in 2015, the as local law enforcement staying healthy, which demonstrates our MFR device is already used agencies to implement this commitment to caring for our guests’ well- in Macau and Taiwan. on the ground.” being.” Current approaches to fraud Deputy director of financial Chase co-brand cards president Leslie detection involve protracted processes and investigation at the Singapore Police Gillin added: “With fitness memberships numerous parties, including investigation Force’s commercial affairs department, Ian reaching all-time highs and wellness agencies, payment solution companies and Wong, said: “Besides providing invaluable tourism growing even faster than the card issuers. However, Mastercard said assistance in our day-to-day investigations, tourism industry, we wanted to give Hyatt law enforcement agencies can use MFR to Mastercard has also partnered with CAD loyalists this unique accelerator benefit speed up the processing of seized cards, and other organisations in efforts to with the new World of Hyatt credit card. and verify a suspected counterfeit with the prevent payment card fraud. “Also, with double points on the transit associated issuer within seconds. “Mastercard’s donation of 10 pieces category, like the popular and growing Mastercard’s Asia-Pacific regional head of the MFR will enhance CAD’s ability to ride-share services, World of Hyatt credit of customer fraud management, Derek Pak, investigate into payment card fraud and card members can earn free hotel and said: “With criminals constantly thinking related offences.” < resort stays even faster.” <

6 | July 2018 | Cards International

CI July 2018 557.indd 6 02/08/2018 10:07:47 News | digest

Bahrain Islamic Bank introduces National Bank of new card loyalty programme Canada rolls out Bahrain Islamic Bank (BisB) has introduced BisB retail banking general manager contactless card the exclusive Loyalty Rewards Program Dalal AlQais said: “The launch of the brand for customers using its range of credit and new Rewards Program for credit card and prepaid cards. prepaid card holders comes in line with Cardholders will be able to earn points our continuous efforts to meet the needs of by making everyday purchases at in-store our customers, by providing streamlined POS terminals and online, at both domestic solutions that cater to their daily lifestyle and international locations. Users can then requirements. use the earned points to shop online at the “The portal we’ve launched enables our rewards.ebisb.com website. customers to manage their points with ulti- In addition, reward points can be ex- mate ease and simplicity. To take advantage changed for cashback, airline tickets, hotel of these services, we encourage our custom- reservations, car rentals or frequent flyer ers to register online at www.rewards.ebisb. miles with Gulf Air. com to benefit from the programme.” < Barclays and Frontier Airlines National Bank of Canada has launched a upgrade World Mastercard new contactless debit card. Equipped with the Interac Flash feature, the new ‘my debit contactless debit card’ will allow users to make payments up to C$100 ($75.06) without having to enter their PIN. The bank said customers will be required to enter their PIN during their initial transaction, and then randomly after a certain number of contactless transactions. The card also allows users to decrease their contactless payment limit and even deactivate the card by setting the limit to zero. The feature can also be reactivated upon request. National Bank of Canada’s executive vice-president of personal banking and marketing, Lucie Blanchet, said: “We’re US-based Frontier Airlines, in partnership to earn more miles, along with the ability pleased to offer the new ‘my debit card’ to with Barclays, has upgraded and to earn Elite status through credit card our clients so that they can pay for their relaunched its World Mastercard credit spend alone, makes it easy for every type purchases more quickly and simply, and card, focused on reward points. of flyer to experience our Low Fares Done just as securely as ever. By spending on the new card, users Right and enjoy the exclusive benefits of “This is yet another initiative to expand can unlock Elite status and earn miles myFRONTIER Miles Elite Status.” the bank’s mobile and contactless payment on various purchases, including Frontier Senior director of airline partnerships solution offering in order to simplify the bookings and restaurants. The card also at Barclays, Kristyn Forrester, added: “The client experience.” provides additional benefits such as priority new earning structure and additional The bank said existing customers will be boarding, waivers of award-redemption benefits of this card reward everyone from provided with new contactless debit cards fees, and family pooling. first-time flyers to frequent flyers, adding over the coming months. The card comes with zero transaction value to your everyday spending and The roll-out is the latest in a recent fees on international purchases, and making air travel attainable for all. series of product and service launches provides fraud liability protection for “Regardless of whether you’ve flown with by the bank, including the new nbc. unauthorised charges. Frontier before, the Frontier Airlines World ca website, the addition of Apple Pay Frontier Airlines’ vice-president of Mastercard is designed to allow you and and Google Pay for credit cards, new marketing, Tyri Squyres, commented: your family to travel more often by unlocking automated banking machines, and a mobile “Giving our card members opportunities more perks the more you use the card.” < app for businesses. <

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CI July 2018 557.indd 7 02/08/2018 10:07:51 News | Digest

Nearly 5 million transactions failed during Visa’s network outage More than five million payment transactions of the type that impacted our European throughout Europe failed during the 10-hour system on 1 June. It can isolate and remove technical breakdown that crippled Visa’s a failing component with one command, payment processing network on 1 June this taking mere minutes to remove the mal- year, the company has informed the UK’s functioning component from the processing Treasury Select Committee. environment.” The network outage, which started at In response to Hogg’s letter, Treasury 14:35 on 1 June and lasted until 00:45 the fol- Committee chair Nicky Morgan said: “The lowing day, affected nearly 1.7 million credit Treasury Committee is satisfied with Visa’s and debit cards, and 2.4 million transactions answers regarding its system failure earlier failed to process properly in the UK. this month, which lasted just over 10 hours Accepting full responsibility for the inci- and saw 2.4 million transactions in the UK dent, Visa said a component in its primary fail to process. It appears that the problems data centre in the UK suffered a very rare from accounts for unsuccessful transactions. have been fully resolved. partial failure, which prevented the backup She added that the company is working with “The news that debit card payments have switch at the secondary data centre from ac- banks to resolve complaints and provide overtaken cash use for the first time shows tivating. In the meantime, a malfunctioning appropriate compensation. that the reliability of IT systems is becoming system at the primary data centre continued Hogg said: “Our strategic approach for ever-more important. The detriment caused to try to synchronise messages with the sec- preventing this issue from happening again to consumers by IT failures is greater than ondary site, creating a backlog of messages is migrating our European processing onto ever, so the committee will become less at the secondary data centre. This process our global processing system called VisaNet. tolerant of them. slowed down that site’s ability to process This migration is planned to be completed “The committee expects to see the find- incoming transactions. by year-end. ings of the independent review, which will Visa Europe CEO Charlotte Hogg assured “VisaNet is more resilient in its ability to examine the lessons to be learned from the customers that money will not be debited detect and recover from partial malfunctions incident, in full.” < SIX Payment Services renews contract with Belgian Bancontact SIX Payment Services, a Swiss and Austrian which connects Bancontact members – robustness and stability of their state-of- acquirer and provider of the mCashier issuers and acquirers – and ensures that the-art processing platform as well as the mPOS solution, has extended its contract all authorisation and clearing messages are proactive customer service of SIX – both with domestic Belgian card scheme correctly directed and processed efficiently. are fundamental elements of a reliable Bancontact. It will continue to operate and further technology partnership.” Bancontact is the largest card scheme in develop the Bancontact Scheme Switch. SIX MD and financial industry services . It has more than 15 million debit Bancontact company CEO Kim Van head Andrej Eichler said: “By extending cards in circulation, and carries out 1.4 Esbroeck said: “We are delighted to extend our working relationship with the team at billion transactions per year. our mutually beneficial collaboration Bancontact we are able to continue to play In 2012, SIX was called to build and with SIX Payment Services. We and our an important role working at the heart of operate the Bancontact Scheme Switch, customers will continue to experience the the Belgian card ecosystem.” < AmEx and Amazon unveil new co-branded credit card is set to introduce a new Commenting on the launch, Amex’s to deliver tangible value to our mutual co-branded Amazon credit card as part president of enterprise strategic customers who use Amazon’s services.” of its multi-year collaboration with the partnerships, Glenda McNeal, said: “At As part of the partnership, Amex has retailer. American Express, we have been helping also introduced an enhanced data solution Aimed at small US businesses, the card business owners grow for more than 50 designed to provide US businesses with is expected to enhance how merchants years, and we know that millions of them better insights into purchasing activity. purchase Amazon goods and services. rely on Amazon. The insights are intended to improve the According to Amazon vice-president McNeal continued: “We are delighted to monitoring, control and reconciliation of Max Bardon, the co-branded credit card expand our partnership with Amazon by transactions made using Amex Corporate programme will integrate Amazon’s offering a new co-branded small business or Corporate Purchasing cards, and also convenience and value with Amex’s access card, and by also harnessing the collective enable customers to run more advanced and security. insights and expertise of our companies analytics. <

8 | July 2018 | Cards International

CI July 2018 557.indd 8 02/08/2018 10:07:53 News | Digest

UK Finance: card use soars past cash Cards have overtaken cash as the UK’s most frequently used payment method thanks to the rise in contactless cards, according to UK Finance. UK Finance’s 2018 Payment Markets report revealed the effect that contactless payments, online shopping and smartphones have had on how consumers manage their finances. According to the report, new technology, payment innovation and changing consumer habits contributed to 13.2 billion card payments at the end of 2017 overtaking cash payments (13.1 billion) for the first time. The popularity of contactless payments among UK consumers is a key driver of debit card growth. In total, for both debit and credit cards, the number of contactless payments rose by 97% during 2017 to 5.6 billion. Almost two-thirds (63%) of people in the UK now use contactless payments, and no age group or region falls below 50% usage. options available in the UK is allowing • The number of cash payments in the Not only is card growth significant people to choose to pay the way that best UK is expected to continue to fall over among consumers, but small businesses suits them. But we’re far from becoming the next decade, as consumers turn to across the board are becoming more a cash-free society, and despite the UK alternative payment methods – most comfortable with the speed and ease of transforming to an economy where cash notably debit cards. There are expected making low-value card payments, making is less important than it once was, it will to be 6.4 billion cash payments in the use of debit cards more popular. remain a payment method that continues UK in 2027, accounting for 16% of all By the end of 2017 there were nearly to be valued and preferred by many.” payments. 119 million contactless cards in circulation Jones added: “These trends are likely and, with customers and businesses to shift further over the next decade. Consumers aged between 25 and 34 increasingly choosing to use them, it is Developments such as Open Banking are were most likely to make contactless anticipated 36% of all payments across the expected to bring extensive changes to payments. Those who had moved away UK will be contactless in 2027. the payments landscape, something that from cash entirely were also most likely to The report also noted that in 2017, there will likely shape how we interact with our be in this age group. was a 15% decrease in cash payments, money in the coming years.” Adam Herson, business development coming to 13.1 billion payments overall. A Other notable findings of the report director at Barclaycard Mobile Payments, total of 3.4 million consumers almost never included: highlighted: “It’s not surprising that cards used cash at all, relying on other digital • The average adult in the UK made 54 have replaced cash as the most common payment methods. payments per month during 2017. form of payment. However, although the report findings Of these, 20 payments were by debit “In particular, contactless payments showed that cards have surpassed cash, card with another 20 made by cash. have become the de facto payment type it is still the second most frequently used The average adult also made nine of choice for millions of consumers. These payment method. Cash accounted for just contactless payments per month in are now used across transport systems over one-third (34%) of all payments in 2017; and by the vast majority of retailers – and 2017. Around 2.2 million customers mainly • By 2027 the average adult in the UK shoppers love them because of the speed, used cash for day-to-day shopping in 2017, is forecast to make a similar number of ease and convenience that they bring.” although nine out of 10 had a debit card payments each month, although the Herson continued: “More recently, we to use if they chose, and the majority used frequency of using certain payment have seen a surge in the use of wearable other methods to pay regular bills. methods will change. Some 28 of these and mobile payments, creating new, Despite the rapid rise in digital payments, payments will be made using debit exciting opportunities for both shoppers the report predicts that by 2027, cash will cards, with cash being used 12 times and brands. still hold second place behind debit cards. each month. The average adult will “Consumers are increasingly able to Stephen Jones, chief executive of UK also make 22 contactless payments per match their payment accessory or device to Finance said: “The choice of payment month in 2027, and their lifestyle or fashion taste.” <

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CI July 2018 557.indd 9 02/08/2018 10:07:55 ANALYSIS | self-gifting

treating yourself: the rise of self-gifting £

Gift cards are an often-purchased present; they are flexible and can be given to anyone, no matter the personal relationship. However, consumers have now started to purchase them for themselves. Patrick Brusnahan reports

he UK gift card market is not the gift cards to fit their lifestyles,” says Zeek CEO pricing, so it is no surprise to see convenience, first that one thinks of as large, but Daniel Zelkind. discounts and budgets motivating self- Tlarge it is. “Millennials in particular, whom traditional purchase here. According to the UK Gift Card and retailers have typically struggled to reach, are “It’s all part of the smart consumerism Voucher Association (UKGCVA), gift cards adopting gift cards because they offer benefits trend, where people are willing to pay in grew 6.6% year-on-year in 2017, and by 8.5% they can’t get elsewhere. This is an important advance to save time and money.” in the second half of the year alone. Moreover, trend: these young, tech-savvy, budget- While shoppers are more commonly using 73.2% of UK consumers have purchased a gift conscious shoppers make up a quarter of the self-use gift cards for online shopping (66%), card in the past three years – and with 98.5% UK population, and are leading the way for nearly half (48%) have used them in-store. of consumers redeeming gift cards within 12 the next generation of shoppers.” In-store purchases also tend to be 17% higher months, they are utilised. than online, according to Zeek (£87 in-store The UKGCVA describes millennials as KEY FINDINGS versus £74 online). the “self-gifting generation”, and this is set Close to three in five (57%) users visit to provide an additional revenue stream to Millennials are seen as the most likely to self- a particular store or restaurant more often retailers and other businesses. gift. Defined as 16-34-year-olds by Zeek, three because of their gift card, with 24% indicating According to retail currency platform in five of them would purchase gift cards for that they did it “much more” often; again, Zeek Mobile, close to half (47%) of UK self-use, and another 15% said they did this millennials lead the way in this trend at 71%. shoppers are purchasing gift cards to spend regularly. Zelkind notes: “It’s time to rethink what on themselves. Over 2,000 UK consumers Men were more likely than women to gift cards are, and what they can do for the were surveyed and three principal drivers were purchase a gift card for convenience and to retail sector. As consumer self-use use cases identified: these were convenience (37%), receive a discount – both at 41% for men continue to increase, they offer a win-win for receipt of a discount (36%), and to help versus 34% and 33% respectively for women. shopper and retailer alike. budget shopping (24%). However, 26% of women are likely to do this “We are seeing a similar trend on our “The UK gift card market is estimated to help them budget shopping; this is four own platform. Over 90% of our customers to be worth around £6bn ($7.89bn) and is percentage points higher than men. purchase gift cards for self-use, which has usually associated with gifting; however, savvy Zelkind adds: “The popularity of online led us to reimagine them as retail currency,” shoppers are finding new, creative ways to use retail has been driven by expediency and concludes Zelkind. <

DID YOU BUY YOURSELF A GIFT CARD TO USE IT ONLINE OR IN STORE? (TICK ALL THAT APPLY) Total male female Age 16-24 Age 25-34 Age 35-44 Age 45-54 Age 455+

943 425 518 196 212 179 154 202 Online 618 302 316 123 140 125 102 128 65.5% 71.1% 61.0% 62.8% 66.0% 69.8% 66.2% 63.4% In store 454 181 273 105 110 77 66 96 48.1% 42.6% 52.7% 53.6% 51.9% 43.0% 42.9% 47.5% Source: Zeek

10 | July 2018 | Cards International

CI July 2018 557.indd 10 02/08/2018 10:07:58 feature | cryptocurrency

cryptocurrency: is it finally bubbling over?

Cryptocurrencies are courting conventional banks, reports Ivan Castano. To really take off, however, the new players still need to win the approval of the payments establishment such as Visa and SWIFT. Can they succeed?

“ ongrats! Time to buy Jamie Dimon’s debit cards, merchant processing and other That “wholistic” approach envisages using Chase Bank next,” tweeted Mathew innovative solutions,” boasted Lee, adding Weg and other recently purchased payment CJohn, AKA CryptoWonka, after that while he will have a seat on the bank’s processor TokenSuisse to help individuals and Litecoin bought 10% of ’s Weg board, there is no guarantee the acquisition businesses to transact in crypto and receive fiat bank with rival Tokenpay. will succeed. settlement directly into their bank account. “Banks are in a bubble right now,” piped “We still need to work with and be In addition, customers will have access to user Digisafeguard, adding that banks could approved by players in the current financial Tokenpay’s Blue Diamond international debit soon become good bargains. system like Visa and SWIFT,” he conceded. card, and the ability to withdraw cash from a Litecoin founder Charlie Lee, faced with a future ATM network. torrent of criticism from libertarians keen to TOKENPAY’S AMBITION see crypto thrive as decentralised, peer-to-peer BOOSTING TRANSACTIONS cash, quickly countered that the deal was on For savvy Tokenpay, ranked the 136th crypto the money. with a tiny $60m market capitalisation, the By enabling Weg’s customers to buy crypto, “Nothing successful ever happens without bold manoeuvre to team with Lee – who had the entrepreneurs will solve the head-banging, taking some risks,” he posted on Reddit.com. previously rapped it as a scam – could be a slow and expensive process of purchasing “In this case, we believe that the potential bigger game-changer. virtual currencies through top exchanges like gains far outweigh the risks.” CEO Derek Capo says the new-fangled Coinbase or Kraken. Lee reiterated that the transaction should trio will create a strong platform to help Capo claims those bourses charge exorbitant help speed up the adoption of Litecoin, consumers and merchants use tokens to buy fees and mark-ups to customers using credit the world’s seventh-largest digital coin groceries, or pay car or mortgage bills. cards to buy Bitcoin or Ethereum – charges commanding 0.02% of the nascent digital “We are trying to cater to a demographic that Tokenpay will cut significantly. cash market, worth nearly $300bn at the time of real consumers and users of actual crypto, Weg will also help process crypto salaries of going to press. which is why we are going build this bank under Tokenpay’s jobs site, Tokengig.com. “Best case is that with this bank we are able with a wholistic approach,” explains the And as people’s wages stream in digital cash, to create and deliver crypto solutions like young, Miami-based executive. the hope is that crypto spending will increase,

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CI July 2018 557.indd 11 02/08/2018 10:07:59 feature | cryptocurrency

boosting demand for bank crypto-to-fiat Conversely, the Citigroups of the world could exchange services. also rush to acquire those platforms before “Who gets paid in crypto?” Capo asks. they get too large to absorb. “This is the biggest problem [hindering Whatever happens, “cryptos and banks will widespread adoption]. Right now, more need to strike partnerships to develop new than 99% of payments are done in fiat; to payment solutions,” Rajan notes, ditching bring that to 95%, you need to have systems views that such ventures could violate crypto’s and businesses that work together to spread ‘power to the people’ ethos originating from adoption.” Sounds good on paper, but tough Bitcoin’s genesis block. in practice. “The whole decentralisation catchphrase is Tokenpay has an option to buy another gimmicky,” Rajan claims. “Most cryptos are 80% of the Ottobrun-based lender, which centralised and owned by their foundations or regulators could oppose. Simultaneously, it is a few miners.” And when it comes to business unclear whether the mortgage-focused bank transactions, crypto will not thrive in isolation will manage to convince the Bundesbank, from banks, the executive adds. larger rivals and SWIFT to back its dream Some caution that crypto-bank partnerships of moving large amounts of cash around the may not happen so quickly. world. Derek Capo, Tokenpay “I see banks getting involved to support “If regulators pass a law to approve crypto, exchanges but not in the next six to 12 TRIO FACE CHALLENGES many banks will buy exchanges,” Capo adds. months,” says blockchain consultant Borjan “Those that succeed will then use their profits Panovski, adding that a lack of efficient While Germany is keen to become a digital to buy other banks and grow the space. The custodial services and regulatory uncertainty token-investment hub, European or US banks banks that are late to integrating crypto will will keep institutions at bay. leery of backing rival peer-to-peer payment be bought or go out of business.” alternatives could block transactions, observers Ricky Tan, founder of statistics firm ‘COUNCIL OF ELDERS’ have said. Tokendata.com, says many deals could come “I can’t speak for the banks or the in the next 12 months, adding that the Kingdom Trust, Zapo, Goldman Sachs’s Circle regulators, but I am optimistic Germany will Litecoin acquisition prompted him to build and Coinbase are all scrambling to launch approve this after they conduct due diligence,” an M&A tracking product set to launch soon. crypto-holding services, seen as the holy grail Capo counters. “We are doing what we can to “Crypto has a lot of cash, and there are to lure crucial institutional investment into survive in a space where the life expectancy of many coins looking to buy fiat economy the nascent space. many coins is four to five years. We want to be around for a long time.” In the first M&A transaction of its kind, 99% of payments are done in fiat; To bring Tokenpay sold Weg’s 10% stake to Litecoin in exchange for technical and marketing advice that to 95%, you need to have systems and to build its decentralised eFin token exchange. Capo says eFin will allow people to buy businesses that work together Litecoin and Verge, a privacy cryptocurrency that found its first customer in adult site Pornhub, and will it integrate with Weg. assets to scale up,” Tan notes, adding that, Such services require big investments in Meanwhile, Litecoin and Tokenpay have in the financial sector, a trade finance or anti-theft systems, sophisticated trading company in their drive to bolster crypto banking tokens such as Crypterium or Beluga protocols and insurance, according to crypto adoption. In July 2018, Binance bought 5% could snap up non-digital peers to build its lawyer John Lore, who says many hopefuls of ’s Founders Bank for $133m, and blockchain platform. lack the ability to provide secure, ‘hot-wallet’ seeks to create the world’s first “decentralised trading capabilities for large clients. bank” by issuing tokens in an ICO sale set for BINANCE TO BUY CITI? Hot-wallet trading engines operate online coming months. and can be easily hacked, differing from ‘cold- Founders is expected to win regulators’ Meanwhile, Awanish Rajan, CEO of crypto storage’ alternatives that keep coins off the blessing as Malta works to become a hub for derivatives exchange Idap.io, has forecast that internet and unreachable to criminals. alternative digital currencies. coin-swapping bourses will grow tenfold to Meanwhile, banks and cryptos are unlikely As, and if, crypto continues to boom $200bn in daily trading volumes. This is up get together en masse until governments – some see it hitting $1trn-2trn by 2021 from roughly $20bn currently, if the virtual approve crypto-friendly regulations. – Capo expects banks will succumb to money market hits $1trn-2trn by 2021, as “I think we need clear regulation,” says soaring demand for the disruptive asset class, some analysts have predicted. Lore, who is advising US-based Signature eventually morphing into mini-exchanges, As the space balloons, he expects cash-rich Bank on how to offer deposit and custodial or even acquiring the likes of Kraken or Binance, Coinbase or Bitmex – which are services for hedge fund investors. Coinbase, which is awaiting approval for an already churning $10m in daily profits – The lawyer is trying to put together a new SEC banking license. could eventually target the world’s top banks. coalition, something like a “council of elders”,

12 | July 2018 | Cards International

CI July 2018 557.indd 12 02/08/2018 10:08:00 feature | cryptocurrency

that will bring together the best minds in immutability while its open-source nature The move will see BBVA continue to crypto and banking, international regulators dramatically increases visibility and traceability digitise its loan platform after recently and diverse experts to hammer out an entirely of corporate transactions. renewing a credit line with oil company new framework to govern cryptocurrencies In trade finance, the technology is used Repsol, cutting costs and contractual times to and the future Web 3.0 decentralised internet. to enhance visibility for buyers and sellers in days from hours. Panovski says regulatory constraints linked a supply chain contract, unlocking capital Credit card firms are also jumping into to capital reserves to avoid another financial which can remain frozen until buyers fintech’s Wild West, with Mastercard meltdown will encourage banks to spin off and sellers know goods have left port and announcing that it has won a US patent to their crypto interests into new divisions, as payment received. Banks are also using protect a proprietary method for speeding up opposed to striking partnerships with crypto encrypted ledgers to execute cross-border cryptocurrency payments. startups. money transfers and settle payments where Digital cash is seeing “increased usage over “Partnerships make technical sense but intermediaries are no longer needed to traditional fiat currencies by consumers who form a regulatory and liability perspective they confirm entries, observers note. value anonymity and security”, the payments don’t,” he says. “Given crypto volatility, tier 1 capital reserves could be impacted so banks will form separate entities to provide these People will have no privacy nor personal services.” freedom because every transaction will WILL THEY MAKE IT? be forever written on the blockchain Crypto-sceptics say it is premature to talk about crypto and banks joining forces, especially as the future of decentralised digital Santander’s executive chair, Ana Botin, processor conceded, although processing money remains highly uncertain. Instead, recently said the Spanish bank already times between the two asset classes are a they say central bank-backed digital currencies carries out 50% of cross-border transactions “disadvantage”. could become more widespread. with Ripple, a cryptocurrency that bridges Mastercard, Visa and others are rushing “I don’t believe in crypto as being a [viable] centralised and decentralised fintech, to grow in the sector amid an explosion of form of digital currency as it’s not based on adding: “It works really well because we have crypto-card suppliers and new arrivals such sound economic principles,” says Safwan been testing it for two years. It’s safe. It’s as Pundi Pundi, which is building its own Zaheer, blockchain consultant with KPMG, compliant.” crypto-merchant payments network running advising central banks on growing efforts to Her comments came as Santander recently separately from the incumbent card channels. swap fiat currency with digital alternatives. launched its blockchain lab to explore how Zaheer’s comments come as the European the technology underpinning Bitcoin and CENTRAL BANK CURRENCIES? Parliament Committee on Economic and its ilk can be scaled to its favour. Already, Monetary Affairs published a study saying the expansionist lender runs OnePay FX, a Blockchain faces challenges, however, state digital currencies – which would work mobile app it claims saves customers money including slow transaction speeds. through “bilateral settlements with a trusted on international wires. Running on the Ripple In Bitcoin’s case, proponents are working central party” – will reshape the crypto blockchain, it provides end-to-end tracking. to launch the Lightning Network, a super- competitive landscape by bringing new fast Bitcoin payments channel operating on competitors. SANTANDER’S CRYPTO top of – yet separately from – its blockchain, Meanwhile, banks are rushing to explore eliminating the need for the system’s blockchain’s benefits, even though the fintech Santander also boasts of being the world’s vast computer network to carry out slow breakthrough’s true potential has yet to be most crypto-friendly bank. It was a founding transaction confirmations. discovered. member of several consortia, including the “A lack of consensus and standardisation “I am seeing quite a bit of activity Enterprise Ethereum Alliance, Alastria, about how blockchains should work, fear of form banks that are less concerned with we.trade and Utility Settlement Coin, the regulation, high energy usage [such as with disintermediation and more interested in lender said in a recent press release – a major Bitcoin mining] and lack of scalability” are using the technology to reduce costs and about face on its crypto views after blocking also stalling growth, explains Zaheer. improve transaction speeds,” adds Zaheer. Bitcoin credit-card purchases and threatening Panovski says central bank digital money “A lot of banks are using the blockchain to bar crypto-originating fiat deposits a few will not work, stating: “This argument has ledger to put customer KYC and other data months ago. zero credibility,” referring to Zaheer’s view that to improve the regulatory process and save as Not to be outdone, arch-rival BBVA states can code digital money to rival today’s much as 20% in processing costs.” also announced that it has signed a €100m 1,300 cryptocurrencies. ($117m) long-term bilateral loan with “Centralised-issued money and VISIBILITY SAVES MONEY compatriot builder ACS using the blockchain. decentralised cryptos are a contradiction. It said the technology “guarantees contract People will have no privacy nor personal Essentially, blockchain is a ‘super database’ transparency and traceability” as parties freedom because every transaction will be supported by thousands – if not millions – of can verify and trace contractual stages and forever written on the blockchain. No one will computer nodes. Encrypted records provide conditions at any time. use them.” <

www.cardsinternational.com | 13

CI July 2018 557.indd 13 02/08/2018 10:08:01 distribution | emirates nbd

“Emirates NBD has always been an innovator, and the EasyHub initiative is driving the bank’s digital transformation the 24-hour mini branch: strategy to greater heights.” He continues: “The new multi-function, interactive kiosk targets consumers who need the flexibility and convenience of becoming evolution or an Emirates NBD customer without having to go into a branch. EasyHub offers around- the-clock customer service options for all customers, not only card holders.” revolution? Hanna tells CI that the process began last year. It began by looking at customer needs and the specific services they wanted to access through EasyHub. The two key Emirates NBD has partnered with Diebold Nixdorf objectives when designing the channel were superior convenience and easy, seamless user to deliver a new digital kiosk that the bank hopes will experiences. increase onboarding. It looks like a futuristic ATM, but Sarkar says: “EasyHub embodies our it can in fact do much more. Patrick Brusnahan reports customer-first approach, and will provide them with increased flexibility to open an account or conduct teller transactions in a safe and secure manner while experiencing the anks are constantly concerned with continues: “EasyHub will be available for all same superior service they would receive at customer onboarding. A once time- Emirates NBD customers. The new services any of our branches.” The whole aim of this is Bconsuming process in-branch, it is will enable individual retail and affluent to improve customer onboarding for products, now possible remotely – either online or customers to open current or savings accounts accounts and services. on mobile. However, Diebold Nixdorf and of their choice, and instantly obtain a Currently, over half of Emirates NBD’s Emirates NBD have come up with another personalised debit card. customer base is digitally active. Digital solution: the EasyHub. “Customers will also be able to conduct all transactions are growing at 30% annually, and Said to be the region’s first integrated digital routine teller services, such as cash deposit and 93% of all transactions are conducted outside kiosk, it allows customers to sign up for new withdrawal, check deposits and encashment, the branch. The hope is that this rate could go products and functions as a mini-branch. and internal fund transfers. Additionally, even higher with EasyHub’s introduction. Enabled by Diebold Nixdorf’s Vynamic customers will be able to carry out a variety Emirates NBD also is constantly trying Connection Points, it is open any day of of banking services, such as updating their to get more customers on board, through a the week, offering a self-service banking personal details, requesting a cheque book or number of methods. Sarkar explains: “We experience and allowing customers to do authenticated statements, and even applying continue to drive adoption through customer anything from withdrawing cash to applying for a personal loan, without having to wait at education and the introduction of new digital for a loan. a bank counter.” services that make our digital platforms the Speaking to CI, Suvo Sarkar, senior Habib Hanna, MD, Middle East at Diebold channel of choice for customers. executive vice-president and group head, retail Nixdorf, adds: “We partner strategically with “Our 60-second remittance service, banking and wealth management at Emirates our customers to build customised solutions DirectRemit, only available digitally, provides NBD, says: “Emirates NBD has always made that fit their current-state and future-state instant money transfers to customers free of bold investments in digital technology to needs, and our innovation team brings these charge. Our tablet banking service enables modernise and simplify banking. unique designs to life. customers to sign up for a loan or card without “Our initiative in creating Emirates NBD providing or signing a single piece of paper.” EasyHub stems from our high-tech-with- He concludes: “Earlier this month, we high-touch philosophy that combines digital launched Eidiya Express, enabling customers convenience with the comfort of human to gift Eidiya – an age-old custom during touch. Starting with the launch of the first Eid – easily and instantly through the mobile Interactive Teller Machine in the region a few banking app, to customers as well as non- years back, to introducing EVA [the Emirates customers. NBD Virtual Assistant] AI-powered voice “We also help customers adapt to digital assistant and FaceBanking video banking, better by combining digital innovation with Emirates NBD has been seamlessly combining personalised assistance, such as with our digital with the physical to provide a superior fully digital branches that feature self-service customer experience.” solutions through touchscreens and tablets, The customer-first approach means a with trained service ambassadors present to variety of services need to be offered. Sarkar The Emirates NBD EasyHub help if needed.” <

14 | July 2018 | Cards International

CI July 2018 557.indd 14 02/08/2018 10:08:02 products | starling bank

work exactly the same. It is only the design of the card that Starling has changed. starling debit card: SECURITY

Starling believes the design offers customers much tighter security, at a time when card flipping the card fraud is on the rise. The only name that appears on the front of the new card is that of Starling Bank, making the card look more streamlined and onto its head less cluttered; the customers’ names and card details have been moved to the reverse, making their financial details harder to copy. Commenting on the design, Starling Bank Starling Bank’s vertical card has launched. The digital- CEO Anne Boden says: “We are committed to disrupting the market by challenging old ways only bank has rotated the debit card by 90 degrees to of doing things, and reorienting banking so it reflect the way consumers interact with their cards at works for our customers. Our new card design checkout counters and ATMs. Briony Richter reports does exactly that.” LOOKING FORWARD

andscape cards made sense in the “Our lives are largely lived in portrait now, Starling firmly believes that disruption is past with the way old card machines even down to how we use our phones. A bank healthy for the industry, and the team at Lworked, but Starling insists it is time card in portrait reflects how we actually use Starling Bank all believe the old ways of to move on. our cards today: it’s intuitive, instinctive and, banking need to be challenged. Starling Bank’s vertical card design has in short, it’s just common sense.” Speaking about the need to continually moved away from its trademark purple to a Day continues: “Design usually evolves shake up banking, Day notes: “Good design light teal. The bank has stated that the colour to solve something, or to meet new needs, is about more than the way things look. was inspired by the ‘blue-green’ tones of the and bank cards don’t look the way they do It’s about challenging old methods and starling bird. by accident. They were designed landscape responding to cultural shifts – adapting the The colours chosen are also one of the because of the way old card machines worked, outdated to meet new ways of living. initial group of 16 original ‘web colours’, and they’re embossed with raised numbers so “We built a new kind of bank from scratch representing Starling’s digital heritage and they could be printed onto a sales voucher. because it was clear that traditional banking commitment to innovation. “But we don’t use those machines anymore, didn’t really fit into the way we live anymore. Mark Day, Starling’s art director who so when you think about it, a landscape card It’s that spirit – questioning old logic, then created the design, explains: “Great design is just a solution to a problem that no longer finding a way that works better – that we’ve is about more than just making things look exists.” brought to the redesign of our new debit card.” good; it’s about finding a better way of doing The debit cards for consumers will showcase It has been a busy year for Starling. Never things, being responsive to cultural and teal, while the business account cards will be shying away from challenges, the bank has had technological shifts and adapting the outdated navy blue. However, customers should not a year of successful developments. to meet emerging needs. worry about their purple cards: they will still Earlier in July, Starling launched a joint account for its customers. A notoriously tiresome task for couples, Starling believes it has removed the friction from the process: customers simply just tap on the ‘find your other half’ feature, and accept. The bank is set to continue to lead the way in shaking up the banking sector, showing no signs of slowing down for the rest of the year. Starling’s methodology revolves around studying its customers, looking into how they interact with their cards and all other aspects of banking. By focusing on how to create products that fit effortlessly into a consumer’s daily lives, Starling has been able to deliver The business variant The consumer variant innovative and personalised services to its growing customer base. <

www.cardsinternational.com | 15

CI July 2018 557.indd 15 02/08/2018 10:08:03 country snapshot | czech republic

CZECH REPUBLIC

country snapshot: czech republic

Card use rises as consumer preference shifts

ash remains the preferred method Consumers generally use cash for day- cards and a rise in contactless transactions. of consumer payment in the Czech to-day, low-value transactions. However, The total number of card transactions CRepublic, accounting for 65.9% of its use declined between 2013 and 2017 recorded a strong CAGR of 17.2% from total transaction volume in 2017. due to a growing preference for payment 542.6 million in 2013 to 1.02 billion in

value of credit tRanSfers value of cheque payments value of payment cards

bn bn bn , .

, . , , .

, .

.

e f e f e f

Source: ECB, Czech Bank Card Association, GlobalData Source: ECB, Czech Bank Card Association, GlobalData Source: ECB, Czech Bank Card Association, GlobalData

16 | July 2018 | Cards International

CI July 2018 557.indd 16 02/08/2018 10:08:17 country snapshot | czech republic

2017. Government financial inclusion Debit card shares by issuer Debit card shares by scheme initiatives, increased consumer confidence, and improved payment infrastructure all helped drive this growth. The advent of contactless technology and a robust e-commerce market also supported growth rste ank thers . in the payment card market. . isa Frequency of payment card use astercard . . increased while the average transaction value fell from CZK1,747.70 ($82.11) in Socit ank 2013 to $60.03 in 2017 as a result of the nrale . migration of low-value cash payments to roup . payment cards. DEBIT CARDS DOMINANT Source: GlobalData Source: GlobalData Debit cards remain the preferred card type for POS transactions, accounting for 83.9% pay later shares by issuer pay later shares by scheme of total payment card transaction value at thers the POS in 2017. Consumers are gradually . switching from cash to cards, supporting isa the growth of debit card use. Raiffeisen . Debit card use gained traction during ank . over the past five years, with frequency of use at POS recording a strong CAGR Socit thers nrale of 18.5%. In 2017, consumers used debit . roup . cards an average of 77 times at the POS, oneta astercard compared to 19 times at ATMs, indicating oney . that consumers favour the cards for in- ank . store payments rather than withdrawals. PAY-LATER SPACE

Source: GlobalData Source: GlobalData Pay-later cards are yet to gain ground in the Czech Republic, with just 17.5 pay-later cards per 100 individuals in 2017. This is establish and enhance operations in the Banks also offer prepaid cards for partly due to consumer reluctance to enter country. corporate users. into any kind of debt. The availability of virtual payment cards For example, CSAS offers the reloadable However, in terms of transaction value and alternative payment solutions including corporate business prepaid card. and volume, pay-later cards recorded PayPal, Masterpass, and paysafecard have The contactless chip-and-PIN card can be healthy growth, mainly due to rising also supported e-commerce growth. used to manage employee expenses and merchant acceptance and enhanced company purchases. security measures. PREPAID GAINS TRACTION Banks also offer reward programmes and PAYMENT INFRASTRUCTURE other incentives to boost their use. Access The number of prepaid cards in circulation to international airport lounges, air miles rose from 392,379 in 2013 to 506,888 The number of POS terminals recorded and discounts on shopping and dining are in 2017 at a CAGR of 6.6%. The value of a CAGR of 16.2%, rising from 94,914 in some of the benefits available. transactions via prepaid cards rose from 2013 to 172,954 in 2017; the increase was $4.0m in 2013 to $11.7m in 2017. supported by an increase in the number of E-COMMERCE ON THE RISE Prepaid cards are increasingly gaining POS terminal installations at smaller retail acceptance among consumers as they outlets. E-commerce in the Czech Republic posted do not require a bank account and are mPOS solution provider SumUp entered a CAGR of 18.7%, growing from $2.7bn accessible to individuals who do not qualify the Czech Republic in October 2017. The in 2013 to $5.4bn in 2017. According to for a bank card. company offers its mPOS solution SumUp APEK, e-commerce accounted for 10.5% ČSOB offers the COOL prepaid card in Air, which is a contactless and chip-and- of the total retail sector in 2017, up from collaboration with Mastercard. The card is PIN card reader that can be connected to 9.5% in 2016. primarily aimed at children and students, is tablets and smartphones via Bluetooth, The growing e-commerce market has not linked to any bank account, and can be enabling merchants to accept card-based encouraged international companies to applied for online without any agreement. payments. <

www.cardsinternational.com | 17

CI July 2018 557.indd 17 02/08/2018 10:08:21 country snapshot | greece

GREECE

country snapshot: greece Economy shows signs of recovery following the eurozone crisis

reece was severely affected by the Many banks faced liquidity problems and initiatives to revive the economy, including eurozone crisis, due to government loan defaults, which had a direct impact cuts in public sector employment, defence Goverspending, tax evasion and a on the cards and payments industry. The and other government spending, as a result budget deficit that spiralled out of control. government announced a number of of which the country registered real GDP

value of credit tRanSfers value of cheque payments value of payment cards

bn bn bn ,

e f e f e f

Source: ECB, GlobalData Source: ECB, GlobalData Source: ECB, GlobalData

18 | July 2018 | Cards International

CI July 2018 557.indd 18 02/08/2018 10:08:32 country snapshot | greece

growth of 1.0% in 2017, up from -3.2% in Debit card shares by issuer Debit card shares by scheme 2013. The country received conditional bailout packages from the International

Monetary Fund, the EU and the European thers . Central Bank. Conditions included capital- ational ank control measures in June 2015 to arrest of reece . the outward flow of money; curbing tax astercard isa Alpha . . evasion; encouraging electronic payments; ank restrictions on ATM cash withdrawals; .

restrictions on the use of payment iraeus ank cards abroad; restrictions on transfers . of funds from Greek to foreign banks; and compulsory acceptance of card- based payments by retailers and certain

categories of professional. Source: GlobalData Source: GlobalData With the anticipated economic revival and the injection of liquidity into the pay later shares by issuer pay later shares by scheme banking sector, the Greek payment card market is anticipated to gradually shift towards sustainable growth by 2021. thers . DEBIT CARDS DOMINATE thers . Alpha ank Debit cards remain the preferred payment . isa card type, accounting for 90% of the total astercard . payment card transaction value in 2017. urobank . . The introduction of new regulations in June 2017, making it compulsory for private iraeus ank . companies to pay salaries through bank accounts, will further drive penetration. All major banks including Alpha Bank, Piraeus Bank, National Bank of Greece Source: GlobalData Source: GlobalData (NBG) and Eurobank now offer debit cards with contactless functionality. Prepaid Virtual Card by Piraeus Bank. E-commerce growth has also supported CREDIT CARD REVIVAL Alternative payments such as VivaWallet, growth in the prepaid card market. Banks my Alpha wallet, and Masterpass are also such as Piraeus Bank, NBG and Eurobank, Amid economic uncertainty and growing increasingly used by consumers to make offer cards exclusively for online shoppers. unemployment, banks were forced to adopt online purchases. Eurobank offers a Visa-branded e-prepaid a cautious approach to issuing credit cards. card, which can be purchased online and This resulted in a decline in the number of PREPAID UPTAKE activated immediately. pay-later cards issued up to 2015. However, with capital infusions and Growth in the number of prepaid cards in PAYMENT INFRASTRUCTURE strict austerity measures adopted by circulation can be attributed to factors, the government, the economy and the including their growing popularity among The number of POS terminals recorded a banking sector are gradually recovering. the unbanked population, and control of CAGR of 18.1%, increasing from 279,156 With growth in the job market, banks have expenditure. in 2013 to 542,702 in 2017. become more confident about credit and Faced with harsh economic and labour In response to rampant tax evasion, are in a much better position to extend conditions, many Greek consumers were the government identified 85 business credit than they were five years ago. forced to curb unnecessary expenditure; categories that were required to install POS they therefore used prepaid cards as a way terminals by July 2017. Refusal to accept E-COMMERCE GROWTH to spend within their means. card-based payments now attracts a fine Banks also offer prepaid cards to enable equivalent to $1,800. E-commerce in Greece grew from €2.8bn individuals to receive social benefits from The growing market is gradually ($3.3bn) in 2013 to $5.6bn in 2017, and is the government. In 2016, Piraeus Bank attracting new entrants. In September forecast to reach $7.5bn by 2021. launched the Social Solidarity Income 2017, UK-based payment solution provider Banks are now offering cards exclusively prepaid card, which is issued instantly at SumUp launched its mobile POS device for online shoppers, such as the Mastercard any bank branch. SumUp Air for $94.80. <

www.cardsinternational.com | 19

CI July 2018 557.indd 19 02/08/2018 10:08:36 Country snapshot | japan

JAPAN

country snapshot: japan Olympics and other initiatives to challenge cash’s dominance

apan’s payment landscape is initiatives to promote electronic foreign-issued cards, payment cards have dominated by cash, which accounted transactions, the adoption of chip and gained ground recently. Jfor 78.1% of the overall payment PIN and contactless, and payment The upcoming 2020 Olympic and volume in 2017. Yet with government infrastructure being improved to accept Paralympic Games are expected to provide

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

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, , , , ,

, ,

, , , ,

e f e f e f

Source: BIS, GlobalData Source: BIS, GlobalData Source: BIS, GlobalData

20 | July 2018 | Cards International

CI July 2018 557.indd 20 02/08/2018 10:08:44 Country snapshot | japan

further impetus to the country’s cards and Debit card shares by issuer Debit card shares by scheme payments industry. To supplement these global events, all of the country’s major banks are making their ATMs compatible with foreign-issued payment cards, and are also installing ATMs apan ost ank at high-footfall locations such as tourist . attractions and supermarkets. Meanwhile, thers astercard ebit isa . . . card issuers and payment service providers Sumitomo are focusing on developing payment itsui F infrastructure via expansion of the payment . iuho acceptance network. F In addition, the market is witnessing . new developments encompassing payment card security and convenient payment

solutions, with card issuers and technology Source: GlobalData Source: GlobalData companies experimenting with advanced technologies such as biometrics. pay later shares by issuer pay later shares by scheme DEBIT CARD USE

Debit cards accounted for 0.6% of total payment card transaction value at the POS Sumitomo itsui thers in 2017. The use of debit cards is mostly Financial roup . . isa restricted to cash withdrawals at ATMs. . This is at least partly due to limited thers . akuten consumer awareness of the ability to use . debit cards at POS terminals. Debit cards redit . are also unpopular with merchants, as the Saison settlement process typically takes three or . more days. To counter this, financial institutions are taking steps to encourage debit card use. In Source: GlobalData Source: GlobalData February 2015, Sumitomo Mitsui Banking Corporation removed ATM fees and increased the number of 24-hour ATMs. online shoppers. Alternative payment New entrants will find it difficult to make solutions including Apple Pay, PayPal, Paidy headway in this space. CREDIT CARDS and Masterpass are also used for online Prepaid cards are increasingly used for purchases. transport, travel, shopping and gifting Credit cards are the most popular payment To capitalise on the trend, in August purposes. Contactless technology has been cards in Japan due to the associated reward 2015 Rakuten Edy launched its own app developed to meet the needs of public programmes, which are perceived as more store, Rakuten App Ichiba, with 380 apps transport users. beneficial to users than those offered with covering a wide variety of genres such One of the largest contactless products debit and prepaid cards. Another key factor as entertainment, games, education and in Japan is the Suica card, owned and for high credit card use is wide merchant lifestyle. Customers are also offered reward operated by Japan Railways. It started acceptance. points on purchases. as a contactless transit pass, but over In addition to goods, credit cards are In January 2016, the company time expanded to payments at vending also used for various services such as tax introduced a ‘virtual changing room’ machines, shops and restaurants. Other payments, donations to rural municipalities, to its online marketplace, which allows popular prepaid cards used for transport in and medical-related expenses. consumers to visualise how clothes fit by Japan include Pasmo, Icoca, Toica, Manaca, providing their measurements. Kitaca, Sugoca, Nimoca and Hayakaken. E-COMMERCE GROWTH To capitalise on rising outbound tourism, PREPAID CARD VARIETY issuers are introducing prepaid cards for Japan’s e-commerce market grew from travellers. Shinsei Bank launched the $99.1bn (JPY11.2trn) in 2013 to $145.9bn The Japanese prepaid card market is Visa-branded Gaica Overseas Prepaid in 2017, at a CAGR of 10.1%. mature, with penetration standing at three Card in July 2015, which is available to any Major card issuers including Rakuten, cards per individual. The market is also Japanese resident aged 13 or over, with Sumitomo Mitsui, Mizuho Bank and Resona fiercely competitive, with issuers offering a no annual membership fee. A maximum of Bank offer a range of cards targeting range of prepaid cards for various purposes. $8,875.98 can be loaded to the card. <

www.cardsinternational.com | 21

CI July 2018 557.indd 21 02/08/2018 10:08:46 industry insight | token

somewhat analogous to the BIOS layer in personal computers: the simplest possible time for a API that safely exposes the offered banking functionality and that handles authorisation and consent management in a consistent, secure manner. This would enable vendors serious open implementing other Open Banking API specifications to build on top of this core layer. We should always be asking: do we need this complexity at the core layer? More often than banking standard not, the answer is no. Things should be specified at a high level, The Open Banking revolution is, apparently here, but for example a payment request that can there is a certain lack of excitement, and not everyone include metadata, and let the metadata itself seemed to be prepared for what was set to ‘revolutionise’ be self-describing. Higher-level APIs could translate the meta-data to or from a variety of the financial sector. Steve Kirsch, CEO and founder of formats. Token writes on how to make Open Banking work The API should be easy to read, understand, and use by programmers. For example, Plaid here are four things that should now 1. The top banks worldwide should jointly and Stripe APIs are examples of APIs that are be crystal clear to everyone involved fund the creation of a worldwide Open easy to understand, well documented, and Tin Open Banking: Banking standard; easy to use. Following on from that, it should 1. Open Banking has arrived: It was the 2. The creation of the API should be done be available as a commercial product from at #1 topic at Money 20/20 Europe. Open by a commercial vendor selected by the least one commercial vendor so banks do not Banking regulations are now appearing in banks. Presumably, it would be a vendor have to write it themselves. As a result, the other parts of the world beyond the EU; that specialises in Open Banking APIs, and back end of the API server should be easy for a 2. Open Banking is so irresistible that even also has expertise in secure, instant micro- bank to implement. banks that are not required to adopt payments, and The API should use modern security and open APIs are doing so voluntarily. Wells 3. The chosen vendor for the API design software methodologies for authentication and Fargo, for example, has implemented APIs should seek input from all parties in the authorisation/SCA. There must be no shared to support over 20 use cases that it thought ecosystem: business, consumers, banks, secrets between the account owner and bank. were compelling; service providers, software developers, The API should not support the use of 3. There is a lack of standardisation. Of system integrators, regulators, security insecure standards. For example, OAuth2 is the APIs now available, only a handful of experts. fundamentally insecure. It was designed to be banks in the UK and are using the insecure because they wanted it to be easier same one – and they only did so because Here is why these are important. To be a for programmers to implement. Sadly, we see the UK regulator required them to. But global standard, it is really best that it starts OAuth2 specified in pretty much every Open each bank implemented the standard with global support. Trying to take a single Banking standard proposal. This is a huge differently. This lack of standardisation region or country’s standard and get others to mistake; basing Open Banking protocols on is bad for everyone: it increases costs and adopt it is harder – especially one designed OAuth2 is a recipe for never-ending security complexity at each bank, it opens the by committee. The best standards are created problems for the next 50 years. door to insecure solutions which expose by small teams of highly competent people Obviously, it should work for retail as well banks and their customers to unnecessary working together in close proximity. as corporate applications. For example, the risk, and it hinders adoption by software In contrast, ‘design by committee’ efforts API should not assume that there is a human developers who only have bandwidth to take a very long time to come to fruition being/user interface making the transaction: write to one or two open APIs at most, and and the results are generally sub-par. For it should be computer-to-computer. Human 4. The standards that have been created example, all the computer platforms we use interaction should be layered on top of the or proposed leave a lot of room for today to develop software on desktop and API, not designed into it. improvement. The UK Open Banking mobile devices were all created by commercial Moreover, the API should be designed API, for example, is only usable by human vendors, not by non-profits or industry to be extensible so it can last for at least 50 beings, and it took around two minutes consortia. Choosing multiple vendors to work years. Also, the API should allow for instantly and 15 screens for a typical human to together is also infeasible: great products are pushing payments worldwide, not just a local approve a simple access request. None of not created this way. payment push. the standards allow for charging the caller Getting input from all stakeholders is not However, there should not be any sacred a fee. controversial. Importantly, however, this cows, or directives such as: “You should start does not mean the vendor should accept it with the XYZ standard and build off of that.” If Open Banking is to reach its full all blindly; good design is always an iterative Following this process will create a solid potential, it is critical that points 3 and 4 are process, and input is often conflicting. foundation for building great applications and resolved. Here’s what I think should be done: APIs should be simple and low-level, benefit all parties. <

22 | July 2018 | Cards International

CI July 2018 557.indd 22 02/08/2018 10:08:46 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE LEASING LIFE CONFERENCE & AWARDS 2018 15th November 2018 ∤ Tallinn,

For its 14th edition Leasing Life Conference and Awards 2018 moves to the Baltic Region to bring together asset finance professionals and industry disruptors in an active discussion of the key issues facing the leasing industry. This year’s Leasing Life conference explores how Europe’s leasing industry is responding to the value chain opportunity - the operational, and strategic, implications of the paradigm shift, and the role that technology must play in transforming the industry so that it thrives in the digital age. . Event highlights:

∤ Re-defining asset ownership for a digital generation · The Baltic Approach: Regulatory arbitrage in the digital era · GDPR and its implications for reporting, asset management and marketing · Funding strategies for a lean world · Re-defining sales and distribution channels for the digital era · Harnessing the power of agile: Assessing the transformative potential of digital · Embracing the circular value chain approach to lease delivery & design · Taking the right risks for the rewards: Strategic implications of the era of asset ownership · Using data and analytics to drive performance, deliver value

Headline Partner: Gold Partner: Silver Partners:

Badge and Lanyard Drinks Reception Brand Partner: Exhibitor: Partner: Partner: Table Hosts: Regional Partner:

For more details please contact:

Page 2 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF RETAIL BANKING Retail Banking: Europe 2018 28th November 2018 ∤ Hesperia Hotel, Madrid

Retail Banking: Europe 2018 is moving to Madrid for a day of discussion between traditional and challenger banks along with selected solution providers about the key issues of today in the European retail banking sector. Key issues:

∤ The digital transformation ∤ Enhancing customer experience of European banking in the digital age ∤ How to make the most of Open Banking ∤ The role of branches in the 21st century ∤ How can traditional banks benefit ∤ Adapting for the millennial customer from open APIs? ∤ Are mobile-only banks the future? ∤ PSD2 and fraud: What new trends are developing? ∤ The opportunities for blockchain and cryptocurrencies ∤ GDPR: The early experiences following implementation

Silver Partner: Bronze Partner: Panel Host: In Association with:

For more details please contact:

Page 1 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580