www.cardsinternational.com Issue 565 / march 2019
RETAIL THERAPY
ARE GIFT CARDS COMING TO THE UK HIGH STREET’S RESCUE?
TECHNOLOGY INSIGHT COUNTRY SNAPSHOTS
SumUp’s strategy to meet How SCA is the biggest Key market data and demand as society becomes shake-up in payment analysis for Brazil, increasingly cashless security since chip and PIN Indonesia and Mexico
CI March 2019 565.indd 1 22/03/2019 14:34:39 contents this month
COVER STORY NEWS 14 05 / EDITOR’S LETTER 06 / DIGEST • Contactless set to explode in Poland as limit increases • Barclaycard partners UnionPay for card acceptance • ShoCard, Alhamrani Universal develop biometric ATM • US credit card and DDA fraud losses to reach $2.7bn by 2020 • Curve customer protection covers claims up to £100,000 • Experian calls off ClearScore deal • Nets renews and extends DNB and Eika deals • Barclaycard Presicionpay to integrate with Amadeus • Fingerprint Cards biometric software platform goes live GIFT CARDS 06
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 | March 2019 | Cards International
CI March 2019 565.indd 2 22/03/2019 14:35:13 contents march 2019
COUNTRY SNAPSHOTS 16 / BRAZIL 12 Government initiatives, efforts by banks, and growing awareness and confidence in digital payments are leading Brazilian consumers to gradually shift away from cash and towards electronic methods of payment 18 / INDONESIA Cash remains the predominant payment instrument in Indonesia, especially among the rural population. It accounted for 98.3% of the total transaction volume in 2018, mainly as a result of the high unbanked population 20 / MEXICO The model operated in the Mexican banking and payments system differs from those of the country’s peers, with banks and other financial institutions partnering with convenience stores to provide services TECHNOLOGY FEATURES 10 / WEARABLES 12 / PREPAID Payment technology continues to reshape Prepaid can be one of the more neglected areas the financial industry; however, that is not of the payments sector, but it is making strong the only sector where it is making an impact. strides. Briony Richter speaks to Prepaid Briony Richter looks at how wearables are International Forum commercial director transforming the world of fashion Diane Brocklebank and chair Paul Swinton 11 / SUMUP 14 / GIFT CARDS With consumers now expecting to pay through Two trend predictions are common in the UK multiple channels, demand for fast, convenient market: the fall of the high street and the rise and often contactless options is growing. of mobile payments. However, the gift card Marc-Alexander Christ explains to Briony looks as like if it could buck – or at least delay Richter how SumUp meets those demands – both of these. Patrick Brusnahan reports 10 20 INDUSTRY INSIGHT 22 / FREEDOMPAY When the European Payment Services Directive for Strong Customer Authentication comes into force in September 2019, consumers and businesses can expect a sharp drop in fraud, writes Tony Hammond
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CI March 2019 565.indd 3 22/03/2019 14:35:17 HEAR l NETWORK l DISCOVER l CELEBRATE Private Banking and Wealth Management Germany 2019 30th April 2019 l Frankfurt, Germany SHAPE THE FUTURE OF PRIVATE BANKING
Private Banking & Wealth Management: Germany 2019 Conference & Awards brings together private banks, family offices, independent wealth managers and intermediaries in an active discussion of the key issues facing the industry. The informative and inspiring keynote sessions and informal conversations provide setting for you to join other high-profile guests in engaging discussions.
Key Issues l How is the regulation change set to challenge industry practices? l What is the future of Europe without Britain? l How can the private banking industry in Germany rival its neighbours? l Is Germany the traditional wealth hub we all know or will it become the new FinTech centre? l How can robo-advisors present opportunity to traditional wealth managers? l How are FinTech start-ups rivalling the market? l How can firms remain cyber safe and raise their security profile? l Can collaboration between incumbents and FinTechs be the next big thing? l Discovering Germany’s best kept investment secrets l How can banks leverage technology to strengthen the human relationship? l An insight into the next generation and how they are shaping the industry
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For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
Untitled-40219Timetric_PBI_Ad.indd 1 1 22/03/201907/12/2018 15:2909:37 editor’s letter
Second megadeal of 2019 as FIS snaps up Worldpay
Douglas Blakey, Editor
IS’ deal to acquire Worldpay is not just the Worldpay expand into new territories – in particular, emerging biggest deal for the payments sector: it means FIS markets such as India. F overtakes Fiserv to become the largest processing Worldpay’s reward solutions for cards and payments may and payments company. complement FIS’ banking software to offer enhanced loyalty Fiserv’s deal to snap up First Data for $22bn in January programmes in multiple channels. FIS will now be able to offer lasted a mere two months as the biggest-ever payments e-commerce services that are not currently part of its offering. deal. FIS’ acquisition of Worldpay values the latter at around As for savings following the two megadeals, Fiserv and First $43bn, including its net debt of almost $8bn. FIS shareholders Data forecast $900m in run-rate cost savings, and at least will own around 53% of the combined group, with Worldpay $500m in “revenue synergies” over a five-year period. FIS and shareholders owning the remainder. Worldpay’s forecast savings are of the same order, estimating The premium paid by FIS is not quite as large as the initial $500m of annual revenue synergies by the end of year three, press reports suggested. The purchase price represents a 13% with a further $400m in annual cost savings. premium compared to the Worldpay share price pre-deal. The press release confirming FIS’ acquisition correctly states Scale matters that there is a risk that the integration of FIS and Worldpay The Fiserv/First Data combination provides the impetus for will be more difficult, time-consuming or expensive than consolidation in a fragmented market. As FIS chair, president anticipated. It adds the predictable caveat that “there is a risk and CEO Gary Norcross says: “Scale matters in our rapidly of customer loss or other business disruption in connection changing industry.” FIS/Worldpay will have pro forma 2018 with the transaction”. annual revenue and adjusted EBITDA of approximately FIS will be acutely aware that, as issuer-processing $12.3bn and $4.9bn respectively. contracts come up for renewal, there remain a number of In the main, analyst comment is positive. As my colleague live competitors in the sector. No financial institution, from Bhavika Shah, payments analyst at GlobalData, says: “The the largest tier one to the smallest credit union, can credibly merger of FIS with Worldpay, originally acquired by Vantiv, suggest that this year’s two megadeals are anti-competitive. represents full value at $43bn. Future possible M&As: players to watch “Worldpay, as of year-end 2018, held a 21% share of the US Attention will inevitably turn to other major players in the merchant acquiring market by value of acquired transactions, sector, and it is a long list. Is there a better-performing player according to GlobalData’s Merchant Acquiring Analytics, in the past year than Adyen? Its annual results, released on 28 making it the largest player in the US, in addition to its February, beat analyst forecasts. In the second half of 2018, international presence in 146 countries.” Adyen’s net revenue in North America almost doubled, and FIS, Worldpay: proven management Asia-Pacific revenue rose by over 120%. Adyen shares are Executing deals of this size successfully can never be taken up by close to 200% since its IPO last June. Others to watch for granted, but to be fair, senior management at both FIS and include Global Payments, Jack Henry, Wirecard and TSYS. Worldpay have successful M&A track records. FIS alone has The battle for payment-processing dollars in the SME sector, executed more than 10 deals in the past decade or so. and TSYS going head to head with the likes of Square, Poynt Both firms currently spend more than 7.5% of annual and Stripe will be fascinating to watch. And then there is revenue on innovation and technology, and that is unlikely to PayPal: fresh from its $2bn-plus deal for iZettle last year – its change. We can now expect to see FIS expand its acquiring 13th acquisition in all – it cannot be ignored for long as M&A and payments offerings. At the same time, the deal will help activity in the sector accelerates. <
Get in touch with the editor at: [email protected]
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CI March 2019 565.indd 5 22/03/2019 14:35:20 News | Digest
news digest Contactless set to explode in Poland as limit increases payments in increasing numbers. and Rybnik having already integrated Almost every Polish adult now holds a NFC-enabled technology into their public contactless card, with the total number transport systems. of contactless cards in the country rising 2017 was a good year for the Polish by over 32% from 25.7 million in 2014 to economy, with growth of 4.7%; growth 34 million in 2018. The move to increase in 2018 was even stronger, at 5.1%. the limit on contactless transactions from Average earnings in 2018 rose by 7%, with PLN50 ($13) to PLN100 is predicted to unemployment standing at 5%. Inflation give contactless payments in Poland a remained relatively low at 1.6%. The World further boost. Bank is forecasting growth of more than Nikhil Reddy, payments analyst at 4% for Poland in 2019. GlobalData, said: “The growth in the Sister title Retail Banker International contactless card market has been fuelled by recently ranked the largest banks in Poland, government policies to promote electronic as the fiscal 2018 reporting season for the payments, supported by wider merchant largest banks in Poland drew to a close. acceptance and improved payment Highlights from the analysis included that it infrastructure.” is not just the incumbents that are making Reddy added: “The announcement by strides in the market, with Alior Bank Contactless payments are set to boom in the country’s central bank that, from the launching the second edition of its fintech Poland, as a result of an increase in the second quarter of 2019, it is doubling the accelerator. payment limit that is scheduled to come maximum limit for contactless transactions The RBL_START acceleration programme into force in the second quarter of 2019. without a PIN from PLN50 to PLN100 will has reopened and is seeking start-ups that This is according to research from further drive contactless payments in the offer solutions in security, data analysis and leading data and analytics firm GlobalData, country.” client loyalty. In particular, the accelerator which states that while cash is very much Increased use of contactless payments is seeking businesses that are looking to the dominant payment instrument, Polish on public transport is also set to increase launch financial services in channels that consumers are adopting contactless adoption, with major cities such as Warsaw have not yet been explored. < Barclaycard partners UnionPay for card acceptance Barclaycard has announced a new card-ac- Rob Cameron, CEO of payment accept- ceptance partnership with UnionPay Inter- ance at Barclaycard, said: “We have invested national, a subsidiary of China UnionPay. in our payments platform so that our mer- The partnership will allow 110,000 Bar- chants can seamlessly accept the different claycard UK merchants to accept payments payment options that their customers want with UnionPay cards, with a phased roll-out to use. With the world’s largest cardhold- scheduled to begin this summer. er base, we’re excited to add UnionPay as The UK is a popular destination for Chi- a partner and open up acceptance to our nese tourists, and the partnership will boost 110,000 UK merchants. the availability of the preferred payment “China is one of the UK’s most valuable brand for many Chinese consumers. inbound visitor markets, and this deal means Cardholders will benefit from the famil- our UK merchants will be able to better iarity of paying with UnionPay cards and serve Chinese and global consumers who mobile payment products, and the facility and retailers from international visitors. Visit choose UnionPay as their preferred payment will be available for both in-store and online Britain has indicated that bookings are up method when shopping online or in-store.” purchases using Barclaycard’s UK merchant 31% from January to June this year com- Wei Zhihong, UnionPay International’s network; this includes major retailers, trans- pared to the same period in 2018. market director and head of its European port providers, and hotels and restaurants. Visitors from China are also some of the branch, added: “The UK remains an attrac- The number of Chinese visitors to the UK UK’s highest spenders, spending an average tive destination for Chinese tourists, and we is expected to rise this year, and accepting of £2,059 ($2,700) each per visit, more than are delighted to partner with Barclaycard in UnionPay will drive sales for UK merchants three times the all-market visitor average. growing our network of acceptance.” <
6 | March 2019 | Cards International
CI March 2019 565.indd 6 22/03/2019 14:35:26 News | digest
ShoCard, Alhamrani Universal develop blockchain-based biometric ATM Blockchain-based identity-authentication an individual’s identity without accessing that banks need to verify that a withdrawal is platform ShoCard and ATM provider the bank’s database. The authentication legitimate.” Alhamrani Universal are developing a process includes the ShoCard ID, a QR Alhamrani Universal CEO Tariq Abdat blockchain-based biometric ATM for the code, timestamps, session IDs and other added: “We’re delighted to be working with Middle East market. certification methods to verify users, ShoCard to develop a blockchain-based The biometric ATMs will enable consumers including facial recognition. The prototype is biometric ATM. This will play a major role in to use a blockchain-based app and facial currently undergoing testing, and is likely to helping to reduce fraud for consumers. recognition instead of a PIN, in a move that move to the production stage soon. “Digital transformation is a key pillar of ShoCard hopes will solve the issue of card ShoCard CEO and founder Armin Ebrahimi Saudi Arabia’s Vision 2030. Collaborating fraud at ATMs. said: “The ShoCard solution will solve the with trusted technology partners such as Alhamrani Universal, Saudi Arabia’s issue of card fraud at ATMs that continues ShoCard allows us to offer solutions that largest ATM provider, said it is the first to plague banks and consumers. It fits meet ever-growing demands for innovations.” technology provider to develop a blockchain- nicely into existing ATM technology, which ShoCard is also working with major based biometric-authentication ATM that usually already has a camera installed. This international banks and other financial is compatible with local banks. The ATM makes the customer experience as seamless institutions to build a blockchain-based developed with ShoCard uses five-factor as possible. At the same time, it utilises financial ID. This uses the ShoCard Identity authentication to communicate with banks, blockchain technology to protect individuals’ Management Platform, with a key focus on and uses blockchain technology to confirm identity while confirming the information user privacy and higher levels of security. < US credit card and DDA fraud losses to reach $2.7bn by 2020 Application fraud losses will cause $2.7bn and 32 financial crime executives on pain that improving the customer onboarding in US credit card and demand deposit points and planned technology spend. experience is a key business case driver. account (DDA) fraud losses in 2020, Over 13 billion data records have been “When data quality is not part of representing a rise of more than 20% stolen or lost since 2013, with around 87% onboarding, the match between incoming from 2018’s $2.2bn losses. The forecast is of bank executives saying data breaches identities and the repository relies on exact revealed in a report published by data- or phishing attacks are responsible for the matching. That is an ineffective, error- quality and identity-verification solution bulk of digital channel fraud. Application prone practice, and it can result in myriad provider Melissa Data Corp. fraud due to identity theft, and synthetic issues around KYC and other regulations,” The paper, titled Identity Verification: identity fraud also play substantial roles. said Melissa UK MD Barley Laing. Successful Strategies to Minimise False The impact of these attacks will cause Julie Conroy, research director at the Positives and Risk, examines two key over $2.7bn in US credit card and DDA report’s author, Aite Group, added: “The conflicting priorities: the challenge of application fraud losses by 2020. importance of ongoing investment in new verifying identity without intruding on the While fraud is increasing, the pressure technology cannot be understated. Data is customer experience, and the operational to minimise friction from the customer the new currency, and creating intelligence impact of false positives. The report experience is also growing, with 88% from data at scale can give firms a canvasses expert opinion from US banks of fraud executives surveyed indicating competitive edge.” < Curve customer protection covers claims up to £100,000 Customer protection for purchases made tection in place from the outset. By introduc- with a Curve card now covers claims within ing Curve Customer Protection, we’re adding one working day on eligible purchases of up an extra layer of protection for cardholders, to £100,000 ($130,450). when facing certain disputes with merchants. The Curve customer-protection policy “With the new Curve purchase-protection covers all credit and debit card payments policy, our customers can be reimbursed made via the Curve card, giving cardholders faster, offering them greater peace of mind. additional protection in the event of mer- This is complemented by the Mastercard chant disputes. The Mastercard chargeback chargeback scheme. That offers addition- scheme, which previously covered Curve al protection for transactions exceeding payments, continues to apply to transactions £100,000, however different timescales for of more than £100,000. reimbursement may apply.” Under the new policy, claims can be made feit, or a promised refund is not completed. The Curve card and app allow customers within 120 days when buyers use a Curve Alison Moore, financial crime manager to add debit and credit cards onto one Mas- card and goods or services are not received, at Curve, said: “Ensuring our customers are tercard. Since launching in Beta in February defective or not as described. It also covers protected when using their Curve card is a 2016, the number of Curve sign-ups has purchases where goods prove to be counter- top priority. That is why we’ve had fraud pro- reached more than 300,000. <
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CI March 2019 565.indd 7 22/03/2019 14:35:28 News | Digest
Experian calls off ClearScore deal the CMA, Experian does not believe that the CMA will approve the proposed acquisition of ClearScore on satisfactory terms, despite the dynamism and competitive nature of the market, and the customer benefits arising from the proposed transaction. “Experian and ClearScore’s shareholders have therefore taken the decision to abandon the proposed transaction.” Experian and ClearScore are the UK’s two largest credit-checking companies. Had the Experian and ClearScore plan gone ahead, the credit group aimed to expand its services in the UK. ClearScore has grown significantly since 2015, by offering a free membership plat- form. Its services and offerings particularly attract younger customers seeking credit ad- vice and solutions. It offers customers a view of up to six years of financial details, with Experian has announced that it is pulling out regulator highlighted that the acquisition data and scores updated on a monthly basis. of its planned £275m ($365m) takeover of could harm competition, stifle product Experian offers users both paid and free ClearScore. development, and impact customers. credit-checking services, as well as advice on The UK credit data group said that it In a statement, Experian commented: improving credit scores. doubted that the Competition and Markets “Further to the provisional findings pub- Both companies use Open Banking-style Authority (CMA) would allow the deal to lished by the UK Competition and Markets platforms that provide users with compar- go ahead, with the CMA having hinted in Authority on 28 November 2018, and taking isons of third-party lenders such as credit November that it would block the deal. The into account subsequent interaction with card providers and banks. < Nets renews and extends DNB and Eika deals Payment processor Nets is expanding its Eika CEO Hege Toft Karlsen said: “Eika agreements with DNB, Norway’s largest has been working with Nets for many years. bank, and Eika Gruppen. The expanded This new agreement will strengthen our remits confirm Nets as the largest card long-term, strategic partnership. Nets will processor in Norway and the wider Nordics deliver a number of new and more effective region. payment and card solutions for Eika banks Eika, which represents a strategic alliance and their customers. This will realise of 69 Norwegian banks, has agreed a new considerable cost savings for the banks in seven-year framework agreement with the Eika alliance.” Nets. The deal increases its card-processing DNB’s deal increases Nets’ scope beyond remit to include an array of value-added card processing and payment services, and payment and card services. includes joint innovation and a variety of According to Nets, joint innovation value-added payment and card services. will be key to the partnership, with Nets DNB executive VP Benjamin Golding partnerships with these two major players taking a particularly active role in product commented: “As the largest bank in in the Norwegian banking industry. In development. This will enable economies Norway, we depend on being able to offer the process, this confirms our role as the of scale for Eika’s 69 member banks; innovative, secure and stable services. leading enabler of Norway’s payment specific examples include fraud and And our ongoing partnership with Nets infrastructure. dispute services, which will be increasingly supports this. We have closely collaborated “We continue to make payments easier automated and incorporate new artificial with Nets for many years, and this new and more convenient, as well as safe and intelligence capabilities. chapter deepens our relationship.” secure, for our customers’ end users. The workflow digitisation that Nets will Thomas Jul, group executive VP – These collaborative partnerships, focused facilitate will also bring “significant process financial and network services at Nets, on product development, will ensure that and cost efficiencies” to banks and their added: “We are delighted not just to the Nordics remain at the forefront of customers. be continuing, but expanding, our payments innovation.” <
8 | March 2019 | Cards International
CI March 2019 565.indd 8 22/03/2019 14:35:36 News | Digest
Barclaycard Precisionpay to integrate with Amadeus ago, Barclaycard has been pushing the boundaries to create payment solutions that help make businesses more successful. “While cash flow remains one of the main challenges for any growing business, we know that travel agencies in particular have an ongoing need to make up-front purchases before they themselves get paid. This integration with Amadeus will be another way to help travel agencies take control of their cash flow and become even more competitive.” Virtual cards are a fast and convenient means of cash flow management. As passwords increasingly become outdated as the financial industry increasingly Barclaycard Precisionpay has announced overall payment process with quicker adopts more digital solutions, adding plans integrate into Amadeus’s B2B Wallet settlements. virtual payments into the accounts-payable payment solution, to boost payments in the workflow is one way to help pay invoices travel sector. The solution also enables businesses to more efficiently. The Precisionpay virtual card aims to pay suppliers up front without impacting Virtual cards are extremely secure make payments more simple and secure. It cashflow. Barclaycard highlighted that as there is no password for hackers to operates in there main ways: customers can use Precisionpay to build discover and use. Barcaycard Precisionpay • Barclaycard Precisionpay Online is stronger relationships with suppliers. will also generate a new virtual card suitable for increased control of direct Amadeus’s solutions support travellers after every purchase, making it almost and occasional purchases with less- by connecting them to relevant businesses impossible to hack. regular suppliers; such as travel agencies, airlines and hotels. Bart Tompkins, MD for payments • Barclaycard Precisionpay Connect is It said the new partnership aims to enhance at Amadeus, said: “Payments is not a directly connected to the buying system payments and create a seamless user one-size-fits all business. That’s why we using an API. It is particularly suitable experience. developed the B2B Wallet concept, which for buying from suppliers directly from a Travel agency Flight Centre, which has gives travel agencies access to a range catalogue, and over 80 stores in the UK, already uses the of different payment options in a single • Barclaycard Precisionpay Direct is aimed solution. link. The addition of Barclaycard brings at companies that want to use secure MD of client coverage at Barclaycard, greater choice and deepens our credit card payments but also retain purchase David Price, said: “Since launching the UK’s offer, enabling our travel agencies to better orders and invoices. It eases the first corporate credit card over 50 years manage their cashflow.” < Fingerprint Cards biometric software platform goes live The Fingerprint Cards biometric software Chief technology officer at Fingerprints, • OneTouch features an ‘always on’ sensor, platform for payments has gone live. Pontus Jägemalm, commented: “Biometric enabling users to make fast transactions; The FPC-BEP platform targets payment performance can only be optimised when • QuickTouch captures and verifies an cards, wearables and USB dongles, and aims you consider the whole package: hardware image of a fingerprint in less than 0.3 to transform the performance of its small and software working in harmony. seconds; and power-efficient biometric sensors for “Our technology is used billions of times • The EvoTouch algorithm learns and payments, which include the FPC1300-series every day, and now we have poured our adapts to the user’s changing conditions; and T-Shape module. long and unrivalled experience from the • 360Touch technology recognises a finger- The company said it can now offer card mobile world into this software platform to print, no matter its orientation, and and device makers a complete hardware maximise the performance in low-power and • The SafeTouch collection of functions is and software solution, which will integrate low-computing-power payment environ- designed to maximise security. biometric authentication and maximise the ments.” overall user experience. The company aims to drive acceptance While traditional payment security Fingerprints has also developed a new of biometric cards, and said it hopes to see systems are heavily reliant on passwords, in-house algorithm, adapting its mobile more biometric security rolled out by banks biometric cards aim to achieve a greater level algorithm, which verifies billions of ‘touches’ and financial institutions worldwide. of security. Using fingerprint or iris scanners per day, to the specific needs of payment Other advanced features of the FPC-BEP means only authorised persons are able to cards and payment devices. platform include: process transactions. <
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CI March 2019 565.indd 9 22/03/2019 14:35:39 technology | wearables
Banks are fully embracing the potential available to them to build overall customer fashion and technology: satisfaction, and they now also understand that style is increasingly important. At the beginning of this year ABN Amro released wearable tech for all its customers. Customers merging trends to can buy Garmin, Mondaine and Olympic watches, or keyrings and bracelets from Laks and rings from K-ring that have Mastercard- certified payment chips. define the future The amounts that consumers are spending with wearables are also increasing. Recognising this trend, ABN Amro now observes a limit of €250 a day that clients can spend with their Payment technology continues to reshape the financial wearables; it is the first bank in the world to industry; however, that is not the only sector where support higher-amount payments for these types of wearable device. it is making an impact. Briony Richter looks at how Other companies are also embracing wearables are transforming the world of fashion fashion tech. Amazon, for example, has patented a virtual mirror where users can try products on at home. This means fashion s wearables become increasingly but well-designed options. Now technology technology is moving in the direction where mainstream, technology is now and fashion brands need to work together to it will be possible to stand in front of a mirror A transforming the fashion industry. end the consumer confusion over whether and realistically try clothing on, see how it As new technologies merge with the old, devices are fashion accessories, tech hardware fits and looks, and match it up with make-up new developments drive innovation while or fitness tools.” products to fit individual complexions. fashion evolves. The London College of Fashion’s Fashion As the technology that powers wearables SHAPING FASHION’S FUTURE Innovation Agency (FIA) is constantly seeking gets smarter, fashion brands are driving the new ways to bring together the worlds of next evolution of the wearables market. Both the fashion and tech industries act fashion and technology. The FIA explores Mastercard recently noted that one in five as extensions of oneself, and for wearable various technologies from augmented reality, adults now wear a smart watch or fitness technology to be attractive to consumers, it wearables and virtual reality to reinvent the strap. Furthermore, by 2020, the wearable must appeal to both elements; this could take way fashion is perceived. technology market will be worth €30bn the form of a diamond cuff or metallic watch. One project that the agency is currently ($34.2bn) globally. This is a fast-moving The trend also represents an innovative working on is Westfield’s Destination 2028, market – and is certainly one to watch. way for brands to enter a new market, and a platform that aims to visualise the possible One of the first companies to enter will enable fashion to reach a new, digitally shopping centres of the future. The project fashion tech was Sony, with its Wena (Wear connected environment. includes concepts featuring hanging sensory Electronics Naturally) smart watch strap. Since the end of 2017, watch brand gardens and AI-enabled walkways, giving It incorporates quick contactless payments, Triwa and contactless tech provider Fidesmo consumers a glimpse into the future of the advanced fitness tracking and direct link-ups have partnered to create payment-enabled shopping experience. for phone notifications – all merged into a wearables. They launched the Tapster wearable While innovations like this will transform luxury timepiece design. in February 2019, to which users can connect the future of fashion technology, the key is However, technology is no stranger to a Mastercard to make contactless payments. to make the payment process as simple as fashion. From smart fabrics to models wearing Whether for fitness, design or brand possible, with fashion trends driving new Google Glass on the runway, it is clear that awareness, wearables are evolving rapidly. designs that meet consumer needs. < wearable tech will increasingly feature in the shaping of future fashion trends. Jorn Lambert, executive VP – digital solutions at Mastercard, says: “With fashion shows taking place in New York, London and Milan this month, and Mobile World Congress Barcelona about to get underway, there’s no better time to talk about the future of wearables. In the fashion world, trends such as athleisure remain steadfast. “Meanwhile, technology is getting faster and smaller, speaking to those same consumers seeking minimalist and seamless, The boundaries between fashion and wearables are becoming increasingly blurred
10 | March 2019 | Cards International
CI March 2019 565.indd 10 22/03/2019 14:35:41 technology | sumup
summing it up: making cashless more attractive
With consumers now expecting to be able to pay through multiple channels, there is a growing demand for fast, convenient and often contactless options. SumUp co-founder Marc-Alexander Christ explains to Briony Richter how the company meets those demands
umUp launched in 2012, and now has This allowed members of congregations with the beginning of the ‘post-cash’ era. a global reach that stretches across 31 to make quick and digital donations while Figures from UK Finance showed that card Scountries. at church. SumUp will support the Church has become the UK’s most popular payment Building its platform from scratch, SumUp of England revolutionise how they gain method, over traditional bank notes, for the created its unique card reader and app donations. first time.” that allows small merchants to accept card The Church of England now receives As ATMs and bank branches close across payments anywhere. It has also developed around £580m ($757m) in donations the UK, consumers are increasingly choosing a host of APIs and SDKs to enable it to annually, with SumUp technology enabling digital ways to pay. SumUp does not view this facilitate more services and functionalities. it, and businesses globally, to accept payments as a concern, necessarily, as it depends largely Speaking to CI, SumUp co-founder Marc- quickly. Furthermore, over 16,000 churches on how society tackles it. The key is providing Alexander Christ details the benefits of using involved will have access to a portable SumUp education and the infrastructure for businesses the platform. “SumUp’s service is about Air card reader through the Church of seeking to accept payments in multiple ways. empowering businesses of all sizes to take England’s Parish Buying portal. These can be The company will continue to support payments quickly and easily,” he explains. used to take contactless payments, Apple Pay businesses around the world as countries “The benefits of a mobile card reader are and Google Pay, as well as chip and PIN, and transition from cash to cashless. Asked about that – whether you are a taxi driver, landscape are capable of supporting 500 transactions what the future holds for SumUp, Christ gardener or a cafe owner – taking a payment without recharging. states: “Countries that are still reliant on cash from the tap of a card, or a smartphone are dwindling – and are certainly not doing device, is quick and easy. This means you can DEMOCRATISING PAYMENTS this out of convenience. Businesses actively focus on what makes your business unique.” lose out on potential customers if they’re Christ continues: “Protecting our one In an increasingly cashless world, businesses having to go find a cashpoint nearby instead million active users globally is always at the have to adapt quickly to ever-growing of paying for the service they want. centre of the service we provide. SumUp has demands from consumers. “Our role is to build a cost-effective, reliable over 1,300 staff working on making sure we “Traditionally, introducing card infrastructure of card readers which merchants are at the very forefront of data protection, acceptance to a business was expensive and can literally carry in their pocket, to help encryption and ensuring secure payments bureaucratically cumbersome,” Christ notes facilitate this change in culture.” channels. In fact, compared with taking cash about the challenges facing the card industry. Christ concludes: “Our key business payments, card payments pose far less risk of “Smaller merchants found the cost of focus remains the same, as it’s important to fraud and theft.” acquiring and maintaining the card payment remember where the core of the business lies – As well as small businesses globally, terminals prohibitive, which created an empowering small merchants to do what they SumUp has also turned its attention to acceptance gap. While 10% of the population love. However, with our recent acquisitions other organisations that need support in should be able to accept card payments, in of Shoplo and Debitoor, we’re looking to an ever-increasing digital society. In March reality only 1% does. SumUp has a vision of develop as a one-stop-shop for those looking 2018, SumUp partnered with the Church of empowering merchants to grow through card for the right technology to future-proof their England to make contactless, virtual terminal, acceptance while doing what they love. We’re businesses – whether that’s bookkeeping, and SMS mobile payments available to over on a mission to democratise payments.” building an e-commerce site, or making sure 16,000 churches, cathedrals and religious sites Christ continues: “The biggest disruption they don’t miss out on a sale due to lack of throughout England. to the financial sector is happening right now, technology.” <
www.cardsinternational.com | 11
CI March 2019 565.indd 11 22/03/2019 14:35:41 feature | prepaid
prepaid: growth brings a new wave of challenges
Prepaid can be one of the more neglected areas of the payments sector, but it is making strong strides, offering quick and cost-effective ways to increase customer satisfaction and enhance security. Briony Richter speaks to Diane Brocklebank, commercial director, and Paul Swinton, chair at the Prepaid International Forum (PIF), about the impact of cybercrime and where the industry is heading
he PIF represents organisations digital technologies and their adoption across to prepaid, to support them with quicker around the world that are fully the world. Moves towards a more personalised account-opening processes and transparent Tregulated under e-money and customer journey and the development tracking of expenses and charges. payment services legislation, and that of more seamless channels are also driving “For consumers, prepaid is the engine operate across the prepaid and fintech ambition among financial organisations. behind a growing range of alternative, feature- sectors. With more payments options available, rich digital accounts that can offer lower The organisation is committed to the prepaid industry is moving towards an costs and fees, fast account opening, as well accelerating innovation in the prepaid era driven by consumer choice. However, as smartphone accessible products that meet industry, as commercial director Diane as adoption grows, so too do the risks. modern-day spending habits,” she explains. Brocklebank explains to CI. Brocklebank highlights that as the risk of “Prepaid also plays a key role in driving “PIF was formed to build awareness and the fraudulent attacks grows, businesses working financial inclusion and education, helping profile of the prepaid sector as a key enabler within the prepaid sector face the same consumers from every part of society to of inclusive financial services and as a driving hurdles as other financial institutions. They benefit from the innovation that prepaid force for fintechs in the payments space,” must be able to combat fraud with the right injects into financial services.” she explains. “We do this by demonstrating infrastructure and innovative solutions. The rapid growth of online platforms makes the social and financial benefits that prepaid the digital financial landscape particularly delivers to all parts of society, and by helping AGILE PLATFORM vulnerable to targeting by hackers. Combined our members to overcome the legislative and with growing consumer expectations, trust, operational hurdles they all face. Prepaid is able to offer businesses an extremely safety and confidence are vital for online “As a not-for-profit organisation, we have agile platform that can facilitate the growths financial platforms. It all comes down to no commercial goals. Our goal is to make in new banking services, expense management finding the perfect balance between protecting sure businesses get the support they need to and fraud solutions. consumers, driving innovation and making innovate, compete and thrive. This benefits In an increasingly digital world, businesses cybersecurity a priority. not only the wider industry, but the people are using prepaid solutions to seamlessly Prime examples of vulnerability include and businesses they serve.” streamline their payment processes and traditional banks such as TSB that still rely The payments industry has never been more improve overall operations. Brocklebank notes on legacy systems. Over the course of 2018, exciting, with 2018 seeing a proliferation of that small businesses in particular are turning the bank suffered from multiple data breaches
12 | March 2019 | Cards International
CI March 2019 565.indd 12 22/03/2019 14:35:44 feature | prepaid
and IT meltdowns. The bank reacted to the attacks, but in the current environment, this is no longer enough: the key challenge now is detecting well-cloaked threats before they can cause serious damage. Asked whether financial organisations will be able to keep up with the hackers, PIF chair Paul Swinton states: “In an increasingly interconnected world, criminals are becoming more sophisticated. Staying one step ahead of fraudsters is a constant challenge for every financial service provider. “Whilst it’s very difficult to completely eliminate the threats, our research shows that businesses are actively embracing new technologies that allow them to develop and implement robust fraud-prevention strategies, including new identity platforms that combine multiple identity technologies to help them verify their customers.” He continues: “Collaboration is key Use of facial-recognition technology is growing in the fight against fraud, as this presents an opportunity for operators, legislators, • Of those applications failing initial A growing number of fintech businesses regulators and government departments to database checks, 14.3% are cleared to be across the prepaid industry are using a leverage data and insights to build an effective opened within 15 minutes and 100% of range of technological techniques that are line of defence. For example, Confirmation of valid applications are cleared within two increasingly difficult for hackers to penetrate. Payee is a new payment-verification process days; Importantly, these new strategies are not being developed by Pay.UK to give customers • 39% of online applications are started but harming the overall digital journey for the greater assurance that they are sending their not completed, and customer. payments to the intended recipient. • Of those requiring KYC, 62.5% are “A newer trend in the sector is to go “We’ve also seen an increase in consumer successful with one process, while 65% are beyond ID document validation to examine a education initiatives, which we hope will also successful in account opening with customer’s online identity and gain confidence reinforce the efficacy of new fraud-fighting multiple processes. around their real-world identity. This can be technologies. The government-backed Take done manually, but digital footprint analysis Five to Stop Fraud campaign led by Financial IDENTITY TECHNOLOGIES can also be done programmatically, where the Fraud Action UK, part of UK Finance, is one digital footprint is tested for authenticity and such example.” Swinton highlights: “From our recent compared with other sources such as an ID Recent research from PIF actually revealed research, we know that companies in the document,” Swinton adds. that criminals and terrorists are increasingly prepaid sector are expanding the range of While competition, cybercrime and on the back foot thanks to ID checks on identity technologies they use to gain a emerging technologies are all disrupting the e-money and prepaid services. The research wider view of a customer’s identity, either industry, the prepaid market has been growing reported that new, secure and innovative at the point of account opening or ongoing rapidly. One positive disruption is that the technology is proactively thwarting criminals monitoring. In fact, companies in the prepaid number of UK adults using tech-based from seeking to use e-money or prepaid and fintech space have long used technologies financial services has risen to 42%, compared financial services to launder money or commit that mainstream players are only now starting to just 14% in 2015. other types of fraud. to adopt. Concluding, Swinton says: “Brexit As the market for e-money products “These include geo-location, which uncertainty is a major challenge right now. continues to grow, so does the increased risk identifies a person by location. When this is The UK is a significant market for prepaid and of attempts by criminals and terrorist groups combined with address information extracted is the home of much of the EU’s innovation to grab the sector for themselves. from other KYC content, companies are and growth for this sector. Over two-thirds of Highlights of PIF’s research include: increasingly making better-informed fraud- businesses we surveyed in 2018 were preparing • 100% of prepaid fintech firms achieved prevention decisions. to move at least some or all of their operations Customer Due Diligence compliance “The use of facial biometrics is also out of the UK. requirements. In addition, many firms extensive. While comparing the face in a selfie “The full impact of Brexit and new went above and beyond the minimum with the face in an ID document, such as a payments services legislation remains to be compliance requirements; passport or driving licence, is over and above seen, but as an industry body we’re helping • When database checks are successful, compliance requirements, many companies in businesses to navigate the complexities and the 100% of accounts are opened within 15 the prepaid market use this technology to help potentially different scenarios that each could minutes; prevent impersonation and identity theft.” bring.” <
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CI March 2019 565.indd 13 22/03/2019 14:35:48 feature | gift cards
gift cards: will they save the high street?
Two trend predictions are common in the UK market: the fall of the high street and the rise of mobile payments. However, the gift card looks as if it could buck – or at least delay – both of these. Patrick Brusnahan reports
he UK high street is undergoing ($2,504), France ($1,547), Canada ($1,372) have seen significant year-over-year growth in a period of massive turmoil. and Germany ($1,114). physical gift card purchasing: US consumers TAccording to the Property Industry bought an average of 5.9 physical gift cards Alliance, there are more than £200bn GIFT CARDS in 2016, 6.5 physical cards in 2017 and 8.0 ($264bn) of high street properties and physical cards in 2018. supermarkets across the UK. An unlikely saviour for the high street is “This has outpaced growth on the digital However, the CBRE, Britain’s largest valuer, the gift card. According to First Data, the side, where consumers have shifted from has stated that between June and November payment-processing business acquired by purchasing 6.1 digital gift cards in 2017 to 2018 there was a 10% drop in the capital Fiserv for $22bn, the physical gift card is still 6.3 in 2018. The data clearly illustrates that values of good-quality high street shops. This performing strongly in the UK. both are growing – and, more importantly, is a massive fall. Sixty-two percent of UK consumers prefer not cannibalising one another. However, Approximately 85,000 jobs were lost from to purchase physical gift cards rather than physical gift card spending growth seems to be the UK’s high streets in the first nine months digital ones. Similarly, 44% prefer to receive outpacing digital gift card growth for now.” of 2018, according to a report from the Office physical gift cards when only 27% prefer In the survey, 34% of those surveyed said for National Statistics. Big retail businesses, receiving the digital alternative. gift cards prompted a visit to a store they such as House of Fraser, Poundworld and Speaking to CI, Dom Morea, head of gift would not have visited. Furthermore, 44% Toys ‘R’ Us have gone into administration solutions at First Data, says: “Digital gift cards said it prompted more frequent visits to the over the last two years. Further companies, are certainly on the rise in the UK, but it is store. such as New Look and Homebase, have closed hard to imagine physical gift cards going away Another crucial aspect is how much multiple stores. anytime soon. consumers spend when a gift card is involved. E-commerce is also a rising concern for “In fact, per First Data’s 2018 UK Morea explains: “Consumers are indeed prone the high street as it becomes even more Consumer Insights Study, when purchasing a to overspending the value of their gift cards – fruitful. According to GlobalData, the UK gift card as a gift, UK-based consumers tend 74% of UK consumers did so in 2018, per the e-commerce market grew in value from to prefer purchasing physical cards to digital UK Consumer Insights study. This is a major $131.9bn in 2014 to $212.3bn in 2018; it is by a 62% to 18% margin. According to the plus for brands, and it is not too surprising. expected to grow by a further 40% by 2022. study, this is primarily because physical cards “Just as getting customers in the door Furthermore, two in every 10 consumers can offer an added personal touch during can be half the battle for retailers, for many shopped using a smartphone every month gift giving – gift receivers also prefer physical shoppers, a significant hurdle is feeling in 2018. UK consumers had the highest cards. empowered to spend at all. Once consumers e-commerce spend per capita ($3,192); this “In a similar study in the US, which we have an incentive, such as a gift card, to go is much higher than its peers such as the US have conducted for 18 consecutive years, we spend a little, they often feel comfortable
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CI March 2019 565.indd 14 22/03/2019 14:35:53 feature | gift cards
gift card trends, 2018 Reasons to purchase gift cards for others
Present for occasion/event Present for festive event To pay someone Physical To limit how gift is spent E-gift To earn loyalty points 0% 20% 40% 60% 80% 100%
Gift card locations 2018
Department store Supermarket grocery Online-only merchant Entertainment Discount store Fast food restaurant Coffee shop 0% 5% 10% 15% 20% 25% 30%
Source: First Data
enough to splurge beyond their initial impact of gift cards in the UK market. It card as a consumer proposition across each budget.” found that 84% of people have purchased a generation of UK shoppers. However, with The average UK consumer spends £204 a gift card at some point in their life. Of those Generation Z and Millennials leading the way year on gift cards; however, the majority of that have, 87% of them are purchasing gift in terms of gift card purchasing frequency, it is this seems to be as gifts for others, and the UK cards at least once a year. now more essential than ever that the gift card is not yet into self-gifting. In the UKGCVA’s State of the Nation industry evolves to meet the changing needs “Self-gifting seems to be a rising trend report, it states that no matter the age of the and desires of the modern consumer.” globally, but it was not as popular in the UK,” consumer, gift cards hold relatively similar Clearly, gift cards – and their physical forms Morea adds. “Of the UK consumers who levels of popularity. in particular – are still in vogue, but is this purchased a gift card for themselves, many did In fact, 89% of Generation X (35-54 years enough to save the British high street? so to earn loyalty rewards or discounts. old) and 86% of Generation Z/Millennial Morea concludes: “To make the most of “One popular strategy that brands have (16-34 years old) shoppers reveal they have their gift card programmes, retailers and executed to drive loyalty is to offer customers purchased a gift card at some point in their brands should look for gift card solutions an additional free or discounted card when lifetime, compared to a slightly lower 78% of that offer programme and card inventory a gift card is purchased. In the US, the self- Baby Boomers (55 years and over). management, streamlined digital gift card set- gifting trend has become the norm: our study Younger generations are actually helping the up, consumer engagement tools, distribution found that 64% of US consumers bought a gift card sector out. A gift card was purchased and provisioning technology, all while gift card for their own personal use in 2018, at least once every two months by 44% of operating on a secure, trusted platform. up from 58% in 2017.” Generation Z/Millennials; however, only 35% “These features will make it easy for of Generation X admitted to the same, and businesses to try a variety of gift card options, UKGCVA even fewer (16%) Baby Boomers agreed. and even customise cards to fit a specific UKGCVA director general Gail Cohen season or promotion. We’ve found these The UK Gift Cards and Vouchers Association comments: “The 2019 research confirms the unique campaigns can be highly effective in (UKGCVA) has also been researching the growing importance and relevance of the gift boosting sales.” <
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CI March 2019 565.indd 15 22/03/2019 14:35:58 country snapshot | brazil
BRAZIL
country snapshot: brazil Confident consumers gradually shift to electronic payments
razil remains a cash-driven economy, initiatives, efforts by banks and growing The government has taken a number with cash accounting for 77% of consumer awareness and confidence in of steps to boost financial inclusion and Btotal payment transaction volume in digital payments, Brazilians are gradually promote electronic payments in the 2018. However, as a result of government shifting towards electronic payments. country, including expanding the banking
value of credit tRanSfers value of payment cards value of cheque payments
$trn $bn $bn 1 . 1,
12. 8
4 .
3
. 4 2
3. 2 1
2 14 2 1 2 14 2 14 2 1 2 18e 2 22f 2 1 2 18e 2 22f 2 18e 2 22f
Source: Central Bank of Brazil, GlobalData Source: Central Bank of Brazil, GlobalData Source: Central Bank of Brazil, GlobalData
16 | March 2019 | Cards International
CI March 2019 565.indd 16 22/03/2019 14:36:12 country snapshot | brazil
infrastructure in rural regions, appointing Debit card shares by issuer Debit card shares by scheme banking correspondents, and introducing regulation allowing consumers to open bank accounts through digital channels. With the necessary payment F infrastructure in place – which includes thers thers 2 . % 2 .8% a wide ATM network and the highest 2 .8% astercard proportion of POS terminals among its 41.3% regional peers – consumers are gradually becoming more aware of the benefits of anco anco payment cards. The frequency of card do rasil radesco isa 2 .8% 23. % 3 . % payments increased from 23.2 times per card per year in 2014 to 33.4 in 2018. Over the next five years, e-commerce growth and the emergence of contactless
technology will help drive growth in the Source: GlobalData Source: GlobalData payment card market. pay later shares by issuer pay later shares by scheme DEBIT CARD PAYMENTS RISE
Debit card penetration is high in Brazil, thers and, on average, every Brazilian holds at .8% least one debit card. This is supported by thers 24.1% growth in the country’s banked population, Ita nibanco 3 .8% with the government and banks striving astercard 48. % to provide access to financial services isa nationwide. anco 43. % radesco In an effort to increase financial 18. % anco inclusion, the government passed do rasil Resolution 4,480 in April 2016, requiring 2 .1% banks to allow consumers to open accounts using electronic channels. The measure applies to checking, time and savings Source: GlobalData Source: GlobalData deposit accounts, and removes the need for physical IDs or proofs of address. Banco Inter was one of the first four banks to Growth is also supported by the primarily as a result of the government’s introduce the measure, and its account availability of instalment facilities for decision to levy a 6.38% tax on numbers jumped from 10,000 in March big-ticket purchases on credit cards. The transactions made with credit cards outside 2016 to 80,000 in December 2016. decrease in credit card interest rates the country from 2011. Consequently, The debit card payments transaction charged by leading banks will also aid most Brazilians chose prepaid travel volume is also rising, registering a growth in this space. cards specifically for foreign trips. As the significant CAGR of 12.3% between cards were loaded with local currencies, 2014 and 2018. The capping of debit E-COMMERCE GROWTH transactions were treated as domestic card interchange fees from October 2018 payments and attracted a tax of just 0.38%. will encourage debit card transactions in Brazil’s e-commerce market grew However, with effect from December coming years. significantly from BRL39.5bn ($11.92bn) 2013, the tax on international prepaid in 2014 to $19.23bn in 2018, at a CAGR cards was raised to 6.38%, reducing PAY-LATER CARD USE of 12.7%, as improvements in technology demand. The economic crisis that began in and rising online and mobile penetration mid-2014 also led to an overall decline in Despite low penetration, pay-later cards resulted in enhanced consumer confidence demand for prepaid cards until 2016. are the preferred card type for payments, in online transactions. In March 2018, Banco Central do Brasil accounting for 60.3% of total card With major banks offering customised announced a cap on debit card interchange payments by value in 2018. cards for online purchases, as well as the fees, with effect from 1 October 2018. The pay-later payment frequency stood introduction of alternative solutions such Charges are now limited to 0.8% of the at 46 times per card per year in 2018, in as Apple Pay, Google Pay, Samsung Pay, transaction value, and the average must not comparison to 27 for debit cards. Many Visa Checkout and Masterpass, the market exceed 0.5%. The central bank also noted banks offer benefits in the form of reward is expected to record healthy growth. that the maximum debit card transaction programmes and cashback to encourage Prepaid travel cards have became value could be reduced, or a cap on credit card use. popular among Brazilian consumers, card interchange fees imposed. <
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CI March 2019 565.indd 17 22/03/2019 14:36:19 country snapshot | indonesia
INDONESIA
country snapshot: indonesia Government aims to reduce a high unbanked population
ash remains the predominant total transaction volume in 2018, mainly as payments, and low acceptance of payment payment instrument in Indonesia, a result of the high unbanked population, cards at merchant outlets. Cespecially among the rural inadequate banking infrastructure, However, the government has taken population. It accounted for 98.3% of the limited consumer awareness of electronic various initiatives to transform the country’s payment landscape and bring value of payment cards value of cheque payments more of the population into mainstream banking. These include the introduction
$bn $bn of a National Strategy for Financial 8 1 Inclusion, the appointment of banking correspondents in rural areas, the migration 12 of payment cards to EMV standards, compulsory use of electronic payments for toll road payments, and the launch of a 4 National Payment Gateway. Consequently, 3 the number of payment cards in circulation, 2 the transaction volume and the transaction 3 1 value recorded robust CAGRs between 2014 and 2018 – a trend that is anticipated to continue over the next five years. 2 14 2 1 2 14 2 1 2 18e 2 22f 2 18e 2 22f The emergence of contactless technology and e-commerce market growth Source: Bank of Indonesia, GlobalData Source: Bank of Indonesia, GlobalData are also anticipated to support an increase
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CI March 2019 565.indd 18 22/03/2019 14:36:29 country snapshot | indonesia
in the payment card market’s value. Rising Debit card shares by issuer Debit card shares by scheme investment in POS infrastructure and the proliferation of new payment solutions will further promote electronic payments. thers 13. %
DEBIT CARDS HOLD FIRM thers 2 .1% Debit cards remain the preferred payment an a yat isa Indonesia 48.4% card type among Indonesian consumers. 4 . % The government and commercial banks astercard an entral 3 . % have taken initiatives to bring the sia 1 .1%
unbanked population into the formal an egara banking system, resulting in the banked Indonesia 14. % population rising from 36.1% of the total population in 2014 to 52% in 2018.
Debit card use is mostly restricted to Source: GlobalData Source: GlobalData ATM cash withdrawals, with frequency of use six times higher than for payments. pay later shares by issuer pay later shares by scheme This is primarily because both consumers and merchants still prefer to use cash. However, as the government enhances the card-acceptance infrastructure, debit cards thers . % are being gradually used for payments. an andiri thers 2 . % STRICTER REGULATION 3 .8% astercard 2 . % isa Pay-later cards account for a small . % proportion of the payment card market, an entral I sia 21.2% with overall penetration at just 6.6 cards iaga per 100 individuals in 2018. 14.3% Strict government regulations on credit card eligibility remain a primary reason for the low penetration. The minimum Source: GlobalData Source: GlobalData monthly income to apply for a credit card in Indonesia is IDR3m ($221.05), with the number of credit cards held and SHARED ATM NETWORKS instance, national ATM operator ATM credit limits depending on the individual’s Bersama allows instant interbank fund monthly income. Although payment card adoption is low transfers by member bank customers. In addition, in December 2017 the in Indonesia, accounting for just 1.7% Indonesian central bank required all of the total transaction volume in 2018, UNBANKED POPULATION credit card issuers to submit details of the government is collaborating with the transactions to the Tax Office. central Bank Indonesia, payment service The prepaid card market recorded a CAGR providers and banks to develop initiatives of 43.9% between 2014 and 2018 in terms E-COMMERCE GROWTH to boost electronic payments. of the number of cards in circulation – a One example is the introduction trend that is anticipated to continue for at E-commerce in Indonesia posted a of instant fund transfers that enable least five years. significant CAGR of 47.5% over five years, individuals and commercial customers Rising demand for prepaid cards has rising from $2.95bn in 2014 to $13.95bn to transfer funds in real time. Bank been supported by the country’s high in 2018. Rising mobile penetration, Indonesia also introduced a real-time unbanked rural population. As consumers increasing consumer confidence in online gross settlement system, BI-RTGS, in become accustomed to using prepaid cards transactions, extensive foreign investment, November 2000, which settles high-value for daily transactions, issuers are looking to and the presence of secure online gateways transactions, over $7,368.17, in real time. increase their customer bases. have driven this growth. However, the time window for transfers is Airline Citilink Indonesia collaborated While alternative solutions such as between 6.30am and 4.30pm, which is a with Bank Mandiri in October 2017 PayPal, Doku Wallet, iPayMu and BBM key limitation of the system. to launch a co-branded e-money Money have driven e-commerce growth, ATM operators ATM Bersama, ATM card exclusively for Citilink Indonesia consumers in Indonesia have also started Prima and Alto have taken initiatives to passengers. The card can be used to pay for to pay for online purchases by scanning QR develop a system to enable low-value travel purchases including flight tickets, and codes displayed on merchant websites. interbank transfers at low fees. For in-flight meals and beverages. <
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CI March 2019 565.indd 19 22/03/2019 14:36:31 Country snapshot | mexico
MEXICO
country snapshot: mexico Services offered in partnership with convenience stores
ash dominates the payments With government and central bank Mexicans are gradually shifting towards landscape in Mexico, accounting initiatives to promote electronic payments, electronic payments. The central bank and Cfor 89.5% of the overall payment growing consumer awareness and a gradual financial institutions have taken steps to transaction volume in 2018. rise in the acceptance of payment cards, boost financial inclusion, such as insurance
value of credit transfers value of payment cards value of cheque payments
$trn $bn $bn 2 . 2
4 1 . 1
3 1 . 1
2
. 1
2 14 2 1 2 14 2 1 2 14 2 18e 2 22f 2 18e 2 22f 2 1 2 18e 2 22f
Source: Banco de México, Bank for Source: Banco de México, Bank for Source: Banco de México, Bank for International Settlements, GlobalData International Settlements, GlobalData International Settlements, GlobalData
20 | March 2019 | Cards International
CI March 2019 565.indd 20 22/03/2019 14:36:34 Country snapshot | mexico
cover on deposit accounts, and the Debit card shares by issuer Debit card shares by scheme availability of basic and payroll accounts. To arnet increase merchant acceptance, the central 2. % bank has capped interchange fees on debit
and credit card transactions, while banks are reducing merchant discount rates. 2 .4% While debit card penetration is relatively thers high, the cards are mostly used to withdraw 4 .2% astercard isa 41. % cash from ATMs. Pay-later cards are used an oppel .1% more frequently for payments. 18.1% Contactless cards and mobile proximity payments are not widely used in Mexico, itiban 1 .3% although major banks have made attempts to boost their adoption.
FINANCIAL INCLUSION Source: GlobalData Source: GlobalData
The government undertook the Savings pay later shares by issuer pay later shares by scheme and Credit Sector Consolidation and Financial Inclusion Project between 2012 and 2017. The project provided financial thers 4. % education to 1.8 million individuals and Citibank encouraged Mexicans to open new deposit 1 .3% accounts – with a total of 9.5 million members insured by deposit insurance in astercard 2017, compared to 6.1 million in 2011. thers 1 .1% 38. % isa . % The number of banking service points .8% for members of social bank Bansefi tripled BanCoppel from 1,800 in October 2011 to 5,600 in 13.1% July 2017; during the same period, the number of banking agents rose from just 95 to 2,496. CONVENIENCE STORES Source: GlobalData Source: GlobalData
The model operated in the Mexican consumer confidence, and an increasing cards in Mexico. Prepaid card providers banking and payments system is very number of online retailers. are partnering with leading chains such different from those of the country’s peers. To capitalise on the growing market, as Oxxo and 7-Eleven to enable the Banks and other financial institutions online retailers also offer cards for online distribution of prepaid cards; for instance, partner with convenience stores to shopping purposes. In March 2018, 7-Eleven offers prepaid cards for iTunes, provide banking and payment services. For Amazon introduced a Mastercard-branded Amazon, Netflix, Playstation and Uber. instance, Banamex partners with Oxxo, prepaid card, Amazon Rechargeable. It Mexico’s largest convenience store chain, enables users to load money through CARD INFRASTRUCTURE to supply co-branded Saldazo debit cards convenience stores and can be used for through 14,000 stores. As of December purchases at Amazon’s online store. The number of POS terminals registered a 2017, over nine million Saldazo debit cards CAGR of 7.6% between 2014 and 2018. had been issued through Oxxo stores. UNBANKED AND PREPAID Mexican banks are collaborating with Similarly, in October 2017, Amazon mobile payment technology vendors to introduced a cash payment service that Mexico’s prepaid card market, though deploy mobile POS (mPOS) terminals at enables Mexicans to load Amazon account nascent, grew at a moderate pace over the ‘mom and pop’ stores, as they are typically balances at 7-Eleven stores. five years to 2018, at a CAGR of 6.6% in more cost-effective than traditional POS terms of transaction value. terminals. E-COMMERCE SUPPORT The high unbanked population, the In November 2014, Mexican tax disbursement of social welfare through authority Sistema de Administración Mexico is the largest e-commerce market prepaid cards, and the availability of Tributaria and the National Chambers of in Latin America. The market recorded remittance cards drove the overall prepaid Commerce, Services and Tourism launched significant growth between 2014 and card market between 2014 and 2018. the Tableta Concanaco scheme to provide 2018, supported by rising internet and Convenience stores are also an important micro-enterprises and SMEs with mPOS smartphone penetration, improving channel for the distribution of prepaid terminals at subsidised rates. <
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CI March 2019 565.indd 21 22/03/2019 14:36:38 industry insight | freedompay
a magazine subscription or hotel expenses, it is impractical for merchants to need payment security: authentication each time. While some industry use cases are exempt from SCA under PSD2, others are not. In the lodging industry, for example, overnight automated sca and the new, processes for incremental authorisation could now require consumer interaction. One solution is for the consumer to ‘whitelist’ trusted merchants, so future quiet revolution payments do not require SCA – but most have yet to be educated. Merchants may want to encourage customers to do this. It is the biggest shake-up in payment security since chip- 2. SME retailers: Small and medium-sized and-PIN. When the European Payment Services Directive retailers need to consider whether they have for Strong Customer Authentication (SCA) comes into force SCA technology. If not, will introducing this impact their workload and the level of in September 2019, consumers and businesses can expect a service they can offer to customers? They sharp drop in fraud, writes FreedomPay’s Tony Hammond may need to rethink the way they interact with customers, in order to comply with hroughout the payment ecosystem, On the other hand, rising online fraud – PSD2’s SCA requirement. SCA will mean key challenges for and consumers’ details being hacked – are 3. Keeping details current: In theory, it Tonline and face-to-face transactions, growing threats, so people understand the is the consumer’s responsibility to keep and for payments via cards or smartphones. need for protection, even if the specifics of their payment details and authentication Many changes have already been authentication are less well known. information up to date. In practice, this can implemented through existing technology: Whereas consumers have become used to be hard to achieve: your smartphone may there has been a quiet revolution in customer tapping to pay, they will now have to revert contain more than one email address, for authentication, as businesses have responded to inserting their card and entering a PIN. example. During a transaction, a payment to growing security threats. Merchants are typically better informed than system may seek out these details and use SCA is the next stage of this revolution. consumers, so an education programme could an out-of-date address in error. It applies where payer and payee are entirely educate the public on how new rules from 4. Fuzzy rules: Aspects of SCA are unclear. inside Europe, or whether one party has ‘one September 2019 will safeguard transactions. No two merchants operate in exactly the foot out’. It requires consumers to provide two Ideally, SCA will reduce online fraud such same way, so how far they will be subject types of authentication from three categories: that transaction processing costs fall. Perhaps to the rules is open to interpretation. Will something they have (such as a card), then, merchants will seek to negotiate lower it depend on the type of transaction? How something they know (such as a PIN) and rates from acquirers – whose premiums should will they know if they are exempt from something they are (such as a fingerprint). be lower – as fraud declines? the regulations? These questions may only From September, customers making become clear once issues are encountered contactless payments at a POS will be NEW CHALLENGES and new precedents set. asked for additional identification at either 5. Issues with contactless payments: There every fifth transaction, or at a cumulative SCA standards for online transactions were are continual and growing impediments to transaction value of £150 ($197) – whichever implemented in 1999 via 3-D Secure version contactless payments by regulators, aiming occurs soonest. This and other new layers of 1. But this caused delays, and consumers to reduce fraud but placing a growing security may slow down payments for retailers. abandoned purchases. The latest iteration, burden on merchants. Payment solution So, how great an impact will SCA have? 3DS2, brings in frictionless authentication providers can mitigate SCA’s additional One large UK-based grocery chain estimates such as facial recognition, providing more burden by minimising contactless- that it loses £1m in turnover for every extra flexibility and customisation options for authorisation times. They can also offer second that a transaction takes at the POS. merchants. expert advice on the most effective ways to At a time when many high street retailers are Across Europe, different countries and comply with PSD2 and 3DS2. struggling, SCA could be bad news if not different sectors are moving at different speeds handled wisely. to adopt these technologies – some are yet All merchants need to look at the full range Consumers are put off by long queues to introduce chip and PIN – but everyone is of their payment-acceptance use cases and ask at the POS. They decide to buy less, or to heading towards SCA compliance, even if they whether there is anything they need to change. leave the store altogether. So there are strong will reach it at different times. We believe SCA is a positive development: motivations to maintain speed and simplify Higher authentication standards are clearly consumers and merchants will be more secure, transactions. This psychological hurdle applies a positive development to reduce fraud, but just as they were 13 years ago when chip and equally online: if authentication is too tricky we foresee challenges in implementing SCA: PIN arrived. The challenge is to implement it or time-consuming, consumers typically 1. Recurring payments: Where a consumer while also enhancing the customer experience: abandon their baskets. needs to make recurring payments, such as a truly positive revolution. <
22 | March 2019 | Cards International
CI March 2019 565.indd 22 22/03/2019 14:36:38 HEAR l NETWORK l DISCOVER l CELEBRATE Digital Accountancy Forum & Awards London 2019 3rd October 2019 l London Shape the Future of Digital Accountancy The Digital Accountancy Forum & Awards has grown from strength to strength in recent years. Starting as an awards reception in 2012, we will be returning to London in 2019 with our industry forum followed by a gala awards ceremony aimed at UK, European and global accounting firm leaders. On the 3rd October at the iconic Waldorf Hilton we will once again bring together c-level professionals from accounting firms, regulators and industry bodies, consultancies and advisors, law firms and tech vendors to discuss some of the most pressing issues the industry faces today.
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Untitled-41019Timetric_DAF_Ad.indd 1 1 22/03/201912/12/2018 15:2910:23 Retail Banking London 2019 24th April 2019 l London SHAPE THE FUTURE OF RETAIL BANKING
Retail Banking London 2019 brings together high-street banks, new market entrants, financial professionals and industry disruptors in an active discussion of the key issues facing the industry: new regulation, digitalisation and tech innovations that are shaping the future of retail banking.
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For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
Untitled-51118Timetric_RBI_Ad.indd 1 1 22/03/201926/11/2018 15:3210:17