October 2016 Issue 352 www.electronicpaymentsinternational.com

The new mobile wave Are about to make cards redundant?

•Sibos 2016: Transforming the landscape? •SWIFT: Europe’s changing payment infrastructure •Comment: combating professional fraud •Surveys: New Zealand, South Korea, Ukraine

EPI 352.indd 1 11/11/2016 12:32:10 Multichannel digital solutions for fi nancial services providers

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

CONTENTS

NEWS

3: NEWS DIGEST

FEATURE few landmark events for elec - night Eastern Time, during electoral proceed- tronic payments have taken place ings, the cryptocurrency climbed to $732, almost 6: SIBOS over the last month. Firstly, and $120 more than the same time a month prior. The theme for this year’s Sibos conference was ‘transforming the landscape’. Anna most probably least significantly, Speculation started the night before the elec- Milne reports back from Geneva A tion. If Clinton were to win, this was not expect- every black cab in London now takes 8: SWIFT card payment- and they have scrapped ed to have much effect on the value of bitcoin. A With the ECB looking to merge the Target2 the surcharge, instead adding 20p to the Trump win, however, would be a different story. real-time gross settlement payment base fare. Hardly something that will put And true enough, as Trump garnered more system with the T2S securities settlement people off. Is it too little too late, in light and more votes, so the value of bitcoin rose in mechanism, Anna Milne speaks to SWIFT at Sibos about its plans for 2017 of Uber’s storming success? I wouldn’t tandem, rising 3.4% in the two hours after mid- like to say. night on 9 November. 10: CONTACTLESS The global contactless card transaction At more or less the same time there was the A similar spike occurred during Brexit, when value will almost quadruple between 2016 world’s highest ever (probably) trans- bitcoin spiked 7%, resulting in a $100 increase and 2020. Why is contactless affecting the action in the form of the remote purchase of a in the price of bitcoin during one trading session. payments world with so much vigour? Patrick Brusnahan takes a closer look vintage car at British auctioneer Coys. All this amid the pound taking a serious bashing. The first ever purchase of a classic car via social In an interview for CoinDesk, a hedge fund SURVEY media using mobile app Vero for the sale of a manager dealing in bitcoin said a Trump presi- 1964 Aston Martin DB5 for £825,000 ($1.01m) dency, despite being an “epic disaster” in most 13: NEW ZEALAND was completed by a buyer who made the pay- respects, would be “great for bitcoin”, adding, 14: SOUTH KOREA ment using Apple Pay. “in the fear and chaos bitcoin would be a defen- Mobile payments are on the increase and will sive asset people could turn to”. 15: UKRAINE likely follow an upward trajectory for quite some He wasn’t the only one. As a result of Brexit, COMMENT time longer. many analysts had predicted a boost for bitcoin Recent research by Timetric suggests that in the event of success for Donald Trump. 2: JOHN MARSDEN, EQUIFAX mobile NFC payments will overtake contactless Other analysts suggested that even if there was card transactions both in volume and value, a spike, it would be shortlived. Either way, any 16: RALF OHLHAUSEN, PPRO GROUP although the latter won’t take much to beat, given positive fluctuation would indicate that bitcoin the low value maximum limit on contactless card is a go to measure for many to safeguard against payments. See page 10 for a more comprehensive economic uncertainty.< rundown on the contactless payments landscape, based on this research. And further west, the US election result has come up trumps for bitcoin. Shortly after mid- A NNA MILNE, [email protected]

Editor: Anna Milne Sub-editor: Nick Midgley For more information on Timetric, visit Tel: +44 (0)207 406 6701 our website at www.timetric.com. As a Ray Giddings Email: [email protected] Director of Events: subscriber, you are automatically entitled Tel: +44 (0)203 096 2585 to online access to Electronic Payments Financial News Publishing, 2012 Group Editor: Douglas Blakey Email: [email protected] International. For more information, please Registered in the UK No 6931627 Tel: +44 (0)207 406 6523 telephone +44 (0)207 406 6536 or email ISSN 0956-5558 Email: [email protected] Head of Subscriptions: Sharon Howley [email protected] Unauthorised photocopying is illegal. The Tel: +44 (0)203 096 2636 Senior Reporter: Patrick Brusnahan London Office contents of this publication, either in whole or Email: [email protected] Tel: +44 (0)207 406 6526 71-73 Carter Lane part, may not be reproduced, stored in a data Email: [email protected] London retrieval system or transmitted by any form or Sales Executive: Harry Hooker Tel: +44 (0) 203 096 2622 EC4V 5EQ means, electronic, mechanical, photocopying, Asia Editorial: Xiou Ann Lim Email: [email protected] recording or otherwise, without the prior Tel: +65 6383 4688 Asia Office 1 Finlayson Green, #09-01 permission of the publishers Email: [email protected] Customer Services: Singapore 049246 Group Publisher: Ameet Phadnis Tel: +44 (0)203 096 2636 Tel: +65 6383 4688 Tel: +44 (0)207 406 6561 or +44 (0)203 096 2622 Fax: +65 6383 5433 Email: [email protected] Email: [email protected] Email: [email protected]

www.electronicpaymentsinternational.com October 2016 y 1

EPI 352.indd 1 11/11/2016 12:32:12 Electronic Payments International COMMENT EQUIFAX

How to combat professional fraud

With some unwanted recent findings regarding fraud, as well as major breaches in cybersecurity, a stronger strategy towards security is needed now more than ever. John Marsden, head of ID and fraud at Equifax, gives an overview of the problem and offers critical advice for individuals and businesses

ecent ONS crime figures show bank- and the security signs visible in a brows- thinking when we create a password, mak- ing and credit fraud is up 13% in the er. Make sure you log on to a banking ing them all too easy to crack. This is why year ending June 2016. website at a web address you know, not businesses need to invest in new technology Companies have stepped up their via a link. like biometrics and device recognition creat- R ing multiple layers of defence. fraud protection with multiple layered fraud 4. Never provide any banking details to a defences, but this often moves criminal activ- third party you do not know or are unsure The criminals do not stand still, and busi- ity to channels that are less well protected. about – in part or as a whole. nesses of all sizes need to work hard to stay Fraud is a surprisingly professional indus- 5. Avoid unnecessarily sharing details such ahead. try. The number of cases continues to rise as as your name, address and date of birth. criminals find new ways to access informa- Stolen passwords and usernames tion, often fuelled by a deep understanding Fraud losses rise Around 500m Yahoo passwords and user- of their target’s identity. Underlying this is The latest FFA UK report reveals a 25% year- names have been stolen since 2014. the sharing of knowledge and consumers’ on-year increase in financial fraud losses for Passwords are continuing to topple like personal information across dark web mar- the first half of 2016 to £399.5m. dominos, and the rate of major breaches is ketplaces. Cyber and ID fraud dominate the fraud increasing at an alarming rate. The Yahoo Consumers must take steps to protect landscape, and online scams and attacks con- breach is a super-sized domino that is going themselves from falling prey to fraudulent tinue to rise. E-commerce is growing, and is to have huge effects on people for years to behaviour. People are without doubt con- a tempting prospect for fraudsters looking to come. fused about where to store and share confi- use identity and payment data such as credit This is a game changer in the online fraud dential information like their bank account and debit card information they have gained world; aside from Gmail being cracked, there number, sort code and even date of birth. via the vast ‘carders’ markets’. is no other single event that could happen As consumers seek the convenience and Fraudsters are sophisticated, and can easily that will cause more fraud and damage over speed offered by digital correspondence, gather information which can then be used the next five years. they expose themselves to fraudsters who to open accounts and make purchases online The breach has been a major blow to will steal this information to gain access to fraudulently. This situation is exacerbated Yahoo, with personal details of around 0.5bn accounts and financially exploit individuals. by an increasing frequency of data breaches users now up for sale on the dark web. This Data shared on the dark web cannot by hackers who can then sell this data on to information will spread quickly and globally, be treated as a one-time event; the data other criminals. with no chance of recovery. There will be a never truly vanishes and can spread glob- In addition, a frightening number of con- long-lasting impact for consumers and busi- ally in a short amount of time, enabling sumers are also still being tricked into hand- nesses as hackers attempt to use the breached criminals to fraudulently takeover accounts ing over personal data. This usually occurs data to access other online accounts. and identities. when a criminal is able to convince an indi- We urge businesses to be on high alert for To reduce the risks and damage associated vidual that they are emailing or calling from any customer contacting them from a Yahoo with fraudulent activity, more needs to be a legitimate organisation and they need to email address, as there is a high chance that done to educate the public and give them a verify their personal details. Using this infor- their details have been comprised. One par- stronger chance of protecting themselves. mation, criminal fraud networks can create ticular area to watch are requests to reset The advice is very clear: remain vigilant, high-quality ID data to sell via the dark web. passwords; sending a ‘click here to reset pass- only share your details when you are sure The financial services industry has to work word’ link to a Yahoo address is not advis- the channel is secure, and keep the follow- together, educating consumers and sharing able given the size of the breach. ing guidelines in mind when handling your information to help collectively tackle this Passwords are no longer effective as a personal information: criminal activity. standalone measure, and companies must 1. Do not do your online banking in public The focus must be twofold. It is vital that act sooner rather than later to improve their places, and definitely do not use public any organisation holding personal data con- online security. Wi-Fi – criminals can set up bogus pub- tinuously evolves the systems and processes The normal advice of complex password, lic Wi-Fi hotspots to access devices and in place to keep that information safe. numbers and numerals no longer works information. Equally, any business handling financial in a world where there are now billions 2. Never respond to unprompted banking transactions has to take every possible step of cracked passwords; companies should messages unless you are absolutely certain to ensure the customer they are dealing with instead introduce a second layer of authenti- the request is genuine, for example you is genuine. cation processing, such as device recognition, have spoken with your bank to confirm. It is clear that passwords alone are no to help build the necessary barriers to keep 3. Be very aware of domain names online longer enough, fraudsters are wise to our data safe.<

2 y October 2016 www.electronicpaymentsinternational.com

EPI 352.indd 2 11/11/2016 12:32:13 Electronic Payments International DIGEST NEWS

STRATEGY PRODUCTS Visa appoints new CEO Dion introduces instant bank solution Payment giant Visa has named Alfred Kelly, global payments technology company, into Jr, a current Visa board member, as its new a technology-driven digital commerce com- Dion Global Solutions has launched a Real CEO. pany, and has led a strategy that will benefit Time Payment Engine (RTPE) solution, Kelly will replace Charlie Scharf, who is this company for years to come. which will enable banks to comply with new resigning as CEO with effect from 1 Decem- “The board of directors is extremely grate- regulatory directives and also meet customer ber 2016. Kelly is president and CEO of ful for Charlie’s leadership and wishes to demands. Intersection Co., and the former president of thank him for his outstanding four-year A modular payment hub, RTPE will sup- American Express (Amex). tenure, which saw total shareholder return port processing of real-time payments and According to the succession plan, Kelly increase by more than 130%, outperform- will allow banks to become compliant with will join the company on 31 October 2016 ing both the overall stock market and our new European regulation, European Pay- as CEO designate, while Scharf will act as an peer group.” ment Services Directive, which becomes advisor to Kelly from 1 December 2016 for During his 23-year tenure at Amex Kelly effective in 2018. several months. assumed numerous management roles, The multi-channel solution, according to Visa independent chairman Robert Mats- including president of Amex and head of the company, will allow banks to connect to chullat said: “Charlie has been a visionary the global consumer and consumer card ser- customers via corporate, internet, mobile or CEO, highly successful by any set of metrics. vices groups. At present he is on the board of branch banking. He has helped transform Visa, the leading directors at MetLife. < The solution supports the ISO20022- based Common Global Implementation- STRATEGY Market Praxis standard for customer con- nectivity. partners with payment Developed on Dion’s SEPA Gateway solu- tion platform, RTPE’s architecture provides platform Zapper in the UK 24-hour availability that supports existing SEPA workflows as well as foreign currency Chinese online payment platform Alipay outside of China and pay with Alipay. and domestic payments. has collaborated with Zapper, a mobile pay- “Meanwhile merchants, in addition to the Dion Global Solutions chief technology ments platform, to allow Chinese tourists Alipay payment solution, can better connect officer Andreas Wagner commented: “The visiting the UK to pay using the Alipay app and understand hundreds of thousands Chi- PSD2 directive requires banks to rework the at more than 1,000 locations in the country. nese tourists travelling in the UK.” payment processing cycle and implement a The partnership will enable over 450m Zapper CEO of UK and Ireland Gerry far more efficient and quicker method. Alipay users to pay for goods through the Hooper said: “This is an incredibly exciting “Using Dion’s messaging technology, Alipay app at affiliated Zapper businesses in opportunity for us, pioneering the way by X-Gen, our RTPE application is a real-time the UK, Europe and North America. combining our synonymous QR code pay- payment hub that will support banks to Alipay app consumers will be able to use ment technology. comply with the upcoming payment initia- mobile-based QR code technology in the “This is a huge development, enabling Chi- tives. country; nearly 85% of mobile payments in nese tourists to seamlessly continue using the “We provide a cost-efficient solution, as China are made using QR technology. highly popular Alipay app when travelling it embeds into the existing application and Alipay’s head of Europe, the Middle East to the UK, and our partnered Zapper ven- process landscape. and Africa, Rita Liu, said: “With Zapper as a ues to appeal more favourably to travelling “Due to its modularity customers can select partner, Alipay can further enhance our user Alipay users and stand out from the competi- only what they really need to improve pro- experience as they can conveniently shop tion.”< cess efficiency.” <

PAYMENTS WorldRemit launches remittance service to Cameroon

UK-based online money transfer service “WorldRemit remains committed to secure “By opening its 700 points of sale to the WorldRemit has partnered with financial and instant money transfers, tapping into the beneficiaries of WorldRemit transfers from company Express Union to launch its instant unrivalled local knowledge and operational abroad, Express Union is showing its civic remittance service to Cameroon. excellence of trusted partners like Express commitment to solidarity, generosity, popu- The deal will enable WorldRemit clients Union.” lation welfare and Cameroonian develop- to transfer money instantly, to be picked up Express Union general manager Charès ment thanks to money transfers”. as cash at over 700 Express Union locations. Nghoguo added: “For Express Union – the According to the World Bank, Cameroon WorldRemit co-founder and executive number one money transfer company in received $244m in remittances in 2015, more director Catherine Wines said: “Adding hun- Cameroon – the partnership with WorldRe- than double the amount in 2010. dreds of new cash pickup locations to our mit is geared towards providing an addi - In May this year WorldRemit partnered Cameroon corridor translates into improved tional means of connecting Cameroonian with UAE Exchange to expand its reach service, better choice and more convenience migrants to their relatives back in the coun- in Morocco, Uganda, Rwanda, Kenya and for our customers and their families. try, and local economic actors to foreign ones. Zambia. <

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EPI 352.indd 3 11/11/2016 12:32:13 Electronic Payments International NEWS DIGEST

STRATEGY SECURITY Payment startup Affirm raises UK financial $100m from Morgan Stanley fraud losses up Affirm, the company started by PayPal co- what they will owe, with no hidden fees or 25% in first half founder Max Levchin, has obtained a $100m surprises. lending facility from financial services giant Affirm also offers advanced technology Total financial fraud losses in the UK dur- Morgan Stanley. and analytics that look beyond traditional ing the first half of 2016 increased by 25% The financial technology company said it FICO scores. Affirm currently has agree- to £399.5m ($490m) for payment cards, will use the facility to continue its expansion ments with more than 750 merchants. remote banking and cheques, according of consumer-friendly POS financing at lead- The fresh round of funding comes with the to new data issued by the Financial Fraud ing online and offline retailers. news that Affirm has tripled the volume of Action UK (FFA UK). Affirm offers consumers an alternative to its loans in the last year. Losses on payment cards, including traditional credit with a transparent loan Levchin co-founded PayPal with Peter remote purchase fraud, lost and stolen cards, product that enables consumers to pay for Thiel, and was its chief technology officer card-not-received, counterfeit card and card purchases over time. for four years before it was bought by eBay ID theft, grew by 31% to £321.5m, com- Affirm shows customers upfront exactly in 2002. < pared with £244.6m in the first half of 2015. The FFA data shows that the prevented MOBILE loss for cards stood at £475.7m. Between January and June, remote pur- Apple Pay arrives to ANZ chase fraud increased by 31% to £224.1m, compared to £171.7m in the first half of customers in New Zealand 2015, the report said. Banks’ security systems continued to pre- vent the majority of fraud from taking place, with prevented fraud totalling £678.7m, according to FFA UK. This is equivalent to £6 in every £10 of attempted fraud being stopped. There was a small increase in remote banking losses, up from £66.2m in the first half of 2015 to £70.6m, with a prevented loss of £103.2m. FFA UK director Katy Worobec com - mented: “Banks use a range of robust secu- rity systems to protect their customers, but as these systems become more sophisticated, ANZ Bank New Zealand has announced actions are contactless, and this number is criminals have increasingly been turning to that customers with a Visa debit or personal steadily increasing as more retailers adopt scams and exploiting data breaches to con ANZ Visa credit card can now use Apple Pay contactless technology. victims out of their personal and security to make transactions in the country. “Adding Apple Pay to our information, as well as money. When a consumer adds a credit card to offering will make it fast and convenient for “Banks will continue to invest in advanced Apple Pay, the actual card numbers are not more customers to securely make everyday verification methods, including biometric stored on the device or on Apple servers. purchases wherever there is a contactless validation and dynamic card security codes. Instead, a unique device account number is terminal. “We ask all consumers to be alert to assigned, encrypted and securely stored in “Following on from our highly success - scammers, which is why we recently the secure element on the device. ful goMoney mobile banking app, ANZ is launched the Take Five campaign,” Worobec In stores, Apple Pay works with Apple’s pleased to continue leading the industry with continued. latest iPhones, including the iPhone SE, innovative solutions for customers.” “The industry takes its responsibility to iPhone 6 and later, the iPad Pro, iPad Air 2, ANZ New Zealand head of digital and combat fraud extremely seriously, but banks and iPad Mini 3 and later, and Apple Watch. transformation Liz Maguire said: “Our cus- cannot stop all fraud on their own. It is Customers will be able to use Apple Pay tomers asked us for Apple Pay and we’re essential all organisations with a role to play anywhere in New Zealand where contactless thrilled they can now use it, continuing our work together to better protect individuals payments are available, such as BP, The commitment to giving our customers innova- and companies.” Warehouse, Warehouse Stationery, Noel tive digital ways to do their banking. In an attempt to prevent future data Leeming, Torpedo 7, McDonald’s, Domi- “We’re confident they will enjoy this easy, breaches, the FFA UK has also requested no’s Pizza and Burger King. They can also simple and secure way to pay without having all organisations that manage personal and use Apple Pay to purchases online via apps to present cards or cash.” financial data to improve their security sys- and websites. On 5 October 2016, Russia-based Sber- tems, and urged customers to beware of any ANZ CEO New Zealand David Hisco bank launched Apple Pay for its customers unsolicited phone calls, text messages and said: “More than 50% of ANZ Visa trans- and MasterCard cardholders. < emails. <

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EPI 352.indd 4 11/11/2016 12:32:15 Electronic Payments International DIGEST NEWS

PAYMENTS Seamless launches feature in UK

Swedish m-commerce software firm Seam- According to Seamless, the UK is one rapidly establishing itself as the standard less has introduced a contactless payment of Europe’s most advanced markets for way for customers to pay with their mobile, feature for its Seqr mobile payment app in contactless payments, with nearly 500,000 adding contactless payments and direct bank partnership with UK-based payment net- terminals currently activated. account linking the UK will cement this posi- work GoCardless. Seamless CEO Peter Fredell said: “The tion further.” The contactless feature, called Tap & launch of these two new features represents Linking bank accounts is facilitated by Pay, will allow Seqr customers to link bank a major leap forward for Seqr in terms of GoCardless, whose partnership with Seam- accounts to the app and make payments customer acquisition and payment accept- less was announced in June. Tap & Pay is directly from them. ance in the UK. At a global level, Seqr is available to Android users.<

STRATEGY PAYMENTS Wells Fargo forms new payment Vodafone and PayPal team up to enable UK division; shakes up management contactless payments American banking giant Wells Fargo has cre- includes dealer services, including indirect Vodafone has teamed up with payment ated a new business division that will focus auto lending and commercial services, and giant PayPal to allow UK customers to on payments, virtual solutions and innova- personal lending, including direct auto, per- make contactless payments through PayPal tion. sonal lines and loans and student lending. accounts with Android smartphones. The Payments, Virtual Solutions and Inno- Perry Pelos, currently head of commercial The partnership will enable PayPal users vation group will be headed by Avid Mod- banking services, has been named head of to link accounts to Vodafone Pay to make jtabai, who is currently head of the bank’s the banking wholesale banking division. purchases at over 400,000 restaurants and consumer lending group. Codel, Pelos and Mary Mack, head of shops that accept contactless payments. Commenting on the move, Wells Fargo community banking, have also been added Customers can also make payments on president and COO Tim Sloan said: “Creat- to the group’s Operating Committee. public transport in and around London ing this new group will significantly enhance “There is nothing more important to our where contactless and Oyster are accepted. our ability to transform products, services leadership team than for our customers and Customers can also make purchases of and technologies to deliver simple, reliable clients to be proud of banking with us,” said up to £30 ($36) at any contactless terminal and compelling new experiences for today’s Sloan. using a phone integrated with a Vodafone and tomorrow’s customers.” “I have huge confidence in our leadership NFC SIM. They can also use Vodafone Pay, In conjunction with the creation of the team, and believe these new appointments a subsidiary of the Vodafone Wallet app, at new division, the bank also unveiled a raft will enable us to manage our business and retailers by using a PIN. of management changes. engage with customers and clients in compel- Customers can also add MasterCard bank Franklin Codel, currently head of home ling ways as we serve their varied and evolv- credit and debit cards to Vodafone Pay. lending, will assume an expanded role that ing needs.”< Vodafone Pay can be used to make a pay- ment even when the phone is switched off M&A or out of battery, because the terminal uses NFC technology embedded in the Vodafone Euronet Worldwide completes SIM card. Vodafone UK head of consumer services Kate Wright said: “Our customers told us YourCash Europe acquisition that being able to use PayPal when making Electronic payment provider Euronet World- convenience to customers, and has a proven mobile payments was important to them wide has completed the acquisition of Your- track record of delivering strong growth in so we’re delighted to now offer this on Cash Europe, a UK-based ATM operator. new and existing markets. Vodafone Pay. YourCash Europe operates around 5,000 “This is a great opportunity to leverage “The service also works with any Visa and cash machines in the UK, Netherlands, Bel- the benefits that each organisation brings to MasterCard credit or debit card offering cus- gium and Ireland. the partnership in order to expand Euronet’s tomers greater choice than any other mobile The company, which processes millions ATM coverage across Europe, create addi- payment service.” of transactions every year while dispensing tional value for all of our customers, accel- PayPal UK director of mobile commerce billions of pounds and euros to consumers erate revenue growth and achieve market Rob Harper said: “Mobile payments have via its European ATMs, generated revenues synergies across the businesses.” long been at the heart of what we do; this of around £29m ($35m) in 2015. The com- Jenny Campbell, CEO and principal year marks 10 years since we first launched bined businesses will operate independent shareholder of YourCash commented: “We a mobile payment service in the UK. ATM networks in 21 European countries. are excited to join the Euronet family. After “As mobile technology continues to evolve, Euronet CEO – EFT Europe Nikos Foun- years of excellent organic growth and expan- we will continue to look at new ways to tas said: “YourCash has a management team sion into new markets, we are excited to be make it easier and faster for our customers that shares our vision of bringing financial able to leverage Euronet’s global scale.”< to pay.” <

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EPI 352.indd 5 11/11/2016 12:32:15 Electronic Payments International FEATURE SIBOS

The two big questions for banks

The theme for this year’s conference programme at Sibos in Geneva in late September was ‘transforming the landscape’. Anna Milne reports back with an essential overview of the main points made by key industry participants during the Payment Strategies for the Future panel discussion

anks have two questions to ask • To produce more collateral to help trade finance, because this area has a lot of themselves as they move into an members navigate the field paper-based processes, and stakeholders in open banking environment: where • To monitor development in the market different areas need information to proceed B are they sourcing their products and • To use regulation and technology to with the next stage. services, and how are they distributing them? inform business model The instant exchange of information there- Previously a bank would only produce and • To produce papers informing whether fore makes a massive difference, and speeds develop its own products and services, and the environment now is actually new, things up tenfold; goods can be sent sooner distribute them to its own customers. or whether it is a matter of pulling the once transactions are transparent. Now they can bring in other providers’ strands of themes together from the last offerings, and there are also platforms as few years A pertinent use case: a permissioned ledger well, providing interplay between products Daniel Szmukler, MD at the EBA Group, There is a huge mountain to climb to trans- and services. said the EBA workgroups do not value block- form this. How do you make it interoperable? During the Payment Strategies for the chain in itself, but aim to evaluate use cases The view was that blockchain/DLT will Future panel at Sibos, the EBA Group out- of how beneficial it would be to financial not replace the entire legacy environment lined some very real prospects for banks with services, particularly in transaction banking. with something new unless a whole new regard to evolving in the emerging ‘open They analysed possible use cases on inter- environment is put in. It would just be tanta- banking’ and PSD2 landscape. bank and intrabank transactions, but could mount to spending a whole lot of money just “At EBA we have a four-point focus,” not find much of a use case for interbank; it to do something in a different way. explained Vincent Brennan, head of group was, however, much more relevant to intra- Stakeholders need to build new value ser- operations at Bank of Ireland and deputy bank, for example in cases where a parent vices to exploit the technology. chairman of the EBA Group. company distributes among subsidiaries. The role of a bank has always been to fill The four points are: There is a whole raft of opportunities in a gap, provide a service; this needs to evolve.

Sibos soundbites Blockchain hype has died down somewhat, or Standards, standards, standards as aggressively as it might have seemed. rather the camps have become distinctly more If one word echoed around the conference hall, It was only too keen to point out there will be Don’t have online account details? polarised. it was standards. a point in time, if it is not already here, where There are those who are happy to dismiss Everybody is in agreement about the need to Ripple would be only too delighted to join it outright, and those who proclaim its You and your associates may be entitled to online agree on a common standard in payments, so it forces with SWIFT, and possibly vice versa. They profundity in shaping the future. is just a matter of time. have market share and scalability respectively login credentials. The benefits of full online It must be said, however, that there is to be play for. a little more understanding around the Segmentation of banks access are as follows: different types of blockchain: permission/ Banks need to figure out what they are best at permissionless, mutable/immutable (thanks and, based on this, decide who to partner with. The future • Timely daily news updates to Accenture’s curveball release last week), IBM calls it Cognitive Business: digital today, and so on. CBW Bank is coming to Europe, and had a “great week” drumming up business at Sibos. cognitive tomorrow. • Access the latest analysis IBM’s CEO Ginni Rometty said: “This will Watch this space. “It is more than machine learning,” said have profound impact on how the world • Monthly editions sent directly to your inbox Rometty. Augmented intelligence, or, as works. Efficiency will be improved [to the IBM’s Rometty: “Very few will be able to keep tune of] over $100bn. Blockchain will do up with our cloud development – the amount futurologist Gerd Leonhard, speaking at the • News alerts direct to your inbox we invest. Innotribe arena, referred to it (in a human for transactions what the internet did for • Comments from key industry influencers and leaders information.” “Banks need to make strategic decisions about evolutionary way), exponential humanism. She was referring to IBM’s work on and with partnership, for those segments they decide Leonhard explained: “There will be a shift of • Search for specific, relevant content the Linux Foundation and Hyperledger, they will not and should not specialise in, and value from selling commodities to creating for which IBM has contributed significant then focus on what they are good at.” experience. Airbnb doesn’t own property; Uber • Access the archive amounts of code, open source, so anyone can doesn’t own cars. work with it. SWIFT’s gpi vs Ripple’s global payments To summarise it differently: “IBM puts 38% steering group “The future of the financial industry is creating To create or activate your account please contact: of its revenue ($31bn) into helping clients Despite fierce gossip to the contrary, Ripple experiences – value trust and relationships, become digital,” Rometty added. has not been throwing down the gauntlet quite and having tech support it.”< [email protected]

6 y October 2016 www.electronicpaymentsinternational.com www. www.privatebankerinternational.com

EPI 352.indd 6 11/11/2016 12:32:17 Digital touch briefings ad copy - CI 18042016.indd 1 18/04/2016 11:17:37 www. Digital touchbriefings adcopy -CI18042016.indd 1 EPI 352.indd 7 bank six years ago. a in acceptable been even have not would lingo Such ago? years six cryptocurrencies we would be sitting here today talking about -party player.” third a by disintermediated be to expected – fintechs are not as good at this. become very good at dealing with regulation with cybercrime and data. Banks have had to they all need to coalesce, and it is intertwined IT,channel, practitioners, Cards products, require collaboration, even within the bank. open banking really means.” cesses. digitise the process and then rethink the pro ise, rather than give in to the temptation to digit to seek then and process the rethink tois point “The said: Group, EBA at CFO technology can bring. intimatelyis linked totheopportunity that or account holding fees; the business model International Electronic Payments It might not be just based on transactions Szmukler said: “Who would have thought banks80% that stated research “KPMG all now topics “The added: Brennan what on view common a not is “There Egner,Thomas member,board andCEO - - has to give. an instant payment, therefore something else a flat fee? We cannot charge the customer for instant payments? Are we going to introduce explained. the strategy, the revenue strategy,” Brannan vice versa. ing the processes before digitising rather than rethink of terms in evolve, might banking possible to provide a clearer picture of how colleagues.” competitors are now potential partners and to end.” in banks, however, is to own the process, end trades, master of none. The culture inherent all of jack a become you otherwise self, pulled into play. job. Culture comes into play – everything is day the in organisation the of culture the by bound when job day the in difficult is “Also you need to break it down in terms for pay to going is who example, “For “It is about everything: the pricing model, This led to the question of whether it was considered once “Firms added: Brennan “Also, you cannot build everything your “We need to think outside the box, which To create or activate your account pleasecontact: [email protected] access areasfollows: login credentials. You and your associates may beentitled to online Don’t have onlineaccount details? www.privatebankerinternational.com • • • News alertsdirectto your inbox • Monthly editionssent directly to your inbox • Accessthelatest analysis • Timely daily news updates • Access thearchive Search for specific,relevant content Comments from key industry influencers andleaders The benefits of full online - - just trot out the requirements.” lation, from a strategic point of view, and not an element of proactivity in response to regu realising they need to act and react, introduce and September. Maybetween this ‘strategic’; is answer the pliance. Now you ask the same question and proposition. compliance or strategic a was it whether was a question put to bankers on PSD2 and at channel level, etcetera.” stages, need to take a view at product level, tion; we are not the only ones. and that is not disclosing sensitive informa made life far too complicated for ourselves, Brennan continued. “For our bank we have now and 2018. between happen not will ity.change Real standards and PSD2; that has to take prior tech deadlines, upcoming with complying to tied are banks term, medium to short the In term. longer and medium short, of “Something has changed and banks are banks and changed has “Something “The majority view was that it was com there Day EBA “At continued: Egner in journey the out think to need “Banks “There are multiple layers to this answer,” < SIBOS 11/11/2016 12:32:19 18/04/2016 11:17:37 - - - -

FEATURE Electronic Payments International FEATURE SIBOS

The future of Europe’s payment infrastructure – an update

With the ECB telling Sibos that it is looking at merging the Target2 real-time gross settlement payment system with the T2S securities settlement mechanism, providing a single platform for cash and securities processing in the eurozone, Anna Milne speaks to SWIFT’s Carlo Palmers to get the gen on its plans for 2017

f the ECB’s proposed merger of Tar- started. The system will be going live next SWIFT is also eagerly watching how the get2 and T2S goes ahead, SWIFT year, after stress tests. announcement Yves Mersch made pans stands to lose its status as sole pro - The SWIFT board said in June that any out regarding the consolidation of the T2 vider of the Target2 network, which solution should be applicable across differ- and T2S platforms. How would this affect I ent communities. SWIFT? it has had since 2004 when the central bank selected SWIFT. Palmers explains that there are slight dif- T2 runs on SWIFT. The new system is At the time it made sense for SWIFT to be ferences everywhere, so the board said to likely to go multi-network so SWIFT would the network provider as it already had a sys- analyse differences and come up with a com- no longer have exclusivity, and the harmo- tem in place, but it meant SWIFT employed mon solution harmonising different sets of nised solution SWIFT would build for retail its own proprietary solutions, differentiating requirements for all parties. payments would also have to support ECB it from the network-agnostic T2S, the single If sufficient community support is gar- real-time payments. pan-European platform for securities settle- nered by June 2017, SWIFT will rebuild the “We need to see the development first to ment in central bank money. Australian solution and build the standard- make sure we build the right thing,” adds The ECB now wants to consolidate the ised system. But what does Palmers expect Palmers. two systems in an open, agnostic solution, thereafter? Asked whether there is more uncertainty and is even looking at blockchain as a means “That depends on what community sup- now than ever before, Palmers replies: “Last by which to achieve this. port we achieve but, for example, we are year we had uncertainty as to whether there For now, SWIFT’s stance is clear: “We’re closely following Europe, where there are would be real-time payments in Europe. eagerly watching how the ECB study will lots of systems – Nets, Equens, EBA. “Now we know for certain real-time pay- evolve; how far will the ECB step into the “In Hong Kong we are closely following ments are going to happen, but the question European market, we really don’t know,” the UK as it looks to revive Faster Payments is how it will happen,” he explains. says Carlo Palmers, market infrastructures and also anything not on CHAPS. To what extent do the banks need to work solution manager at SWIFT. We will look at Canada later, after it has together? As far as SWIFT is concerned, this “For us it will be one of the potential cus- built its new payments platform. is essential. Palmers worked in standards at tomers we would be able to provide a solu- “In the UK you have Bacs and ACH, so [it SWIFT for many years, and drew compari- tion for, but we really don’t know and I’m involves] looking at whether it makes sense son with this. not sure they know either, which is why they to harmonise into one single solution for all “We need to bring the banks round the are studying it.” retail payments. Who will build and operate, table to build a messaging standard. We need SWIFT is currently working intensively on potentially bringing people together? The to get the operators round the table in the its Australia rollout, for which testing has PSR is looking at this.” same way.”

8 y October 2016 www.electronicpaymentsinternational.com

EPI 352.indd 8 11/11/2016 12:32:20 Electronic Payments International SIBOS FEATURE

But how do you get everyone together? Do how this will be achieved between two oper- “Otherwise it’s very difficult for the bank they not just sit and watch, and wait for the ators needs to be figured out. each time they want to connect to a new or first movers? “The UK, Denmark, Sweden and Australia different real-time network because they “We have talked to a number of opera - do not need this, but across Europe we do.” have launched a full-scale project.” tors this week and they are prepared to work together. It makes it easier for them; they US market plans On blockchain have to do it. The US is already working on instant pay- We know, and Palmers reiterates, that “There is a necessity, definitely in the ments, and TCH has chosen as the SWIFT is looking into blockchain, however eurozone, for operators to be interoperable. operator – using its own network, not relying he remains sceptical as to its current potential Banks being connected to different operators on the SWIFT network. capacity for real-time retail payments. need to be able to exchange the payment in SWIFT’s approach is to see if there is “It doesn’t seem to be ready yet today to seconds – it’s not up to the consumer. demand for a connecting platform for larger step into the real-time retail market for high- We believe only a common solution can institutions. volume, low-latency, high-capacity traffic; it support that.” “Our interface – AMH, for larger institu- does not seem ready to handle this yet. So what, briefly, are the different systems tions – needs to be upgraded for real time, “Maybe in the future, but other areas, such and how do they differ? but we are seeing if there is demand for a as trade finance and correspondent banking, “That’s the million-dollar question. That is connector to hook up to TCH,” explains are areas where blockchain is more appropri- the task at hand, to establish the differences. Palmers. ate right now than real-time payments. It is very detailed. “The other thing about AMH is that it is “It’s good in those areas because you dis- “Specifically in the eurozone, interoper- one thing to build a connector, but AMH is tribute the proof of the data, but in real time, ability across currencies is a different story. A a multi-network interface not bound to the because of the speed it requires, it doesn’t common settlement scheme has been agreed SWIFT network. seem to be the right solution at the moment.” with the ECB. A scheme on service levels, “Larger institutions in the US have said If someone said the SWIFT network was SEPA credit transfer and now ECT SEPA if they used AMH they would also use it in old-fashioned, how would Palmers respond? Credit Transfer Inst. have also been agreed,” other communities with real-time systems, “Speak to Wim Raymaekers! I didn’t think Palmers explains. which is yet another reason for us to harmo- anyone holding real-time payment systems in “All the details – including how quickly nise the communities to come up with the the retail space was looking at Ripple; only the payment will happen, how to reject it if same real-time payments offer so all banks once they go cross-border, cross-currency do need be, how to abort, how to decide if the have the same connector, and therefore a they look at Ripple.” payment is too slow, how to stop execution similar experience when connecting to dif- – all this has all been agreed, but technically ferent systems. Common standard One of SWIFT’s goals is standardisation in Anatomy of an instant payment the financial services industry. “It has always been, and we’ll do every- thing we can to achieve that. “Members don’t want to kick off big pro- jects from scratch for every community they want to connect to each time they want to connect to a new real-time system,” Palmers explains. “The challenge now is there is no time to do conversions; before there was time when systems were off, for example at night. “Everyone now seems to agree on ISO 20022 as a common payments standard, but next come different protocols such as for security and tech, and if these are not har- monised the end consumer standing in the shop wanting to pay on their mobile won’t be able to do so in real time.” So who is doing what and where? Palmers explains that Belgium has issued a request for The key points of the Single Euro Payments • A maximum still needs to be set, but SLAs proposals and is choosing a system that will Area (SEPA) Instant Credit Transfer (SCT Inst.) will expect much faster figures – this is up serve the Belgian market. scheme are as follows: to individual banks and operators. In the Netherlands each bank is choosing • SEPA Inst. will cover the largest area in • 99.999% of payments will be expected to its own operator, already assuming that these the world for an interoperable instant operators will be able to work together. be completed within two to four seconds. payments scheme. “Otherwise you will never be able to do a five-second payment in the Netherlands. • The EBC has set a maximum time of 20 • In Australia it was agreed that 99% of “The ECB is saying you should not look seconds for a real-time payment. An payments have to be made within one at this domestically; you need to look at it additional five seconds can be applied for a second, and 90% in five seconds; beyond eurozone-wide. They don’t like the fact they reply to come back. 10 seconds the payment is aborted.< are all choosing their own solution.” <

www.electronicpaymentsinternational.com October 2016 y 9

EPI 352.indd 9 11/11/2016 12:32:23 Electronic Payments International FEATURE CONTACTLESS

Contactless mobile makes waves

The global contactless card transaction value will almost quadruple between 2016 and 2020, while the global mobile NFC transaction value will grow more than fivefold, Timetric’s latest research reveals. What are the factors contributing to this change? Patrick Brusnahan takes a closer look

n the mid-term, contactless cards are contactless card transactions in the UK rose History and progress set to dominate the global contactless by 212.2% year on year in January 2016. Contactless has certainly come a long way payment environment, according to The number of bank-owned contactless from its origins. The first incarnation of a recent report from Timetric. POS terminals in the UK reached 309,706 in contactless was launched in the US in 1997 I December 2015, representing roughly 17.8% However, smartphone penetration is through Speedpass. Introduced by Exxon destined to increase, causing mobile NFC of the overall number of POS terminals. and Mobil, it was a key chain powered by capability becoming more widespread, pos- As of May 2016, there were a total of Radio Frequency Identification (RFID). sibly leading to mobile NFC overtaking 460,000 contactless POS terminals in Technological advances, the shift from contactless card payments. the country, equivalent to a 50% annual cash to electronic payments, media attention A number of European countries, as well increase. and an evolving retail environment have all as Australia and Canada, are outpacing the Contactless card shipments more than contributed to the rise of contactless from its rest of the world in terms of adoption of trebled between 2012 and 2015, indicating humble beginnings. contactless; these countries currently account a rapid increase in the global adoption of However, in terms of use case, mass public for most of the world’s contactless payment contactless card payments. transport has proven to be a crucial catalyst activity. Europe is also ahead of the US in terms n EMV CARDS AS A PROPORTION OF TOTAL n EMV/NFC CAPABLE-POS TERMINALS IN THE of contactless adoption. According to CARDS IN THE US, 2012-2016 US (MILLION), 2012-2016 MasterCard, contactless transactions in Europe grew by 150% in 2015 from the pre- % m 50 vious year. 8 Global demand for NFC acceptance is 7 accelerating, and in May 2016 Visa Europe 40 6 reported 3bn contactless transactions on both cards and mobile devices. In addition, 30 5 one in five in-store Visa-processed card pay- 4 ments were contactless during the 12 months 20 to April 2016. 3

Visa reported 165m contactless cards in 2 circulation and 3.2m NFC-enabled POS 10 terminals in Europe, and has mandated that 1 all Visa-accepting POS terminals should be 0 0 NFC-enabled by 2020. 2012 2013 2014 2015 2016E 2012 2013 2014 2015 Contactless payments have become 2016E commonplace in the UK. The number of Source: Timetric Source: Timetric

10 y October 2016 www.electronicpaymentsinternational.com

EPI 352.indd 10 11/11/2016 12:32:28 Electronic Payments International CONTACTLESS FEATURE

contactless was a huge boost. The attention Canada leads in North America n CONTACTLESS CARD CIRCULATION IN EUROPE gathered by anything launched by Apple is huge, and Apple Pay directed a huge spot- 2014 2015 Growth light onto contactless. Romania 1.1m 2.5m 127% Netherlands 8m 15m 88% The US Finland 2m 3.3m 61% Contactless cards may have missed their golden opportunity in the US. Due to a lack Switzerland 4.6m 7.1m 53% of migration of cards to EMV in the US, Italy 10.2m 15.1m 49% mobile payments have picked up the slack. Croatia 1.4m 2m 43% Main players in the US payments indus- Austria 6.4m 9m 40% try are focusing on mobile NFC payments. Contactless has quietly become a This could lead to the region going straight UK 58m 79.3m 37% mainstream payment method in Canada. to mobile NFC payments, leapfrogging Spain 7.8m 10.4m 34% During 2015 contactless transactions in contactless cards. Ukraine 1.1m 1.5m 33% Canada grew by one percentage point a Acquirers and card schemes have taken Hungary 3.7m 4.8m 30% month on average to reach around 10% of various initiatives to expedite the migra- total domestic card transactions at the end tion process and support merchants. For Turkey 17.7m 23m 30% of the year. example, to promote EMV adoption among France 31.5m 40m 27% The Canadian government has been merchants, schemes announced that if more Czech Rep. 6.6m 8.1m 23% fully supporting this, which has helped than 75% of merchants’ Visa or MasterCard contactless to gain traction. Slovakia 3.2m 4m 23% transactions originated from EMV-compliant According to Visa, the average proportion POS terminals which support both contact Portugal 4.5m 5.5m 22% of in-store contactless purchases rose from and contactless, they may apply for relief of Poland 25.7m 28.1m 9% 12.1% in June 2014 to an estimated 25% in PCI audit requirements. Source: Timetric June 2015. Many want an accelerated rate of NFC MasterCard has also captured a significant acceptance expansion. Bundled deals are However, mobile NFC has taken the initia- market share, with 27% of its in-store being offered by POS vendors and acquirers tive once again. In a recent announcement, purchases in September 2015 being contactless. so merchants can simultaneously upgrade the Metropolitan Transport Authority of terminals to EMV and NFC. New York launched a mobile ticketing app, The launch of Apple Pay achieved a higher As a result of the US EMV liability shift eTix, enabling commuters to use smart - profile in Canada than in the US, and this only helped the contactless market to in October 2015, EMV adoption rates grew phones to buy tickets and board transit on grow.< from 7.7% in 2014 to 42.3% in 2015. certain routes on the system. Apple Pay and MasterCard were recently added to the app. for adoption wherever it has been imple - What is stopping contactless cards? This is likely to accelerate growth in mented. Companies such as Ingenico and VeriFone mobile NBC, particularly if similar initiatives EMV migration is another key driver. Mer- have already distributed thousands of EMV- are taken up in the rest of the US. chants, PSPs and schemes can take advan- enabled POS terminals in the US, the major- In addition, from a merchant perspective, tage of a mandated upgrade to terminals by ity of which are equipped with contactless contactless was not a priority when upgrad- matching it with an upgrade to NFC-capable technology. ing terminals ahead of the October 2015 lia- terminals. In many cases, the shift from EMV Merchants can also benefit by making a bility shift. This was attributed in part to the to contactless is a simple software upgrade. single investment that would result in the higher costs of hybrid EMV and contactless As a default, many major POS terminal delivery of combined EMV and NFC pay- terminals. manufacturers such as VeriFone and Ingen- ments. Also, as consumers increasingly make ico are integrating contactless technology in payments using mobile wallets, merchants n NEW SMARTPHONE SUBSCRIBER ADDITION BY all newly distributed EMV POS terminals. could actually lose customers if mobile-based REGION (MILLION), 2015-2021 contactless options are not available. The smartphone factor As a result, banks and issuers are not push- North America Smartphones are another crucial factor. ing contactless cards to customers; instead, Latin America 90 According to the Ericsson Mobility Report they are promoting NFC-enabled mobile 230 2016, there are more than 3.2bn smartphone payments. subscriptions worldwide, equivalent to The price of NFC chips is offputting for Europe around half of the world’s total population; banks. In addition, the huge level of mar- 290 the figure is expected to reach 6.3bn in 2021. keting from mobile players highlighting Following the adoption of smartphones NFC solutions has eclipsed campaigns for Asia-Pacific was the launch of the ‘Pays’, Apple Pay, Sam- contactless cards; there is little incentive for Middle East & 1,700 sung Pay, and Android Pay. banks to roll out contactless EMV cards. Africa 730 The entry of payment solutions from some More work also needs to be done with pub- of the world’s most valuable brands, includ- lic transit systems to push contactless cards, ing the ‘Pays’, instantly raised consumer but with so many different state systems and awareness of new payment technology. a general cultural preference for driving over The decision by Apple – seen by Forbes as public transport in most US states, there has Source: Ericsson Mobility Report 2016 the world’s most valuable brand – to adopt not been a push for contactless cards.

www.electronicpaymentsinternational.com October 2016 y 11

EPI 352.indd 11 11/11/2016 12:32:31 Electronic Payments International FEATURE CONTACTLESS

Mexico and Banamex consumers and has likely driven banks and Brazilian potential issuers away from contactless technology on plastic products. The heightened security of mobile NFC is still heavily advertised, and is expected to push consumers and issuers alike towards the solution. Contactless payment cards have actually been available in the US since 2009. Unfor- tunately a lack of contactless-enabled POS terminals meant adoption was not high. According to estimates, only around 2% of POS terminals were contactless-enabled in the US in 2013. However, with the launch of Banamex, the Mexican arm of Citibank, first the ‘Pays’ from 2014, the proportion of ena- A number of factors mean the potential for introduced contactless payments in 2012. bled terminals has since increased to around contactless payments in Brazil is huge: As part of the launch it upgraded 30,000 20%. • Brazil has an unbanked population of merchant terminals with VeriFone devices. more than 65m over the age of 15. The number of contactless terminals has Brazil now ready for contactless • Around 80% of the adult population since increased, reaching 70,000 in 2016. Brazil is no stranger to adopting payment use some type of card for 30% of all In February 2016, Banamex and MasterCard, systems into its infrastructure. Various household expenditure, according to launched a new in Mexico and multi-plank strategies to further increase the Brazilian Association of Credit Card developed a mobile contactless payment contactless penetration and capture the Companies. app for Android smartphones. Banamex was unbanked population have been undertaken. • In 2015, Brazil had more than 2m the first bank in Mexico to implement this Banco Santander has issued more than contactless-enabled POS terminals. technology. 3m Santander University Smart cards with • Around 15.3m smartphones were NFC- Gemalto, using MasterCard’s PayPass fea- Mexico was also the first country in which enabled in Brazil in 2015, representing Citibank and MasterCard launched a digital tures. The cards include digital IDs to access 15% of total smartphones. wallet using HCE technology as part of university facilities, enable users to make • Around 37% of Brazil’s 278m active their global digital payments initiative low-value purchases for everyday needs, and mobile phones were smartphones in agreement. < offer discounts and other student services. 2015. < Due to high rates of robbery and theft in The marketing and promotion of NFC the country – Brazil ranks ninth in the world Contactless was introduced in 2013 when via the ‘Pays’ has driven more merchants to in terms of fear of crime – Brazilians prefer to banks started EMV migration with dual focus on EMV and NFC device capabilities. not carry cash; secure transactions are there- upgrades, making terminals simultaneously A fair amount of coverage has been given fore a strong consumer preference. contactless-enabled. to the risks of contactless cards. Particularly In addition, Brazil is undergoing an eco- As a result, NFC payments on mobile given the ability for card skimmers to extract nomic recession and political upheaval, phones have entered the market. Banks and personalised card data from the contactless which may challenge payment companies schemes, in conjunction with the Banco chip by walking near someone’s wallet with already struggling with an unstable internet Central do Brasil have steadily introduced an RFID card reader. and contactless payment infrastructure in various payment products to gain market This has caused much concern among many areas. share.<

12 y October 2016 www.electronicpaymentsinternational.com

EPI 352.indd 12 11/11/2016 12:32:38 Electronic Payments International SURVEY NEW ZEALAND COUNTRY

New Zealand on track for cashlessness

It has the lowest use of cash in the OECD and an almost fully banked population, and according to a survey in February nearly half of consumers expect cash transactions to die out within a decade. Timetric researchers recently took a closer look at the cards and payments industry in New Zealand

ew Zealand’s cards and payments card market in 2015. Debit card penetration interest-free and promotional retail finance, industry is well developed, and in New Zealand is 238.3 cards per 100 indi- with pricing benefits such as low interest consumers are prolific users of viduals, higher than Singapore (206.3), Aus- rates and reward programmes. payment cards. tralia (178.7) and Hong Kong (77.4). Gem Visa cardholders are offered 0% N interest for the first six months on transac- The country had the highest frequency of In contrast, pay later card penetration use among its Asia-Pacific peers, with 116.2 remains low, at 57.1 cards per 100 individu- tions above $250 (NZD357.4). transactions per card per year in 2015. It was als, the lowest in the region. followed by Australia (109.6), South Korea To increase consumer uptake of pay later Focus on innovation to stay afloat (63.3), Singapore (40.9), Hong Kong (28.0), cards, banks offer various benefits such as With the growing importance of self-service Japan (13.4) and Taiwan (12.6). balance-transfer services and low interest channels, banks in New Zealand are intro- New Zealand has the lowest cash use rates. ducing digital solutions to attract customers among OECD countries. According to a sur- Bank of New Zealand offers the Low Rate and remain competitive. vey by MasterCard in February 2016, 49% MasterCard, providing an interest-free bal- Westpac launched the Westpac One digi- of participants expect cash payments to ance transfer service for 12 months, and a tal banking platform in February 2015, cease in the next 10 years. The country leads standard rate thereafter. ANZ Bank’s Low which can be used on smartphones, tablets other OECD countries in terms of cashless Rate MasterCard charges annual interest and desktops to apply for everyday banking payments, with four of every five payments of 13.90% on purchases, 22.95% on cash products such as accounts, term deposits, made electronically. advances and 1.99% on balance transfers. home and personal loans, and credit cards. Banks and payment companies are taking Non-banking companies are pushing for The launch led to a 7% annual rise in the regular initiatives to improve financial litera- share in New Zealand’s pay later card mar- number of digital consumers, which reached cy in New Zealand, leading to high banking ket. Financial service provider Gem offers 705,000 in September 2015. The bank also penetration and driving demand for current credit cards, personal loans, insurance and reported that more than half of its customers accounts and debit cards. The share of New used digital channels, and 67% used mobile Zealanders aged 15 or above with a bank n NEW ZEALAND PAYMENT CARDS BY CARD TYPE phones to connect with it in 2015. account reached 99.5% in 2014, according (MILLION), 2011–2020 ANZ Bank updated its FastPay mobile to the World Bank’s Global Findex survey. banking app in October 2015. FastPay was Debit Cards Pay Later Cards launched in October 2013, and allows busi- Banks and non-bank companies drive growth 2011 6.6 2.7 ness customers to process payments made Consumers in New Zealand have traditional- 2015 11.0 2.6 through Visa, MasterCard and Eftpos using ly been debt-conscious, and are more inclined 2016 11.7 2.7 smartphones or tablets. to use debit cards than pay later cards. With ANZ FastPay, users can have more In terms of transaction value, debit cards 2020 13.5 2.9 than one card reader, smartphone or tablet accounted for 61.9% of the overall payment Source: Payments New Zealand and Timetric linked to a single business account. <

n NEW ZEALAND CARD TRANSACTION VALUE BY n NEW ZEALAND CARD TRANSACTION VOLUME n NUMBER OF ATMS AND POS TERMINALS IN CHANNEL ($BN), 2011–2020 BY CHANNEL (MILLION), 2011–2020 NEW ZEALAND (THOUSAND), 2011–2020 ATM POS ATM POS ATM POS 2011 13.4 48.7 2011 112.2 1,197.2 2011 2.7 136.1 2012 13.5 52.4 2012 109.1 1,259.6 2012 2.6 141.1 2013 13.3 56.0 2013 103.4 1,330.1 2013 2.6 144.0 2014 13.3 59.4 2014 98.7 1,405.7 2014 2.6 151.8 2015 10.9 52.6 2015 94.6 1,489.9 2015 2.5 158.5 2016 10.0 51.8 2016 91.0 1,578.2 2016 2.5 164.9 2017 9.8 54.3 2017 87.9 1,667.7 2017 2.5 171.0 2018 9.6 57.0 2018 85.3 1,758.7 2018 2.5 176.8 2019 9.4 59.7 2019 83.1 1,851.4 2019 2.4 182.0 2020 9.3 62.9 2020 81.3 1,949.1 2020 2.4 186.7 Source: Timetric Source: Timetric Source: Timetric

www.electronicpaymentsinternational.com October 2016 y 13

EPI 352.indd 13 11/11/2016 12:32:40 Electronic Payments International SURVEY COUNTRY SOUTH KOREA

South Korea’s mobile payments boom

Frequency of card use has historically been high, but mobile payments are arguably the area where activity in South Korea is most intense, to the extent that many mobile manufacturers and telecoms companies now consider themselves to be direct competitors to payment companies

outh Korea has long been a well- Samsung launched m-payment service using some to make fake cards to transact developed payment card market. in South Korea in August 2015, around $113,859. The regulator ordered Its consumers are among the most and transactions worth $1bn (KRW1.2trn) all credit card companies to upgrade fraud S prolific users of payment cards in have since been made. LG introduced the detection to prevent similar data thefts. the region, with a frequency of use of LG Pay contactless m-payment solution in The government also enforced stringent 63.3 per card per year – higher than Sin- November 2015, allowing users to make pay- regulations to curb rising credit card debt gapore with 40.9, Hong Kong with 28.0, ments using LG smartphones. SK Telecom and illicit marketing. Korean financial Japan with 13.4 and Taiwan with 12.6. launched contactless m-payment service authorities and card issuers developed the Between 2011 and 2015, South Korea’s T-Pay in March 2016, and has already reg- Best Practices on Issuance of New Credit payment card market changed rapidly, with istered over 100,000 subscribers. Cards and the Setting of Credit Lines in the centre of innovation shifting from prod- October 2012, limiting eligibility for new ucts to channels and services. Regulations curb credit card issue credit cards to adults with minimum credit Although issuers continue to develop new The South Korean credit card market was ratings, and making it mandatory to consider products, this tends to be little more than heavily affected by security concerns follow- the disposable income of a cardholder when the fine-tuning and modification of exist- ing leaks of customer data between 2011 and establishing credit. Issuers are also required ing products. Strategies such as personalised 2015. In January 2014, the FSS announced to periodically monitor cardholders’ statuses card designs and segment-specific promo- that the information of 20m credit card users in this regard, to ensure compliance. tions and benefits were increasingly used in had been stolen by a temporary employee at the past five years. the Korea Credit Bureau. Growing e-commerce market In a separate incident in April 2014, the The combined e-commerce transaction value Telecoms and mobile push contactless FSS announced that hackers had stolen the in South Korea was $29.7bn in 2015, reg- Growth in contactless mobile payments personal data of 200,000 credit card users, istering a compound annual growth rate of (m-payment) is expected to accelerate in 15.44% between 2011 and 2015. South Korea, as telecoms and mobile opera- n SOUTH KOREAN PAYMENT CARDS BY CARD E-commerce growth in the country pro- tors promote the technology as part of efforts TYPE (MILLION), 2011–2020 vides significant potential for payment cards, to improve the user experience and retain as it continues to be the preferred payment customers. Debit Cards Pay Later Cards method among online shoppers. As a result, The companies are increasingly positioning 2011 141.5 122.1 issuers are offering new card features with themselves as competitors rather than part- 2015 158.2 93.1 enhanced security measures. ners to payment companies. Major handset KB Kookmin Card launched a virtual cred- 2016 162.2 94.6 manufacturers such as Samsung and LG, and it card scheme, SecurePay, in association with telecom operators such as SK Telecom have 2020 175.6 102.9 MasterCard in September 2014, protecting all launched contactless payment solutions. Source: Timetric users against personal information theft. <

n SOUTH KOREAN CARD TRANSACTION VALUE BY n SOUTH KOREAN CARD TRANSACTION VOLUME n NUMBER OF ATMS AND POS TERMINALS IN CHANNEL ($BN), 2011–2020 BY CHANNEL (MILLION), 2011–2020 SOUTH KOREA (THOUSAND), 2011–2020 ATM POS ATM POS ATM POS 2011 322.5 476.3 2011 692.8 8,365.0 2011 118.5 2,195.0 2012 326.0 506.7 2012 738.0 9,893.6 2012 122.9 2,214.2 2013 343.1 545.4 2013 761.9 11,477.7 2013 124.2 2,225.8 2014 374.4 598.9 2014 787.6 13,150.2 2014 122.2 2,235.2 2015 362.6 605.3 2015 801.7 15,107.2 2015 121.7 2,243.5 2016 350.0 611.9 2016 815.6 17,292.2 2016 122.0 2,253.6 2017 359.3 660.8 2017 829.5 19,660.2 2017 122.7 2,265.6 2018 365.5 708.6 2018 843.1 22,122.9 2018 123.7 2,278.4 2019 370.5 757.3 2019 856.3 24,578.6 2019 124.9 2,291.2 2020 374.5 805.5 2020 868.9 27,036.7 2020 126.3 2,302.9 Source: Timetric Source: Timetric Source: Timetric

14 y October 2016 www.electronicpaymentsinternational.com

EPI 352.indd 14 11/11/2016 12:32:45 Electronic Payments International SURVEY UKRAINE COUNTRY

Payroll and public transport drive cards

Severely affected by the global economic crises and currently locked in an ongoing dispute with its superpower neighbour, Ukraine has seen more prosperous times. However, payroll programmes mean debit card use is widespread, and contactless is gaining traction on the Kiev metro

kraine’s economy was severely ATMs. Accountholders are offered Visa or Gradual uptake of contactless affected by the global economic cri- MasterCard-branded debit cards. Contactless technology is expected to gain ses, and the country was extended Oschadbank offers the MasterCard prominence among Ukrainian consumers. U a financial bailout package by the Electronic, MasterCard Cirrus Maestro, The Ukrainian government is also actively IMF and the EU to restore growth and MasterCard Electronic ZP and Visa Electron involved in promoting contactless technol- revive its beleaguered banking sector. for salary accountholders. ogy, especially on public transport. However, prospects to 2020 are uncertain In September 2015, the Kiev Municipal as a result of the conflict in Crimea. Pay later steadily gaining ground State Administration introduced contactless The Ukrainian government is taking sever- Pay later card transactions at ATMs were payments on the city’s subway, enabling al initiatives to foster banking sector growth very high until 2013, as Ukrainian consumers passengers to pay fares with MasterCard in the form of financial inclusion, payment used cards to help meet short-term financing contactless cards while passing through infrastructure modernisation and the adop- needs and avoid liquidity constraints. turnstiles. As of July 2016, 17 of a total 52 tion of technologically advanced payment To encourage pay later transactions at subway stations in Kiev offered contactless cards. POS terminals, banks launched a number of payments; the remainder will be equipped The government has also supported mod- marketing programmes and introduced con- with contactless terminals in phases. ernisation, with regulations in September venient payment options such as instalment Banks are also keen to promote contactless 2010 requiring all retailers of goods and facilities. As a result, pay later card transac- technology, and are launching new services to services to accept card-based payments. This tion volumes and frequency of use at POS increase uptake. These include a contactless contributed to growth in the overall payment terminals increased significantly from 2014. m-payment solution by PrivatBank in Febru- card transaction volume between 2011 and However, pay later average transaction ary 2014. Alfa Bank launched a contactless 2015. values at POS terminals fell, signifying pru- m-payment pilot project in partnership with dent consumer spending. Kyivstar in January 2014. Payroll programmes lead debit card issue Ukraine’s e-commerce transaction value In Ukraine, payroll programmes have lead to n UKRAINIAN PAYMENT CARDS BY CARD TYPE stood at $1.3bn in 2015. According to the widespread issuance of debit cards, account- (MILLION), 2011–2020 Ukrainian Processing Centre, there was ing for 80.4% of all payment cards in circu- Debit Cards Pay Later Cards growth in the number of online shops and lation in 2015. purchases with payment cards on the internet All major banks in the country – such as 2011 26.7 8.2 between 2014 and 2015. The number of sites PrivatBank, Oschadbank, Raiffeisen Bank 2015 24.8 6.0 that accept Visa and MasterCard payments Aval and UkrSibbank – offer payroll cards. 2016 24.5 5.7 grew by 27% during the same period. For instance PrivatBank, through its Salary MasterCard’s launch of MasterPass in July 2020 26.4 6.1 Project, offers salary packages with benefits 2016 is expected to drive online card-based such as free cash withdrawals at any of its Source: Timetric transactions. <

n UKRAINIAN CARD TRANSACTION VALUE BY n UKRAINIAN CARD TRANSACTION VOLUME BY n NUMBER OF ATMS AND POS TERMINALS IN CHANNEL ($BN), 2011–2020 CHANNEL (MILLION), 2011–2020 UKRAINE (THOUSAND), 2011–2020 ATM POS ATM POS ATM POS 2011 66.5 5.8 2011 661.0 214.0 2011 33.0 123.5 2012 81.3 11.5 2012 725.0 348.0 2012 36.2 162.7 2013 94.7 19.9 2013 755.0 584.0 2013 40.4 221.2 2014 64.3 21.5 2014 693.4 879.2 2014 36.6 203.8 2015 38.8 17.6 2015 678.0 1,286.8 2015 33.3 194.5 2016 34.3 19.2 2016 664.6 1,726.4 2016 31.6 191.7 2017 36.7 23.8 2017 653.5 2,167.5 2017 31.0 193.2 2018 38.9 27.8 2018 644.8 2,596.9 2018 31.1 195.8 2019 41.3 30.6 2019 637.8 2,965.5 2019 31.6 200.2 2020 43.3 33.3 2020 631.5 3,293.4 2020 32.4 206.2 Source: National Bank of Ukraine, and Timetric Source: National Bank of Ukraine, and Timetric Source: National Bank of Ukraine, and Timetric

www.electronicpaymentsinternational.com October 2016 y 15

EPI 352.indd 15 11/11/2016 12:32:49 Electronic Payments International COMMENT PPRO GROUP

Paying via chatbots

We already use a great many web services and apps to make our lives easier, yet we want things even easier still. With chatbots soon helping us to shop, this presents the payments industry with both an opportunity and a challenge, writes Ralf Ohlhausen, business development director at PPRO Group

t feels as though each day brings a chatbot to help them find a venue to watch It would also be possible for chatbots to new trend, and each week a fresh their artist of choice, and book the tickets. replace retailer-specific apps, and for these revolution. Yet, if we put aside the For industry giants like Facebook, Google chatbots themselves to contain payment artificial hype we realise that real and Microsoft, chatbots are currently a hot functions. I After all, who needs yet another shopping revolutions are not that frequent. topic, with many internet retailers champ- The last change to genuinely affect mul- ing at the bit to gain access to the messaging app when you can do everything via your titudes of people was the launch of the apps’ huge target audiences. messaging program? Almost no-one. smartphone. But with the multitude of apps, Using chatbots, retailers would simply today’s smartphones are becoming too com- Chatbots today use their chatbot to approach their custom- plicated, with users having to switch between While currently in their technological infancy, ers and offer them a convenient way to pay. a variety of apps in an attempt to optimise chatbots can show current information on This concept of conversational commerce their everyday lives. the weather, or order pizza via text. already exists; after all, chatbots are designed Let us consider how complicated it is to There are also chatbots which function to facilitate direct communication between organise something using a smartphone. Say, as interactive gaming partners or language customers and brands, shops and retailers. for example, that you are interested in going trainers. In order to speed up chatbot devel- The requirements of payment services are, to a concert with a friend. opment, companies like Facebook are pro- therefore, very similar to those of payment First, you decide on an artist via email or viding appropriate software modules and apps. They must be as easy to use as possible, a messaging programme. Next, you use your interfaces. with one-click models being the most desir- browser to search for concert dates. If there Chatbots need to be self-learning and able, and ideally feature a mode of biometric is nothing in your hometown, you go to capable of retaining current context. This authentication. Google Maps to find out how far it is to an means that someone looking for information event in a different city. Once you have col- about an artist, then enquiring about concert Simple P2P payment lected this information, you go back to your dates, should not need to mention the artist’s For a long time now the payment industry friend to get their input. name twice. has been discussing making peer-to-peer pay- After you have chosen the date and loca- Just like a human interlocutor, the chatbot ments via smartphone. There is, however, no tion, you go to the booking website. Here, a should remember that its chat partner is still standard app which facilitates direct pay- variety of problems can arise, including sold- talking about the same artist. ments via smartphone. out dates or poor seating choices. Why would people even want a separate By now, you have spent a great deal of Payment via chatbots app when they already use a messaging app time and used a wide variety of apps and The more intelligent chatbots become and to keep in touch with their friends? A chat- services, and still do not have concert tickets. the more services that can be covered by mes- bot could take over this function and, with a Then, of course, you must continue your task saging apps, the more important the subject simple ‘Pay Tim £23’, split a restaurant bill. via a specialist booking or payment app –all of payment becomes. this to achieve a single aim. Various models are conceivable: Users can, Conclusion: exciting and dangerous It is here that chatbots have the potential for example, simply store payment data in Although chatbots are still in their infancy, to dramatically streamline how we use our the messaging platform and then pay with the major technology companies are amass- devices. any current payment method, like a credit ing all kinds of tools for equipping them with card or PayPal. This means that users need artificial intelligence. Doing it all via messaging apps only share their payment information with a Soon users may no longer be able to tell Chatbots hang out exactly where users do: single provider. whether they are communicating with a real in messaging apps; the most popular of these, This method is already in use in the US, person or with a chatbot. WhatsApp and Facebook Messenger, are where Uber, the popular ridesharing service, Retailers will need to rethink their strate- installed on almost every smartphone. is fully integrated into Facebook Messenger, gies if their customers begin avoiding store- WhatsApp alone is used by more than a complete with payment functions. specific apps or mobile websites and hanging billion people, while Facebook Messenger Chatbots themselves could also be out almost exclusively in messaging applica- has around 800 million users. designed to receive payments. To do this, the tions. If, therefore, people are already hanging platform operators would have to build a There is, however, no such thing as an ideal out in messaging apps with their friends, kind of chatbot app store to enable users to world when it comes to chatbots. Although instead of switching to a different app, it find appropriate chatbots. Payments could communication with virtual assistants may would be far more convenient for them to then be processed centrally by the platform sound simple, it must be secure if it is to han- be able to send a message to a music-themed operator using payment data. dle personal data. <

16 y October 2016 www.electronicpaymentsinternational.com

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