www.electronicpaymentsinternational.com Issue 375 / SEPTEMBER 2018

HACKERS’ DELIGHT

WHERE ARE CRYPTOCURRENCY EXCHANGES GOING WRONG? COUNTRY SURVEYS INSIGHT ANALYSIS

Analysis and key data for Could biometrics be the New research reveals payments in , key to making payments where digital technology is and personal again? helping economies

EPI September 2018 375.indd 1 03/10/2018 10:56:54 contents this month

COVER STORY NEWS 12 05 / EDITOR’S LETTER 06 / DIGEST • expands WeChat Pay HK service to China • UK banks lose £503.4m to scammers in H1 2018 • trials facial-recognition tool • Monzo awaits unicorn confirmation after reaching milestone • Cedar upgrades healthcare payment platform • BBVA opens up app to more products • Japan’s Origami partners with UnionPay for expansion • PayPal closes $2.2bn iZettle acquisition CRYPTOCURRENCY • makes available to Android users • Zaif crypto hack: continuing security EXCHANGES problems spark concern • to acquire UK’s Close Brothers Retail Finance 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]

Senior Reporter: Sub-editor: Head of Subscriptions: Patrick Brusnahan Nick Midgley Alex Aubrey +44 (0)20 7406 6526 +44 (0)161 359 5829 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]

Junior Reporter: Publishing Assistant: Sales Executive: Briony Richter Mishelle Thurai Jamie Baker +44 (0)20 7406 6701 +44 (0)20 7406 8633 +44 203 096 2622 [email protected] [email protected] [email protected]

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2 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 2 03/10/2018 10:57:16 contents SEPTEMBER 2018

COUNTRY SNAPSHOTS 18 / LUXEMBOURG Luxembourg’s payment card market is mature, with a high penetration of 4.0 cards per inhabitant. Cards are also the preferred payment instrument, accounting for 52% of the total transaction volume in 2017 20 / SLOVENIA Cash remains the dominant payment instrument in Slovenia. However, following concentrated efforts by banks, and the central bank’s financial inclusion programmes, the payment card market is gradually growing 21 / SAUDI ARABIA While high-value transactions are shifting to electronic platforms, low-value transactions 18 are mostly made with cash. Use of debit cards, is gradually rising, although they are mostly FEATURES PRODUCTS used for cash withdrawals at ATMs 10 / CHINA CITIC BANK 16 / PAYSEND 21 Virtual technology has helped facilitate the Paysend is the latest digital money-transfer lifestyle of modern society. Briony Richter provider to launch a global account in a speaks to Helen Kan, executive director at crowded market dominated by Revolut and China Citic Bank, about inMotion, Hong TransferWise. Robin Arnfield talks to its Kong’s first virtual banking app London-based CEO, Ronnie Millar 12 / CRYPTOCURRENCY 17 / ORANGE MONEY EXCHANGES Orange Money, Orange’s mobile money solution, is celebrating its 10th anniversary. Regulatory lapses and inadequate security Launched in 2008, the service currently has have led to a number of cryptocurrency 40 million customers and is available in 17 exchanges falling victim to hackers. Hosho’s countries. Douglas Blakey reports Michael Julian explains where they are going wrong. Briony Richter reports ANALYSIS 14 / CRYPTOCURRENCY Mining validates cryptocurrency transactions, and successful miners earn well for their efforts. But it uses large amounts of energy, so what do miners do? Get other devices to do it for them. Patrick Brusnahan reports INDUSTRY INSIGHT 15 / CASHLESS IN 22 / IDEX BIOMETRICS Cashless transactions have changed the Our relationship with money is less personal; financial ecosystem. With card payments gone are the days when people would queue pushing out cash, new research reveals the at their local bank to withdraw cash via countries where digital technology is helping the bank clerk. David Orme, senior vice- economies thrive. Briony Richter reports 12 president at Idex Biometrics, writes

www.electronicpaymentsinternational.com | 3

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Page 1 Rachel Archer on [email protected] or call +44 (0) 20 7936 6591 editor’s letter

Exactuals payments acquisition one to watch

Douglas Blakey, Editor

ny RBC acquisition causes the writer to sit up Exactuals was founded at the Stanford Graduate School straight and pay close attention. of Business in 2011 with the goal of modernising the A The 2015 RBC acquisition of City National, for entertainment payments space. It is by no means the biggest example – its biggest to date – was by normal M&A metrics bank fintech acquisition of the year, but is potentially one of expensive, but is already shaping to look like a shrewd piece the most interesting. of business. And now City National has acquired Exactuals, a Switch launched 30 years ago Los Angeles-based provider of innovative SaaS solutions for It is 30 years since the first Switch transaction, following the complex payments in the entertainment industry. launch of Switch debit cards by Midland, RBS and NatWest. Exactuals is a unique payments provider, leveraging artificial By 1994, one-half of all UK adults held a debit card. In intelligence tools to provide innovative payment solutions 2001, debit expenditure exceeded credit card spending for to clients of all sizes. Exactuals’ innovative payment system, the first time. Switch was to run for 14 years until merging PaymentHub, allows studios, unions, guilds, payroll companies, with Mastercard’s Maestro brand. Switch’s 30th anniversary is music publishers, record labels, distributors and marketplaces much more agreeable to celebrate than the plethora of 10-year to provide direct deposit payments. It also covers tax gloom-and-doom pieces marking the Lehman collapse. document management and online reporting to rights holders, Another anniversary is on the horizon, with the prepaid card performers, managers, service providers and independent in the UK set to become a teenager. Prepaid cards in the UK contractors across the globe. rolled out 13 years ago next month in October 2005. In many cases, this automated system has replaced an outdated payment process, reducing or eliminating the need Open Banking deadline fast approaching for costly paper checks and reporting. Exactuals’ system The EBA is taking a firm on PSD2 Open Banking provides payments and reporting functions with greater regulations, stating that “ignorance of them can, of course, not security, accuracy, transparency and speed. Firms can process be used to justify non-compliance,” and that “non-compliance global payments through operating accounts at City National. amounts to a breach of law, with the resultant consequences In addition to PaymentHub, Exactuals recently launched for the legal entity”. RAI, a sophisticated artificial intelligence tool used by record With less than six months now until the deadline, there are labels and publishers to optimise ownership metadata for the seven key elements that a financial institution needs to deliver calculation and payment of royalties. to meet the PSD2 Open Banking regulations: At the time of the City National deal, RBC retained City 1. API Interface – live for six months prior to going live National’s leadership team. That is also the position at externally; Exactuals, with the business’s senior management staying on 2. Exemption certificate from NCA or fallback option; and being rewarded with multi-year deals. 3. SCA solution; Exactuals will now modernise the residuals and royalty 4. TPP regulatory checking; payment process for the entertainment industry and, 5. eIDAS Seal certificate checking if operating in Europe; interestingly, will expand to serve other businesses as a wholly 6. Access token issuance, and owned subsidiary of City National Bank. 7. Management of consents by PSU The acquisition builds on City National’s history of serving the entertainment industry. It also enables RBC to continue One wonders just how many prepaid and debit programme to build out its payments franchise, defend and grow value for managers at smaller institutions, e-money issuers and credit its entertainment clients, and create a source of lower-cost, institutions are going to be fully compliant and on target to lower-beta deposits in the future. meet the 14 March 2019 deadline. <

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

www.electronicpaymentsinternational.com | 5

EPI September 2018 375.indd 5 03/10/2018 10:57:25 News | Digest

news digest Tencent expands WeChat Pay HK service to China Users in Hong Kong can now use the WeChat app will also connect to UnionPay to facilitate payment app to make purchases at Chinese money transfers. merchants. Tencent vice president and Tencent The latest development is the result of Financial Technology head Jim Lai said: “The a partnership between Tencent, China cross-border will greatly UnionPay, and its subsidiary UnionPay increase the collaboration opportunities for International. both Hong Kong and Mainland Chinese The service will be available from October businesses. This exchange of culture, talent 2018, and will enable Hong Kong users to and the stimulation of economic activity make purchases at Chinese vendors including across a wide variety of sectors will serve to ride-hailing service Didi Chuxing, group strengthen the mutual relationships between buying business Meituan-Dianping, and train- Hong Kong and Mainland China.” booking website 12306. Tencent launched its wallet services in The app will automatically convert yuan Hong Kong in 2016. Previously, the payment to Hong Kong dollars, using exchange rate app service could only be used by Hong Kong quotes and automatic exchange services. The users to settle local payments. < UK banks lose £503.4m to scammers in H1 2018 The banking sector in the UK lost Purchase scams were the most common £73.6m, with banks preventing £137.8m of £503.4m ($662m) through ‘authorised’ and type of APP fraud, with 21,483 cases attempted remote banking fraud. ‘unauthorised’ fraudulent activity in the reported in the first half of 2018, resulting Losses due to cheque fraud slumped first half of 2018. in a loss of £19.4m. 41% year on year to £3.2m, with £74.3m According to UK Finance, a total of The total number of reported of attempted fraud in this area being £145.4m was lost due to authorised push unauthorised fraud cases was 1,036,376 in prevented. payment (APP) scams that trick account the first half of 2018, an increase of 10% UK Finance’s MD of economic crime, holders into sending payments to other from last year. However, combined total Katy Worobec, said: “Fraud and scams accounts. The remaining £358m was lost losses through unauthorised fraud dipped pose a major threat to our country. The through unauthorised fraud, mainly where 2% from the previous year. criminals behind it target their victims transactions are executed by a third party Compared to a year ago, losses due to indiscriminately and the proceeds go on to without the account holder’s authorisation. unauthorised transactions on payment fund terrorism, people smuggling and drug The total number of APP scams in the cards dropped 2% to £281.2m. The trafficking, whether or not the individual first six months of 2018 was 34,128. Of the industry helped prevent £493.5m in is refunded. Every part of society must total lost through this type of scamming, attempted unauthorised card fraud. help to stamp out this menace, especially £30.9m was returned to affected Losses due to unauthorised remote by stopping the data breaches which customers. banking fraud remained almost stable at increasingly are fuelling fraud.” < Paytm trials facial-recognition tool Indian e-commerce payment system Paytm employees. Once live, Paytm users will be facial recognition will be introduced at a is testing a facial-recognition tool to enable able to log into the app by simply looking at later date. Company executives added that digital payments through customers’ the phone.” Paytm will introduce additional security smartphones. The sources also told Economic Times features with the facial-recognition tool, to The technology will enable customers that testing is being carried out on bolster prevention of fraud. to authenticate payments on the mobile Google’s Android platform. Once testing In April this year, Paytm introduced the devices to carry out purchases at merchant is completed, the feature will be launched Paytm Tap Card for customers without outlets. through an app update. internet access. The cards use NFC Sources quoted a senior Paytm executive The Paytm facial-recognition tool aims technology to carry out digital offline as saying: “We have already started testing to increase payment security and prevent transactions at merchant POS terminals the face-recognition tool among our attacks. Offline payments through issued by Paytm. <

6 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 6 03/10/2018 10:57:30 News | digest

Monzo awaits unicorn confirmation after reaching milestone Monzo noted that, on average, each customer has around 16 contacts within the app to send and receive money transfers, adding that the app is designed to make everyday payments simple, secure and fun. Friends and family can split bills when going out for dinner or directly pay contacts they have within the app. According to the blog, customers send over £800,000 to Monzo contacts each day. The challenger has also gained a strong reputation for customer service, with the blog claiming that it now has a Net Promoter Score of +80. Monzo’s unicorn valuation sits at more than $1bn, and is expected to be confirmed after it completes its latest round of Challenger bank Monzo’s unicorn valuation The bank is now processing £1bn fundraising. is awaiting confirmation after it reached ($1.3bn) in payments every month, with On 25 September, Monzo announced the million-customer milestone, just weeks customers spending more than £4bn with the release of its Share with Us tool, which after it was revealed that the bank is set to Monzo cards to date. encourages customers to ask for help join the league of UK unicorns. Monzo CEO Tom Blomfield said: “Our about their financial welfare. On its blog, Monzo boasted that 20,000 community of customers now extends The blog stated: “If there’s anything that new customers are signing up every week, across the UK, and I’m so grateful that affects the way you deal with your money with the digital-only bank now sending out more than a million people are helping us or the relationship you have with your over 3,000 of its coral cards each day. build a better bank. But our mission is to bank, it might be worth telling us. Monzo faces competition from rivals make money work for everyone, so this is “We can use that knowledge to support including Revolut, but that has not stopped only just the start! you in a way that suits your needs – from moving ahead with its goals. Monzo “We’re working hard to earn our whether that’s letting you opt out of now claims that it accounts for 15% of new customers’ trust by building a product lending if you’ve struggled to manage debt current account openings in the UK. that solves people’s problems, giving in the past, or giving you a different way to Since the bank ended its beta prepaid them brilliant customer service, and being verify your identity if you find it tricky to programme in April, its customer base totally transparent every step of the way. take selfie videos.” has surged by 75%. Monzo has also This milestone shows that there’s real, A specialist team will be available for discontinued its waiting list, so anyone mainstream appetite for a bank that’s doing extra support to help customers through wanting to join can now do so immediately. things differently.” the app until issues are resolved. < Cedar upgrades healthcare payment platform New York-based patient payment and with providers. We are excited to share engagement platform Cedar has launched the next evolution of our platform, which an upgraded version of its flagship product, further brings the modern, digital consumer Cedar Pay. experience to the forefront of patient billing.” Featuring multiple updates, the product Cedar advisor and former executive-vice aims to facilitate and simplify the patient president and Montefiore System CFO Joel billing experience. The platform uses advanced Perlman added: “Providers are constantly data science, machine learning and smart Segmentation feature offers users additional challenged with establishing a streamlined segmentation to provide comprehensive opportunities to “personalise the patient approach to engaging patients when it comes information on patient communication and journey”, and simplifies payments by enabling to the billing process. This is a critical pain payment preferences. access to the online dashboard by entering an point in healthcare as organisations look The enhancements in Cedar Pay include email address or telephone number. to optimise time with patients and drive Truly Unified Billing and Dynamic Cedar co-founder and CEO Florian Otto satisfaction. Personalized Segmentation. The Truly Unified said: “As the consumer influence on healthcare “Cedar’s new capabilities now allow Billing service enables patients to view all continues to rise, it’s more critical than ever providers to easily deliver consumer-friendly transactions in one place, as well as the to deliver a payment and engaging experience billing communications that drive patient bills of other family members linked with that turns patients into advocates, and makes engagement and increase collections on the their account. The Dynamic Personalized it as easy as possible for them to interact back end.” <

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EPI September 2018 375.indd 7 03/10/2018 10:57:33 News | Digest

BBVA opens up app to more products BBVA now allows products used by health. It also helps customers to make customers of other banking institutions to better decisions on their spending and be added to its app. investing. The BBVA app tool, Bconomy, opened While Bconomy currently allows balance up to accounts and cards from other checks to be grouped together in the financial service providers in February app, BBVA is looking to extend the app’s 2018. However, customers can now add reach further. In 2019, new regulation will investment funds, pension plans, deposits, add the possibility of operating between securities, as well as mortgage and different products within the BBVA app consumer finance products, through the itself. According to the regulation, banks ‘your other banks’ option. Once verified, must give access to payment account the products download automatically and information if authorised by customers. are added to the app. BBVA customers will also be able to Bconomy was launched to measure choose only the products they wish to customers’ incomes and spending patterns, see, and access comparisons within the as well as savings and debt levels. It Bconomy tool, giving them a monthly now includes all customer positions, and forecast of fixed expenses and comparisons provides a wider overview of their financial with people with similar profiles. < Japan’s Origami partners with UnionPay for expansion Japanese e-payment startup Origami Pay All Origami partner shops in Japan will raised $66m in a series C investment has entered into a new partnership with accept UnionPay’s QR payments. Origami round to support its expansion and expand UnionPay to expand its services worldwide. will also partner with Taiwan-based its workforce. The latest round, which Under the capital and business alliance payment service JKOPay to allow users to increased investment in the company with UnionPay International, Origami carry out transactions at Origami partner to $88m, was joined by SBI Investment, Pay will be accepted at nearly 7.5 million shops in Japan. The service will enable Toyota Finance, Shinkin Central Bank, UnionPay QR code-enabled outlets by all Taiwanese visitors to pay directly for Union Pay International and Mitsui the first quarter of next year. The service purchases from the JKOPay app. Sumitomo Card Company, among others. will be available in 24 countries in North In future, Origami is expected to enter Founded in 2012, Origami operates the America, Central Asia, and the Middle East into new international partnerships to Origami Pay service, which is accepted at and . expand its global footprint. It recently around 20,000 locations in Japan. < PayPal closes $2.2bn iZettle acquisition US digital payments giant PayPal has completed the acquisition of Swedish payments business iZettle in a deal worth around $2.2bn. The iZettle acquisition, first announced in May this year, forms part of PayPal’s growth strategy, and is expected to bolster its commerce services for merchants. PayPal COO Bill Ready said: “We’re thrilled to welcome the iZettle team to the PayPal family, and are excited to expand the ways we serve our small business customers. “iZettle brings a suite of products and services that allows merchants to meet their customers where they are – online, in-store or founder and CEO of iZettle, will continue to Together, we will be stronger and move even via mobile. This is another step in our journey lead the company. Co-founder and executive faster to help small businesses succeed in a towards democratising commerce tools to help chair Magnus Nilsson has also joined PayPal world of giants.” businesses of all sizes thrive.” as part of the deal. The UK’s Competition and Markets iZettle will continue to operate separately De Geer said: “We share PayPal’s strong Authority launched a review of the iZettle under the PayPal brand. Jacob de Geer, co- belief in the power of small businesses. acquisition prior to its completion. <

8 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 8 03/10/2018 10:57:40 News | Digest

Wirecard makes Google Pay Italy available to Android users German payments technology business by Google Pay. boon also enables real-time Wirecard has made Google Pay Italy available person-to-person fund transfers between users. to Android users through its mobile payment The boon app operates on both the Android app, boon. and iOS operating systems. The iOS version The boon app is available from the Google is available in the UK, , Italy, , Play store by Android users in Italy. Users and , and the app is also can now utilise a fully digitised prepaid card, accessible for Android users in , regardless of their bank. , Ireland, the , Wirecard’s executive vice-president of and Spain. consumer solutions, Georg von Waldenfels, Google’s head of Europe, Middle East and said: “With boon, we are delighted to now Africa commerce partnerships, Florence Diss, offer Google Pay to every user of an Android commented: “Starting today, boon users device in Italy, from Android version 5 on.” can link their card to Google Pay once, and Customers can top up their boon account then use Google Pay to make safe, fast and with any Visa or Mastercard, or by bank delightful purchases in millions of places in transfer, eliminating the requirement to hold Italy and around the world – including on a credit card issued by a bank supported their favourite apps and sites.” < Zaif crypto hack: continuing security problems spark concern A second Japan-based cryptocurrency Monacoin is still unknown. The business is methods of unauthorised access, etc., this exchange has fallen victim to hackers, with working to reimburse affected customers. case is a criminal case.” $60m lost in the Zaif crypto hack. Of the $60m stolen, around $19.6m After filing it as a criminal case, local It is the second major cryptocurrency belonged to the exchange and the rest was authorities started an investigation. hack in Japan after Coincheck reported client money. Users are unable to make As a result of the company’s loss from $520m in NEM tokens stolen by hackers in withdrawals or deposits as Zaif rebuilds its the hack, Zaif also stated that it had January 2018. system; the exchange is unable to say when reached an agreement with Japan-listed Tech Bureau operates Zaif, a licenced they will resume. business Fisco to receive investment in crytocurrency exchange. The business In a statement, Zaif said: “Unauthorised exchange for a share of ownership. discovered the theft of , Monacoin access from the outside was conducted Cryptocurrency exchanges have suffered and on 17 September, and from around 17:00 on 14 July on the server at least five large attacks in 2018, with reported it to the authorities the following managing the hot wallet for the deposit and regulators around the world increasingly day. An investigation is underway. withdrawal, and the virtual wallet managed concerned about security in the crypto- The loss includes 5,966 . by the hot wallet currency was illegally exchange market. < However, the amount of Bitcoin Cash and remitted. Regarding specific concrete See feature on page 12 Klarna to acquire UK’s Close Brothers Retail Finance Established in 2014, CBRF offers omni- offering to merchants and customers.” channel retail financing services, providing As well as bolstering its presence in the POS financing to shoppers and enabling UK retail financing market, the acquisition merchants to expand their customer is expected to enable Klarna to grow its base and increase sales. Shoppers repay consumer offerings. the loaned amounts in fixed monthly Klarna chief commercial officer Michael instalments. CBRF currently claims to have Rouse said: “We are delighted to welcome around 600 active merchants in the UK. CBRF to Klarna. The complementary CBRF MD Alex Marsh said: “We at CBRF talents and propositions will help accelerate have transformed retail finance in the UK Klarna’s leadership in the payments market. over the past four years, and are extremely “What CBRF has achieved to date in proud of what we have accomplished. the UK is impressive, but together we can “Together with Klarna, we have the invest in realising the full potential of the exciting opportunity to further develop our business.” capabilities and deliver even more services Completion of the acquisition is subject Klarna Bank has announced that it will and value to merchants to help them to approval by the Swedish financial acquire Close Brothers Retail Finance succeed. supervisory authority, Finansinspektionen. (CBRF) to strengthen its retail financing “We are now focusing on a smooth The financial terms of the transaction were business in the UK. integration and seamless continuity of our not disclosed. <

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EPI September 2018 375.indd 9 03/10/2018 10:57:43 feature | china citic bank

inmotion: making a break into the virtual banking world

Virtual technology has facilitated modern society; almost everything can be done through a mobile. Briony Richter speaks to Helen Kan, Executive Director & Alternate Chief Executive Officer Group Head, Personal & Business Banking Group of China CITIC Bank, about Hong Kong’s first virtual banking app

onvenience is touted as the major handles foreign exchange, mutual funds and Facial recognition is carried out via a ‘selfie’, advantage of virtual banking, but it stock trading, revealing the extent to which from which the app can confidently ensure Cis not the only one. There are many inMotion is making headway in the virtual that the user is the same person as pictured on reasons to bank online, from 24/7 service to banking space. their Hong Kong ID card. a speedy process. On its site, it boasts some of its latest offers, Speaking about the onboarding process, In March 2018, China Citic Bank launched which include cash prizes up to HK$100 Kan states: “We promise account opening inMotion, opening up a completely new ($12) and 0.125% brokerage commission on in 15 minutes, and after putting in key channel for its customers. trading securities. information we achieve that. We use OCR Speaking to EPI about the breakthrough, technology to scan the Hong Kong ID card Helen Kan states: “In March 2018 we REGULATION AND SECURITY and conduct numerous tests to look for became the first bank in Hong Kong to offer fraudulent or invalid ID cards. a completely new way of opening a bank Becoming the first bank in the region to “The other technology is the selfie. These account without having to visit a branch. achieve the launch was a milestone. The bank are the two fintech technologies that enable Opening the account is completely virtual, worked hard with the regulator to ensure us to securely authenticate, but we also had and we were the first and the only bank up security and open the door to enable a new a breakthrough in terms of the regulatory until now in Hong Kong to do so. way of banking. requirements.” “Anyone can download through the Apple Opening a bank account in Hong Kong App Store or Google Play store. It is available used to be a much more rigorous process. 24/7 for anyone who holds a Hong Kong Kan explains: “In the past, when opening a identity card.” brand new bank account in Hong Kong, the She continues: “We want to position this customer needed to submit proof of address. app to be our virtual banking app, because What we are really So the way that traditional banks do it is as a commercial bank we want to offer our to ask the customer to show a utility bill or customers a service that is completely digital.” proud of is our another bank’s statement. As long as the person has a valid Hong “In a virtual world, this is not feasible; the Kong ID, they can enjoy all the functionalities ability to work with bank cannot guarantee the nature of a photo of the app. The onboarding process is one copy. We went through long discussions with of ease and speed. Once a customer has the regulator the Hong Kong Monetary Authority (HKMA) launched the app, it will ask for a mobile to discuss and lobby its support. In turn, it number. inMotion uses a one-time password. had to go to the legislative council to relax Once that is completed, the app will ask the the CML ordinance to allow banks to open a customer to scan their Hong Kong ID card. brand new banking account without needing The app has expanded its functionality The app harnesses OCR and facial- proof of address. beyond day-to-day banking to cover recognition technology and e-KYC processes, “What we are really proud of is our ability investment account opening. It also allows and can complete the account-opening process to work with the regulator, with its support customers to make fixed deposits, and in just 15 minutes. to have this breakthrough in terms of the

10 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 10 03/10/2018 10:57:46 feature | china citic bank

constraint of opening a bank account,” she ability to safeguard both their money and banks and payment service providers in the notes. data. country; around 20 banks and eight payment China Citic Bank was the first to propose Speaking about balancing the digital and service providers are already on board with the the solution and gain approval, and Kan physical channels, Kan highlights: “In Hong system. adds that she expects other banks to join Kong we have 32 retail branches. I think it’s The breakthrough with inMotion marks the the revolution. The regulation is now more a journey, and customer behaviour should start of a long journey towards more digitally relaxed, enabling other banks to adopt the drive the pace of the mix between virtual and accepted payment methods in Hong Kong. same approach and expand their services. This branch channels. The customer experience on According to GlobalData, debit cards account is why the inMotion app added the capability the inMotion app is critically important. for only 32.9% of the total card payment to open an investment account, to enhance its “On the other hand, there are still value in 2018, largely as a result of consumer competitive advantage. customers that come into our branches preference for pay-later cards. The competition did not take long to attempt the new approval process. In August this year, HKMA announced that it had The age profile of inMotion customers received 29 applications for the first batch of virtual bank licences. The applicants ranged is much younger than the customers we from telecommunications operators and financial technology companies to global acquire through our branches banks. inMotion successfully met the criteria to open a virtual banking app; the other because we are very convenient and everything However, debit card use is gradually rising applicants will need to pay close attention to is nearby. Competition is high, but consumers – frequency of debit card payments rose at how it handles operational risk. Successful are very used to visiting branches. I think a marginal CAGR of 2.9%, from 20.6 per applicants will need to effectively demonstrate it’s a generation trend. The age profile of year in 2014 to 23.1 in 2018. Debit cards are to HKMA an understanding of the risk inMotion customers is much younger than the mostly used for payments rather than cash exposure in the running of a virtual bank, and customers we acquire through our branches.” withdrawals, highlighting a gradual shift from more importantly, how they plan to manage Kan adds that around 15-20% of all new cash to card-based payments. Overall, debit those risks. customers have been acquired though the card payments account for 68.6% of the total inMotion app, and that 100 accounts are debit card transaction value in 2018. COMBINING CHANNELS opened every month. Even in the short time Looking to the future, Kan concludes: “Our that inMotion has been live, it is clear there is strategy going forward is to expand our local Even in an increasingly digital arena, having scope for virtual banking on a daily basis. market share through fintech investments. a branch network can play a critical role in HKMA has introduced a number of We want to be able to increase our customer building a strong connection with customers. initiatives in a move to modernise Hong base and tap into the cross-border Chinese Physical branches also provide comfort for Kong’s banking and payments system. The customer because we have the advantage and those customers who are not willing to go country’s instant payment system, the Faster the collaboration with our mother bank, fully digital, as they inspire trust in banks’ Payment System, is now live. It is open to all China Citic Bank.” < hong kong: key data

Cards per person, by card type Contactless card usage

Had not previously heard of them Charge card Reasons for using prepaid cards Have one, don’t use it for contactless payments Credit card Have one, use it for contactless payments Debit card Don’t have one, would like one Don’t have one, don’t want one 3.5 100 7.5 5.2 4.5 3.0 13.9 10.9 Received as a gift 5 13.5 13.5 80 12.9 15.1 20.7 2.5 Receive salary 6 Travel purchases 6 2.0 60 31.7 32.3 35.3 Online purchases 6 60.5 67.5 1.5 Control spending 10 40

1.0 Public transport 28 19.4 17.7 13.5 All regular spending 29 20 0.5 9.4 22.1 24.0 23.0 7.3 11.5 7.3 0.0 0

2014 2015̀ 2016 20172018e 2019f2020f 2021f2022f 2014 2015 2016 2017 2018

Source: GlobalData

www.electronicpaymentsinternational.com | 11

EPI September 2018 375.indd 11 03/10/2018 10:57:49 feature | cryptocurrency exchanges

cryptocurrency exchanges plagued by hacks: where are they going so wrong?

Regulatory lapses and inadequate levels of security have led to a number of cryptocurrency exchanges falling victim to hackers. Michael Julian, information security officer at Hosho, explains where they are going wrong. Briony Richter reports

ryptocurrency has become a for, cryptocurrency. Hacking can create an attacker had already breached the system then societal obsession, attracting both immense level of stress on the systems, and waited patiently for the perfect opportunity Csupporters and strong critics. their ability to handle extreme volume is yet to to withdraw funds – such as a period of Although volatile, digital currencies be properly tested. extremely high withdrawal requests – or, continue to send shockwaves across the The hack into the Zaif exchange follows more likely, there was an internal failure to world. However, maintaining the security of a long line of other successful breaches implement or follow an effective hot/cold cryptocurrency is irrelevant if the exchange in of security. At least five major hacks have wallet-storage strategy. which it is stored is not secure. occurred so far in 2018 and, to make matters “To succinctly answer the question, it In September 2018, Japan-based worse, a whole weekend passed before Tech is likely that this attack was moderately Zaif admitted Bureau detected the Zaif hack. difficult, particularly to infiltrate the network. that it had been hacked. Tech Bureau, the However, with paydays in double-digit parent company behind the Zaif exchange, millions, it’s understandable that hackers are announced that close to 6,000 Bitcoins, worth extremely motivated to engage at higher levels around $29m, had been stolen by hackers. Of of expertise,” he adds. the $60m stolen, around $19.6m belonged to In January 2018, Coincheck, another the exchange; the rest was client money. Japan-based currency exchange, lost a record- The latest attack on cryptocurrency it’s likely that Zaif breaking $526m to hackers. The exchange exchanges once again brings to light the had been storing its assets in a hot wallet that vulnerabilities of the infrastructure, and the was not following Coincheck admitted it had not secured with risk investors take when placing trust in them. multi-signature private keys. Multi-signature Hosho’s Michael Julian offers a clear a sound hot/cold security requires multiple sign-offs before assessment of where exchanges are going funds can be transferred; had the platform wrong: “Lack of company focus on wallet policy been in use, the funds would not have been cybersecurity – specifically, in this case, accessible to a single breach. improper storage of cryptocurrency funds – is Although the relevant security protocols are making cyberattacks frequent in the industry. available, the infrastructure in these exchanges The lack of resources devoted to cybersecurity It is believed that the hackers had gained often struggles to keep up with the pace. causes exchanges to have weak network access to Zaif’s hot wallets, a type of security that, once breached, leads to a loss of cryptocurrency wallet that is stored online. HOSHO CAPABILITIES funds caused by poor cryptocurrency storage “While the method of entry into Zaif’s practices that are susceptible to attacks.” network is unclear at this time, it’s likely that Hosho aims to drive the potential of The hacks reveal how the platforms Zaif was not following a sound hot/cold wallet security. With Hosho audits in within these cryptocurrency exchanges can policy,” Julian states. place, clients can feel at ease that audited be ill-equipped to cope with the volatility “Given the $59m stored in hot wallets, smart contracts have been written securely. of, and unpredictable surges in demand which is not recommended, either the Speaking about what Hosho can do to

12 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 12 03/10/2018 10:57:51 feature | cryptocurrency exchanges

No system is completely unhackable: it is important to have an effective cryptocurrency-handling policy

Michael Julian, Hosho support exchanges, Julian says: “Hosho THE FUTURE IS BLOCKCHAIN as the automobile, telephone, computer or offers penetration-testing services which, internet. in conjunction with an effective infosec The jury is still out on cryptocurrency. In “Hosho’s main goal is to work with business team, will ensure that exchanges have strong September, the New York attorney general’s leaders, investors and regulators to improve perimeter network security. office released a report stating that the blockchain security, leading the market “Because no system is completely exchange sector was full of conflicts of interest. with innovative tools, products and ideas. unhackable, it is also important to have an It went further, saying the industry did not Through improvements in security, blockchain effective cryptocurrency-handling policy. do enough to protect investors and prevent will become more trusted in the eyes of Hosho assists in this domain by auditing damaging breaches. the population, allowing more investment, existing policies and creating custom policies In the UK, similar concerns have been innovation and utilisation, eventually reaching from scratch in the case of a new exchange raised by the government. MPs on the UK its true potential to change the world as we entering the market.” Government’s Treasury Select Committee have know it.” He continues: “Centralised exchanges can called for cryptocurrencies to be regulated, to It will take time to become fully accepted be secured through the proper application protect consumers. across society, however. Julian adds: “Just like of sound cryptocurrency-handling policies, On the future of the cryptocurrency the infancy of the internet, the adoption of effective use of information security teams, market, Julian highlights: “While no one online payments did not become mainstream and use of third-party auditing firms to can see into the future, we believe that until it was deemed to be a secure method. perform policy reviews along with frequent blockchain has the potential to be a globally Blockchain technology needs time to mature penetration testing. transformative technology. The ability to and become understood by the masses. “As witnessed with Bancor, even rapidly exchange currency worldwide is “As more resources are thrown into the decentralised exchanges are not immune to important to the continued growth from development of innovative smart contracts poor security implementation. No system, globalisation, and with it the expansion of and apps, we will see more companies rolling whether centralised or decentralised, is international trade, ideas and culture. out products using blockchain technology. As inherently secure. Systems must be designed “It would appear that the exchange of long as security is taken seriously, and trust is in a secure manner, eliminating single points information has advanced at a pace much developed with users and CEOs alike, soon of failure. Once implemented, they must be faster than the international exchange of we will see many mainstream technologies kept up to date, tested and audited to ensure currency. Cryptocurrency could be the catalyst adopting blockchain technology.” that they remain secure.” that can fuel this continued growth, free from The reality is that the world of As no security regulations or standards the red-tape interference of diplomacy.” cryptocurrency and blockchain technology have been determined, Hosho conducts The government has continued to is growing at an exponential rate. To avoid ‘penetration tests’, involving a series of have concerns over the volatile nature of further breaches, exchanges need to focus signature tools and techniques to attempt a cryptocurrencies. It has the potential for scams on securing their infrastructure. Using breach into a client’s system. By doing this, and has been used in illegal activities, such as Hosho’s security checks enables businesses Hosho can discover potential vulnerabilities money laundering or funding terrorism. and exchanges to learn early on where that could expose a system to damaging hacks. However, Julian notes that blockchain has vulnerabilities lie, and how best to fix them. Each issue discovered is reported by Hosho the real potential to transform various sectors Without a robust platform in place, hacks with a Risk Score based on the likelihood of of society. He says: “Blockchain technology will continue to plague the cryptocurrency the issue being exploited. has the potential to be just as transformative exchange industry. <

www.electronicpaymentsinternational.com | 13

EPI September 2018 375.indd 13 03/10/2018 10:57:52 analysis | cryptocurrency

boxes, internet set-top boxes and all IoT devices are under threat. On a more serious cryptocurrency: note, it proves that a device or system has serious cybersecurity flaws. It is also a sign that there may be far larger security problems ahead. are you mining it The report continues: “Illicit mining shows no signs of being just a phase for threat actors, but will likely be a continuous and nearly effortless approach to revenue without knowing? generation. As enterprises experiment with the use of blockchain technologies to conduct business operations, illicit mining outside In the cryptocurrency world, mining is crucial. It of cryptocurrencies may itself become a validates transactions, and successful miners gain new disruptive risk that enterprises must mitigate.” The CTA has specified five reasons for the cryptocurrency for their efforts. However, it uses an increase in the activity: enormous amount of energy, so what do miners do? Get • The increasing value of cryptocurrencies other devices to do it for them. Patrick Brusnahan reports are making the act more profitable; • Introducing cryptocurrencies that can ining cryptocurrency is not the an impact on 22% of its corporate customers. be mined via standard devices, such as most popular task. In July 2018, Furthermore, the Palo Alto Networks found Monero and Ethereum, provide higher MUS congressman Brad Sherman approximately 470,000 unique binary-based levels of anonymity and a wider attack actually called for a blanket ban on buying samples that have the goal of cryptocurrency surface; and mining cryptocurrency. mining. Security firm McAfee did not have • Ease of use; Both Apple and Google have banned anything better to add, stating that there was a • Increasing availability of pool mining, cryptocurrency mining apps from their app 629% increase in coin-mining malware in the where groups of computers band together stores, in an attempt to stop users having their first quarter of 2018. to mine and increase scale, and phones used for that purpose without their In its The Illicit Cryptocurrency Mining • Enterprises and individuals with lacking knowledge. Even charities are getting into the Threat report, the CTA says: “While the security practices and cyberhygiene are game: Unicef recently asked gamers to use theft of computing cycles to make money bigger targets and often unaware that their their GPUs to help mine cryptocurrency for may sound relatively benign in the face of operations are being utilised. Syrian refugees. other kinds of cyberincident that can encrypt There is also the environmental impact your data for ransom, steal your intellectual The report concludes: “Network defenders of mining cryptocurrencies such as property, or disrupt important functions have a real opportunity to disrupt threat Bitcoin. According to the Bitcoin Energy of critical infrastructure, it is a threat that actors that rely on illicit mining operations Consumption Index, Bitcoin uses around cybersecurity providers and network defenders to generate revenue. Revenue generation on a 32TW of energy every year, enough to power must address together to improve our overall per-infection basis is currently low. around three million US households. In cybersecurity.” “Thus, proper improvements in security comparison, all Visa transactions in a year A multitude of problems can come from may actually drive malicious actors to only use the energy of 50,000 homes. this. On a basic level, it drains resources, abandon mining altogether. Even better, While most mining efforts are intentional, causes higher electricity bills, and decreases the making these basic improvements will also others are using more illicit forms. productivity of devices and workforces. increase your defences against other malicious Cyberattackers are now targeting less- actors that seek to steal or manipulate data or ILLICIT MINING obvious devices to mine: smart TVs, cable disrupt business processes.” <

As cryptocurrency values rise, cybercriminals CRYPTOCURRENCY MINING AT A GLANCE are using devices such as computers, mobiles, currency anonymity coin price july 2018 features and even smart fridges to illicitly mine Bitcoin Low $8,166.08 $140bn market cap. First blockchain coin. cryptocurrency. According to the Cyber Threat $4bn market cap. More frequent block generation Litecoin Low $83.27 Alliance (CTA), illicit cryptocurrency mining and faster confirmation times than Bitcoin. grew by 459% between 2017 and 2018, and is $46bn market cap. Is mined due to its popularity Ethereum Low $465.03 showing no signs of slowing. as well as ease of mining. Mining malware affected 13% of all $2bn market cap. Focused on privacy. Mining algorithm is considered ‘ASIC resistant’, meaning Fortinet customer companies in the fourth Monero Medium $140.04 no specialist hardware is required, making quarter of 2017, rising to 28% by the first traditional CPU/GPU mining more profitable. quarter of 2018. In May 2018, Check $976m market cap. Privacy feature conceals Zcash Medium $219.19 Point’s Global Threat Index identified that the sender, recipient and amount transacted. CoinHive browser-based miner was having Source: CTA

14 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 14 03/10/2018 10:57:53 analysis | cashless in europe

with contactless card payments hitting the 1% mark for the first time this year. the cashless economy: “In the UK, where card and contactless payments have been widely adopted, card payments actually surpassed cash for the first time this year. The availability of simple countries join card payment systems has certainly helped small businesses that previously relied upon cash payments – even beach-front chippies and small markets now offer quick and easy the revolution contactless payment. With more and more people choosing to pay via phones and smartwatches, it is not a stretch to say that Cashless transactions have caused dramatic changes to the cash and even cards might become obsolete here in the coming decade.” financial ecosystem. With card payments pushing out cash, Dragging its feet is , where cashless new research reveals the countries where digital technology payments only accounted for 89 billion is helping economies thrive. Briony Richter reports transactions. The report highlighted that, in comparison, the UK scooped 535 times more cashless transactions. arket Research has analysed “Research shows that consumers are Whether countries go completely cashless cashless transactions in 28 carrying less cash with them because of the is yet to be seen; however, digital payment MEuropean countries, and found ease of contactless. Whether cash will ever methods are certainly causing a shift in how a number of factors that are driving the rise completely disappear remains to be seen, but countries and governments look at money. in digital payments. ultimately people need choice in the way they The Mastercard spokesperson highlights: Across all market segments, cashless make payments. One size doesn’t fit all.” “Clearly there will be always be local nuances transactions are on the up. In the UK, the when it comes to payments. In Germany, for surge of digital-only banks is driving the GERMANY SECOND instance, online payments are far less popular, cashless revolution and transforming how and many shoppers pay on delivery for goods consumers interact with money. The report placed Germany second in terms ordered through e-commerce sites. The report considers the number of cashless of readiness to adopt cashless payment “However, the commonalities tell a stronger transactions and total revenue from digital methods. Although 80% of transactions were story. For instance, in the physical store payments to determine the countries with the conducted with cash in 2014, the nation has environment, contactless continues to witness most digitally ready businesses. It found that, moved forward quickly, with measures such strong growth, consistently, across every of the European countries studied, the UK has as bringing in card payments in all taxis in country. become the biggest supporter of cashless. Berlin in 2015. That move triggered a shift “We are not expecting huge differences in The UK generated a staggering £81.3trn to contactless, and Germany’s annual cashless the adoption of biometric payments from ($106trn) in cashless payments in the year spend is now £48.7trn. one market to the next. The technologies are ending 2016, and the highest total number of Expert Market lead researcher Jared Keleher already in place with fingerprint and facial cashless transactions, at 25.2 billion. comments: “Over the past few years, we’ve recognition on smartphones. And with strong As digital technology in the payments space seen that even the most traditionally cash-loyal customer authentication becoming law in continues to evolve, card payments in the UK countries like Germany are slowly coming September next year, banks will need to offer have now surpassed cash for the first time. The around to the idea that digital payments are their customers biometric authentication frictionless process and convenience of use are a central part of business in the 21st century, as well as one-time passwords. So, from clearly driving the relentless rise in popularity this point on, while we expect a spike in of cashless spending. Top 10 European countries biometrics payments, this should be consistent In September 2018, Mastercard released for cashless transactions across the entire region.” new data revealing a 95% rise in contactless Of course, with an increase in cashless 1. The UK transactions across the UK for the year to transactions, the question of data security 2. Germany date. Contactless now represents almost one in must be addressed. Although certain types of 3. France two in-store card transactions carried out by financial crime would stop, cashless opens the 4. The Netherlands UK consumers. door to an increased amount of cybercrime, 5. Spain Speaking to EPI, a spokesperson for and that concerns a lot of consumers over the 6. Mastercard comments: “Cash will have a role privacy of their financial data. 7. Italy to play for years to come, but what is clear is As many countries free-fall into an 8. The that cash transactions are declining in favour increasingly digital world, it will be imperative 9. Belgium of card payments. This is partly driven by the for them to ensure banks and other financial 10. rise of online shopping, but it is also true of organisations have a sufficiently robust Source: Expert Market the high street. infrastructure to cope. <

www.electronicpaymentsinternational.com | 15

EPI September 2018 375.indd 15 03/10/2018 10:57:53 products | paysend

because cards are now so prevalent compared to cash,” explains Millar. money transfer provider “The reason people send funds to their relatives is so the recipients can spend this money, and they typically withdraw the funds using a card. So it makes sense to enable paysend launches our customers to transfer funds direct to the recipient’s Visa, Mastercard or CUP card. We didn’t just want to offer a cheaper bank-to- bank transfer service, but wanted to provide A global account something transformative.” As a direct Visa and Mastercard member, Paysend is the latest digital money-transfer provider to launch Paysend can act as issuer for Paysend prepaid cards linked to customers’ Global Accounts. a global account, in a market dominated by Revolut and Millar says the company’s development TransferWise. Robin Arnfield talks to CEO Ronnie Millar plan calls for it to develop B2B services such inbound and outbound business payments for aysend’s Global Account allows well, so we can carry on trading in continental smaller international online businesses. He customers to hold, move and spend Europe,” says Millar. says Paysend will likely also eventually offer Pmultiple fiat currencies globally Several members of Paysend’s product bank-account-to-bank-account transfers. In using their Paysend card, and also supports design team originally worked for Revolut, some destination countries, Paysend already several cryptocurrencies. whose app allows users to hold up to 25 supports card-to-bank-account transfers. Customers can switch funds between currencies on a Revolut card and offers “We will be launching our business services currencies using the Paysend app in real time, fee-free transfers in 130 currencies at real- in Europe later this year,” says Millar. “This as they travel to different countries, and there time exchange rates. TransferWise offers a will leverage our payment-processing platform are no charges other than FX rates. borderless account that lets customers hold to enable businesses that sell abroad to receive “If you’re in , and run out of over 40 currencies and send and spend payments in multiple currencies, for example Canadian dollars, you can instantly transfer money abroad using the TransferWise debit via an e-marketplace. some of your sterling funds to Canadian Mastercard. “We plan to link our consumer-facing dollars, and our app handles the FX Whereas Revolut has 2.8 million users, and and business payment-processing platforms. conversion,” Millar says. TransferWise over four million with over two This will mean that, if a consumer makes a Paysend will roll out the Global Account, million TransferWise debit card transactions purchase from one of our merchant clients, currently available in beta form, over the next to date, Paysend so far has signed up 200,000 we can instantly offer the consumer a Paysend few months. Its first product, the card-to-card- users to its Global Transfers platform, having digital account and perform the KYC on them based Paysend Global Transfers remittance seen a threefold increase in Global Transfers to let them make the purchase.” service, is aimed at migrants and expatriate users in the last six months. “Paysend’s platform is very different from workers who typically send small amounts In July 2018, Paysend raised $20m from other remittance companies in that its primary back home. It charges a fixed fee – £1, $2 or investment firm MARCorp Financial and its product offering is card-to-card transfers,” €1.50 – plus an FX rate per transfer. existing investors to fund development of the says Baker. “Card-to-card transfers can work “The Global Account is essentially an Global Account. “Money-transfer companies in developing nations if the recipient has a e-wallet,” says Millar. “It enables people to do were a key focus of fintech investment in prepaid card, since this is a safer way to receive three things: hold money the way they want to 2017, so clearly people are using these firms’ money than picking up cash. hold money, move money the way they want, services extensively,” says Talie Baker, senior “The downside of card-to-card transfers is and spend money how they want.” analyst at Aite Group. disclosing your card number to people, due Initially, the Global Account can hold US to the fraud that may happen when someone dollars, sterling, , rubles and Kazakhstani VISA AND MASTERCARD gets your card account number. However, in tenge, plus three cryptocurrencies: Bitcoin, Russia, for example, it’s common practice to Ethereum and Litecoin. “We’re direct Visa and Mastercard members, give your card number to another person for “The difference between the Global and also support China UnionPay (CUP) P2P transfers, so maybe it’s not a big deal in Account and our Global Transfers service is cards for our remittance service,” says Millar. other parts of the world.” that, with the Global Account, you transfer “Because of our membership of Mastercard Baker suggests that Paysend should set up a money within your own e-wallet from and Visa, we do our own acquiring and directory for its remittance service that allows currency to currency, rather than to someone processing on our PCI-compliant platform, people to send money to an email address or else,” explains Millar. and don’t use a third-party processor.” mobile number tied to a card. This would be Paysend currently has a Payments Paysend uses the Visa and Mastercard P2P a safer way to make transfers, she notes, while Institution license from the UK’s Financial transfer rails, Visa Direct and Mastercard praising the app’s function. Conduct Authority. “If we lose our European Send, for its remittance service. “We opted for “The ability to hold money in different passporting rights due to Brexit, we’ll apply card-based transfers for our Global Transfer currencies is a plus for people who do a lot of for a European Payments Institution licence as service rather than bank account transfers, international travel,” she says. <

16 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 16 03/10/2018 10:57:54 products | orange money

orange money: a decade of financial innovation in africa

Orange Money, Orange’s mobile money solution, is celebrating its 10th anniversary. Launched in 2008, the service currently has 40 million customers and is available in 17 countries, reaching €26bn ($30bn) in transactions in 2017. Douglas Blakey reports

range Money was initially the number of Orange Money services has and compliance control structure, Cecom, launched in Côte d’Ivoire in 2008. quadrupled, leading to the financial inclusion based in Abidjan. These structures guarantee O The success of this money transfer of populations and helping drive national transactions and facilitate dialogue directly and mobile payment solution for unbanked economic development. The offer has been with authorities, thereby simplifying new or relatively unbanked populations is based significantly expanded to include international service launches. The goal is to make Orange on the accessible, universal nature of the transfers, bill payment, and wage payment Money accessible for as many people as service, which makes it possible for millions of services. The Bank to Wallet service, launched possible, in strict compliance with regulations people to perform instant, secure and reliable in 2015, is a major innovation that goes even set out by the central banks in the countries financial transactions using a mobile phone. further by enabling transfers between bank and currency zones where Orange operates. The service is available in 17 African accounts and Orange Money accounts. Alioune Ndiaye, CEO of Orange Middle countries and has 40 million customers, 13 East and Africa (OMEA) says: “Orange Money million of whom use it every month. ELECTRONIC MONEY makes real contributions to economic and Orange Money’s accelerating growth and social development in Africa, and is a part of sales, which rose 60% from 2016 to 2017, Electronic money has also made it possible to our strategy as a multi-service operator and have made it one of the group’s top growth facilitate exchanges and secure transactions, digital transformation partner in Africa and the drivers in Africa, particularly in Côte d’Ivoire, and is now a major advantage not only for Middle East. Orange Money’s success is first , , and . individuals but also for major companies and and foremost a joint achievement; I would like In some countries, the service gives close to SMEs. To meet the compliance regulations to thank all the teams who work hard every 50% of users access to banking services in that govern mobile money activities, Orange day to ensure its success, which now represents areas with low levels of bank usage. has created financial establishments with a major share of OMEA turnover.” Orange Money is now much more than just central bank approval in seven African Paul de Leusse, Orange group deputy CEO a cash transfer service. Over the past decade, countries, as well as a shared supervision for mobile financial services, says: “Orange Money’s success is based on its usefulness, its ease of use, and its full integration with Orange Money: how does it work? Orange’s services. Orange Money represents Orange Money is an electronic wallet linked to an Orange mobile number. It simply converts the future of Orange’s mobile financial services cash into electronic money, and vice versa. in all our countries, especially in Europe.” Orange Money service is available to all Orange customers provided they have a SIM card, After its transfer and payment services, a mobile phone and an identity card. Registration is free at all Orange Money points of sale. Orange is going further with lending and To load their account, the customer goes to a point of sale with the desired amount in cash. savings services available directly by mobile Following the transaction, the seller and the customer receive an SMS confirmation of the phone. Available through partners, the services transaction’s success. The account is instantly credited. have already been offered to customers in Mali Transfers and payments and since early 2018. Three types of transaction are offered by Orange Money: International transfers, another strong area of development for Orange Money, aim to • Money transfer: Orange Money makes it possible to send money via mobile phone to any strengthen ties between people living outside Orange Money customer within the same country, and internationally for certain countries. their home countries and their loved ones. • Payment: Users can make payments to merchants, pay some bills remotely, make Finally, as smartphones become increasingly purchases on the web, or top up airtime whenever they want. widespread and uses change rapidly, the • Financial services: In Madagascar, customers can now access m-kaji, PAMF’s instant credit Orange Money services are evolving with and savings service, from their Orange Money mobile account. Orange will gradually extend the development of an application for easier this type of solution to other countries. interactions and transactions. <

www.electronicpaymentsinternational.com | 17

EPI September 2018 375.indd 17 03/10/2018 10:57:54 country snapshot | luxembourg

LUXEMBOURG

country snapshot: luxembourg

A mature market with high card penetration

ayment cards are the preferred Banking penetration in Luxembourg Luxembourg’s population aged 15 or above payment instrument in Luxembourg, is one of the highest in the world, and with a bank account was 97.3% in 2017. Paccounting for 52% of the total consumers are keen users of bank Luxembourg is also host to a number of payment transaction volume in 2017. products and services. The percentage of wealthy individuals and large corporations,

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

$bn $bn $bn 2,000 2.0 15

12 1,500 1.5

9 1,000 1.0

6

500 0.5 3

0 0.0 0

2013 2013 2016 2013 2016 2016 2017e 2021f 2017e 2021f 2017e 2021f

Source: Central Bank of Luxembourg, GlobalData Source: Central Bank of Luxembourg, GlobalData Source: Central Bank of Luxembourg, GlobalData

18 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 18 03/10/2018 10:58:02 country snapshot | luxembourg

and the majority of banks offer private Debit card shares by issuer Debit card shares by scheme banking, wealth management and asset management services. Payment cards are often cross-sold to customers as part of bundled offerings. Banque et A favourable tax regime and bank- Caisse d’Epargne Others de l’Etat privacy legislation have enabled financial 32.6% 30.5% Visa Mastercard services to become a growth leader. The 48.0% Visa 100% 52.0% rising adoption of contactless technology contributed to the growth of payment card Banque transaction volumes and values between Internationale BNP Paribas à Luxembourg 22.0% 2013 and 2017. 14.9% With a growing number of retailers accepting contactless payments, the increased use of contactless technology is

anticipated to further drive payment card Source: GlobalData Source: GlobalData transaction values and volumes over the next five years. pay later shares by issuer pay later shares by scheme DEBIT CARDS PREFERRED Others 6.8% Debit cards accounted for 55.2% and 54.2% of the payment card transaction

value and volume respectively in 2017. Others Mastercard Growth has been supported by a gradual 40.8% 25.9% BNP Paribas shift from low-value cash transactions Visa 59.2% 67.3% to debit cards, and the availability of contactless cards. Some non-banks also offer debit cards, and the entries of digital-only banks such as N26 and FerratumBank have also supported the debit card market. Germany-based mobile-only bank N26 Source: GlobalData Source: GlobalData launched operations in Luxembourg in November 2017. Account holders are offered a Mastercard-branded debit card to E-COMMERCE GROWTH merchants, although an annual fee of make payments in stores and online. around $600 is charged. This initiative Similarly, Finland-based mobile-only E-commerce in Luxembourg recorded is anticipated to boost e-commerce in bank FerratumBank offers services in strong growth, increasing in value from the country, which will drive electronic several European countries, including €466.1m ($559.3m) in 2013 to $899.2m in payments. Luxembourg. The bank offers a current 2017, at a CAGR of 12.6%. account, an overdraft facility and a Increasing consumer confidence in PAYMENT INFRASTRUCTURE Mastercard contactless debit card. online transactions and a well-developed logistics infrastructure have supported The number of POS terminals grew from PAY-LATER GROWTH e-commerce’s growth. The availability of 11,608 in 2013 to 13,232 in 2017, mainly virtual payment cards and a number of supported by an increase in the number of Pay-later card penetration in Luxembourg is alternative payment solutions for online POS installations at smaller retail outlets. among the highest in the world, with every purchases has also been a key factor. To serve SMEs, payment service citizen currently holding around three pay- In November 2017 the Luxembourg providers are offering mPOS solutions. later cards. government announced the launch of In 2017, SumUp, a Germany-based POS Rising disposable incomes and real national e-commerce platform LetzShop. provider, launched its mPOS solution in household consumption are the primary The platform provides an opportunity Luxembourg, allowing merchants to accept reasons for the strong uptake of pay-later primarily for small and medium-sized payments by mobile phone. cards among individuals. merchants to display and sell products As preference for contactless payments With Luxembourg’s largely wealthy online. Products can be picked up from grows, retailers are also installing POS population, banks are offering premium physical stores or delivered to the terminals with contactless functionality. credit cards and a range of value-added customer’s address. According to Visa Europe, there were 7,000 services to these customers as part of To make it cost-effective, transaction contactless POS terminals in Luxembourg bundled packages. fees on purchases are waived for as of February 2018. <

www.electronicpaymentsinternational.com | 19

EPI September 2018 375.indd 19 03/10/2018 10:58:04 country snapshot | slovenia

country snapshot: SLOVENIA slovenia

Bank and government initiatives challenge cash’s dominance

ash remains the dominant payment The central bank holds an education day to offers a Visa Electron card that allows instrument in Slovenia, accounting improve financial awareness and education, holders to split payments into between two Cfor 54% of the overall transaction while the Bank Association of Slovenia aims and 12 instalments. volume in 2017. to create financial awareness by organising E-commerce grew in value from $222.3m However, following efforts by Slovenian workshops and seminars. Banks have also in 2013 to $402.8m in 2017, at a strong banks and the central bank’s financial taken steps to educate consumers. Nova CAGR of 16%. The young and working inclusion programmes, the payment card KBM promotes awareness among children population is expected to drive the market is gradually growing. Payment cards about banking products and services e-commerce market’s growth. accounted for 21% of the overall payment through its interactive mascot, Dindin. According to the Statistical Office of the transaction volume in 2017, up from 16.7% In terms of transaction value, charge Republic of Slovenia, 46% of the country’s in 2013. cards accounted for a larger share than population aged between 16 and 74 Growths in the payment card transaction credit cards in 2017. Charge cards are purchased online between April 2016 and value and volume in the last five years were mainly preferred by corporate users for March 2017. E-commerce growth is also also supported by the rising popularity of high-value transactions, as they have a supported by the availability of alternative contactless cards. Most banks in Slovenia fixed payment timeline. payment solutions including PayPal, offer contactless cards that can be used to Banks in Slovenia have taken steps and paysafecard. make payments of less than €15 ($18). to boost credit card use, and most offer Banks and payment service providers Debit cards are the preferred card type instalment facilities on credit cards. Abanka are launching new solutions to boost in Slovenia, accounting for 79.9% of the electronic payments. NLB launched its overall payment card transaction value in PAYMENT CARDS BY TYPE (MILLION) NLB Pay mobile wallet in March 2018, 2017. High banking penetration coupled Debit Pay later allowing users to save Mastercard details with consumer preference for debt-free to the wallet and make in-store contactless 2013 2.5 2.5 payments and prudent consumer spending payments in Slovenia and abroad. have led to the dominance of debit cards. 2016 2.6 2.6 In March 2017, Fortumo collaborated Financial inclusion remains a priority for 2017e 2.6 2.6 with Telekom Slovenije to launch its carrier the Slovenian government, which plays 2021f 2.8 2.8 billing service, allowing users to pay for a key role in promoting financial literacy. Source: GlobalData digital content on Google Play. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2013 6.7 5.7 2013 57.4 131.9 2013 1.8 35.6 2014 6.8 5.8 2014 57.0 139.9 2014 1.7 32.8 2015 6.9 5.8 2015 56.4 148.4 2015 1.7 38.0 2016 7.0 6.2 2016 55.8 162.1 2016 1.7 37.0 2017e 7.1 6.6 2017e 55.2 175.3 2017e 1.6 35.8 2018f 7.2 7.1 2018f 54.6 188.7 2018f 1.6 35.3 2019f 7.4 7.5 2019f 54.1 201.9 2019f 1.6 35.7 2020f 7.5 7.8 2020f 53.6 214.1 2020f 1.6 36.3 2021f 7.6 8.2 2021f 53.2 225.9 2021f 1.6 36.9 Source: Central Bank of Slovenia, ECB, GlobalData Source: Central Bank of Slovenia, ECB, GlobalData Source: Central Bank of Slovenia, ECB, GlobalData

20 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 20 03/10/2018 10:58:09 country snapshot | saudi arabia

country snapshot: SAUDI ARABIA saudi arabia

High-value transactions gradually shift to electronic platforms

n Saudi Arabia, cash is the preferred Debit cards are the dominant card SAR24,000 ($6,400) per annum for banked method of consumer payment, type in Saudi Arabia. The Saudi Arabian consumers and $8,000 for non-banked Iaccounting for over 90% of the total Monetary Authority (SAMA) has taken consumers, making credit cards available transaction volume. a number of initiatives to encourage only to certain parts of the population. While high-value transactions are electronic payments, including establishing The gradual adoption of contactless shifting to electronic platforms, most low- the Mada electronic payment system and payments is fostering the use of payment value transactions are in cash. introducing mandatory wage payments into cards at the POS. Riyad Bank launched Although use of payment cards – bank accounts. In September 2015, SAMA the country’s first contactless card in primarily debit cards – is gradually rising, launched a modified payments network, September 2015, converting its entire they are mostly used to withdraw cash linking all ATMs and POS terminals to a card portfolio to contactless technology. In rather than make payments. However, central payment switch. April 2016 National Commercial Bank also the government has taken initiatives to Pay-later cards accounted for only 6.1% transferred its entire credit card portfolio to promote electronic payments, including of the overall transaction value in 2017. contactless technology. the introduction of the Wage Protection Key factors inhibiting the growth of credit In November 2016, SAMA launched the System regulation in September 2013. cards include the debt-averse nature of Mada Atheer contactless payment service, While debit cards remain the dominant Saudi consumers, and merchant reluctance. allowing cardholders to make low-value payment card type, credit card use remains The central bank has also set a minimum contactless payments at POS terminals. low in Saudi Arabia for religious reasons. income requirement for credit cards at In February 2018, SAMA announced However, almost all leading credit card plans to extend contactless functionality issuers in the country now offer Sharia- PAYMENT CARDS BY TYPE (MILLION) to smart devices, and in March 2018 Riyad compliant credit cards. Debit Pay later Bank partnered with payment technology The gradual adoption of contactless provider Gemalto to launch Saudi Arabia’s 2013 17.8 2.7 technology and the emergence of first contactless payment wristband. e-commerce – supported by the availability 2016 26.5 4.0 Saudi Arabia’s e-commerce market of several alternative payment methods – 2017e 29.1 4.4 registered a strong CAGR of 25.2%, are likely to drive the payment card market 2021f 37.3 5.9 supported by rises in the young population throughout the next five years. Source: BIS, GlobalData and smartphone penetration. < CARD TRANSACTION VALUES BY CARD TRANSACTION VOLUMES BY NUMBER OF ATMS AND POS TERMINALS CHANNEL ($ BILLION) CHANNEL (MILLION) (THOUSAND) ATM POS ATM POS ATM POS 2013 179.9 42.8 2013 1,343.9 324.3 2013 13.9 107.8 2014 196.9 51.2 2014 1,537.3 400.9 2014 15.5 138.8 2015 209.2 56.7 2015 1,804.1 484.4 2015 17.2 225.4 2016 203.0 61.1 2016 1,931.4 629.3 2016 17.9 276.2 2017e 197.7 65.7 2017e 2,054.7 770.8 2017e 18.6 305.0 2018f 193.3 70.6 2018f 2,161.3 911.3 2018f 19.4 335.6 2019f 189.5 75.8 2019f 2,264.7 1,057.5 2019f 20.1 366.3 2020f 186.4 81.3 2020f 2,363.7 1,203.4 2020f 20.8 395.7 2021f 184.1 87.2 2021f 2,458.2 1,344.2 2021f 21.4 423.7 Source: Central Bank of Saudi Arabia, GlobalData Source: Central Bank of Saudi Arabia, GlobalData Source: Central Bank of Saudi Arabia, GlobalData

www.electronicpaymentsinternational.com | 21

EPI September 2018 375.indd 21 03/10/2018 10:58:14 industry insight | idex biometrics

use the card via existing secure payment infrastructures – including both chip and ID biometrics: and contactless card readers – in the usual way. Once it is registered and in use, the resolution of the sensor and the quality of image handling is so great that it can recognise how to reconnect prints from wet or dry fingers, and knows the difference between the fingerprint and image ‘noise’ – such as smears or smudging – that is often found alongside fingerprints. The result with our payments is a very flexible, durable sensor that provides fast and accurate authentication. Fingerprint recognition will provide a Our relationship with money is less personal than it was. clearer means to distinguish an individual Gone are the days when people would visit their local bank, from everyone else on the planet. This queue up and request to withdraw cash via the bank clerk. technology will not only assist the financial sector; instead, its benefits will transcend into David Orme, senior vice-president at Idex Biometrics, writes a range of areas, from bolstering national identification which will help address odern technology has positively the rising skill levels of cybercriminals. With healthcare and social fraud, assisting financial shaped personal finance in many biometric technology already implemented inclusion and maintaining access to controlled Mways, by providing convenience as a security measure in airports, and even spaces such as government buildings. and security through areas such as online on the latest smartphone devices, the idea of banking and payment cards. As a result fingerprint recognition should not be a foreign HOW SOON IS NOW? however, our personal relationships with concept. Instead, due to it already being a our money are quickly deteriorating. consumer habit, biometric payment cards Fortunately, the long-held ambition to After all, we live in a world of personalised will be easily adoptable, paving the way for a add biometrics to cashless transactions has experiences. offers us individual smooth transition. now been achieved. Production and trials recommendations, suggests great new of an extremely thin, flexible and durable songs based on our listening, and Netflix DEATH OF THE PIN fingerprint sensor, suitable for use with knows what we will love to watch. We now payment cards, are underway in countries expect everything to be unique and tailored Traditional methods of authentication such such as , the US, , , to us and our personal preferences. It puts as the PIN are becoming more and more Japan, the Middle East and South Africa. us in control and validates that we are each outdated. Failing to combat fraud, the PIN However, we anticipate that each banking individuals with our own specific likes and has seen millions lost to scams ranging from customer may deploy as many as 100,000 needs – that in a world of 7.6 billion people, shoulder-surfing to lost and stolen, even to biometric cards to their account holders by we have a voice. opportunist criminals discovering PIN codes the end of 2018, and that biometric bank card This taps into an innate love of the personal written down. adoption will go into many millions from – something that reflects who we are, from a By introducing a biometric payment card, 2019. It is paving the way for payments to monogrammed shirt, a personalised number consumers will be far more protected from become personal once again. plate, a tailored itinerary for your holiday to fraud, which will eventually bring an end Personal relationships are a key part of simply how you like your coffee. to the PIN. By storing a fingerprint sensor life; they offer us a sense of importance and Yet there are some things in life that have directly onto the payment card, as opposed happiness. The time is now for this to extend resisted being personalised: credit and debit to a central database, there is nobody else in to our payment cards. Biometric payment cards are one such example. They are all the the world that will be able to connect with cards will create a unique connection, with same. All dull and functional. Generally, the the card to issue a transaction other than transactions exclusive to the owner, shunning only way to personalise cards currently is to the owners themselves. Thus, it creates a far anyone else on the planet trying to access the use a PIN with significance such as a birthday, more accurate method of authentication and sensor. Not only is this integral to creating a as insecure as that may be. the ultimate personal relationship between personal relationship between card user and But, as the protagonist from the 1960s TV consumers and their cards. bank, but the security benefits are, therefore, show The Prisoner famously shouted: “I am With everything else now seemingly moving more profound as the challenge of forging not a number!” None of us are numbers. We towards a digital platform, this is the last fingerprints is far more complex for criminals are all unique. And what is more unique than piece of physical interaction in payments, and Though biometric technology is already in our fingerprints? therefore a much-needed opportunity to build place across our society, its potential within a personal connection and better security to payments has yet to be truly discovered. BIOMETRIC INTERVENTION combat fraud head-on. Before this can be achieved, banks need to Specifically, the reference fingerprint can gain consumer trust and promote the value of Our society has become increasingly security- easily be uploaded to the card by the user, biometric technology before its benefits can be conscious, in a landscape characterised by at home, and once that is done they can realised by us all. <

22 | September 2018 | Electronic Payments International

EPI September 2018 375.indd 22 03/10/2018 10:58:14 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE LEASING LIFE CONFERENCE & AWARDS 2018 15th November 2018 ∤ Tallinn, Estonia

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

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

Headline Partner: Gold Partner: Silver Partners:

Exhibitors: Badge and Lanyard Drinks Reception Table Hosts: Panel Hosts: Lunch Documentation Regional In Association with: Partner: Partner: Partner: Partner: Partner:

For more details please contact:

Page 1 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF PRIVATE BANKING Private Banking & Wealth Management: Switzerland 2018 12th December 2018 ∤ Marriott, Zurich

Private Banking & Wealth Management: Switzerland 2018 Conference and Awards leverages the expertise across the Verdict research and publishing portfolio, including Private Banker International, Wealth Insight and Wealth Intelligence Centre. The event is an opportunity to share ideas, discover trends and network with peers across the wealth industry.

Key Issues :

∤ Economic trends to 2020. Wealth ∤ How should Switzerland’s private banking management industry performance industry define itself in the age of digital technology and intensifying competition? ∤ With technology playing an increasingly significant role in service delivery what ∤ What channels are working for attracting, benefit does institutional size confer? retaining and managing an increasingly diverse customer universe? ∤ What are the implications for service, delivery and product distribution in the ∤ What’s the connection between distribution age of the digital wealth manager? and profitability? How are Swiss private banks adapting to the challenge of tight ∤ How is technology enabling faster, more cost margins and higher costs? effective on-boarding, KYC and compliance reporting among wealth management ∤ What does the country need organisations? to do to stay ahead?

Gold Partner: Silver Partner: Bronze Partners: Exhibitor: Supported by

For more details please contact:

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