PAYMENTS INDUSTRY INTELLIGENCE March / April 2017 PaymCARDeS &n MOtBsILE IN THIS ISSUE Islamic Finance TIME TO GO MAINSTREAM? MARKET OVERVIEW PAYMENTS IN RUSSIA OMNI-CHANNEL WHAT DO RETAILERS REALLY, REALLY WANT? ·----· 1ngen1co • GROUP • 0 lngenico seamless payment module, for the next generation vending machines! Be smart, be self service! PAYMENTS INDUSTRY INTELLIGENCE Payments ·----· CARDS & MOBILE March / April 2017 1ngen1co • Volume 9, Issue 2 GROUP Production Team Alexander Rolfe Is the future of finance Islamic? Editor-in-chief and publisher • Tel (+44) 1263 711 800 [email protected] The narrative has changed. Did we consciously decide not to talk about it? Has the FinTech bubble finally burst or did market forces just begin to let some air out? Joyrene Thomas Staff Writer Tel (+44) 1263 711 800 0 I am, of course, taking about the financial technology market. I believe this is the first issue [email protected] in years that we have not mentioned it, whether that be in terms of market sizing or the Wendy Sanders impact it is having on financial services. Head of Business Development Tel (+44) 1263 711 801 lngenico seamless payment module, Nonetheless, we are talking about finance. In this case, Islamic Finance. I am sure that you [email protected] are all aware of the term, but how many of you have actually delved deeper into this rapidly- Gemma Rolfe growing phenomenon, displacing more traditional types of finance? Islamic Finance is far General Manager more than just the prohibition on interest. Tel (+44) 1263 711 800 for the next generation vending machines! [email protected] Much has been written about Russia in the mainstream press in the past months. Here we Gemma Haywood focus on the payments industry in Russia. It’s actually an incredibly vibrant market with lots Subscriptions and General Tel (+44) 1263 711 800 of innovation, including a new domestic card scheme set up to rival Mastercard and Visa — [email protected] good news for an issuing market growing at three percent year on year. Adam Unsworth Graphic Design Finally, we turn our attention to a piece of research we have done with RBTE and Ingenico. Tel (+44) 7932905744 Omni-channel is well spoken about across the board in the payments industry and indeed [email protected] the retailer communities. What we felt is that the consumer drivers behind the changes Contributors are often missed. In this research, highlighted with a teaser feature, we shed some light on Al Pascual - Javelin these shifting drivers. Valdis Janovs - Tieto Cliff Gray - Strawhecker Group Roger Niederer - Six payment Services Alexander Rolfe, Printing Micropress Printers Editorial Advisory Board AlexRolfe John Berns Editor-in-chief and publisher, Payments Cards & Mobile Managing Partner, Accourt Sylvie Boucheron-Saunier SVP Financial Institutions, North America & Europe, ACI Robert Courtneidge Global Head of Cards and Payments, Locke Lord June Felix President – Europe, Verifone Denise Gee Director, Magna Carta Simon Hardie Director, Magna Carta All rights reserved. No part of the publication may be reproduced or transmitted in any form without the Be smart, publisher’s prior consent. While every care is taken to provide accurate information, the publisher cannot accept liability for errors or omissions, no matter how caused. Payments Cards and Mobile The Stable, Hall Yard, Kelling © PaymentsCM LLP 2017 Payment Cards and Mobile™ is owned and published by Holt, NR25 7EW, United Kingdom be self service! PaymentsCM LLP ISSN 1759-829X +44 1263 711800 / paymentscm.com contents 06-07 PAYMENTS NEWS THREE TRENDS SHAPING GLOBAL RISKS WHY IOT IS THE FASTEST GROWING RETAIL OVER THE NEXT DECADE TREND OF 2017 NEWS IN BRIEF Economic inequality, societal polarisation and A recent Gartner survey estimated that by All the latest news from the past 60 days growing environmental threats are the top 2020, the number of connected objects will three trends that will shape global development increase by 30 times current levels, making 08 - 13 CARD NOTES over the next decade, according to the World the Internet of Things (IoT) a huge untapped Economic Forum. opportunity for retailers which simply cannot BLOCKCHAIN TO CUT INVESTMENT BANK be ignored. COSTS BY 30 PERCENT UK CONSUMERS DO NOT TRUST BUSINESSES Blockchain technology could reduce TO PROTECT FINANCIAL AND PAYMENTS DATA 24-25 ISSUING & ACQUIRING infrastructure costs for eight of the world’s ten More than half of UK consumers are concerned largest investment banks by an average of 30 about the ability of businesses and financial THE FUTURE OF THE MERCHANT PAYMENT percent, or $8-12 billion annually, according to institutions to protect financial and payments ECOSYSTEM a new report by Accenture. data, with 19 percent of respondents saying Now in its tenth year, the Merchant Payments they do not trust firms to protect their data and Ecosystem event in Berlin in February has THE AMERICAN LOVE AFFAIR WITH CARDS 33 percent saying they are unsure, according become a firm fixture in the conference CONTINUES to a new global report from ACI Worldwide and calendar. This year’s event saw an expanded Forget rock-paper-scissors. When it comes to Aite Group. exhibition area and separate streams how Americans pay, it is card, paper followed dedicated to mobile point-of-sale (mPOS) and by the two electronic-based systems some SEPA: IS THE ECB STIFLING COMPETITION online payment methods. way behind. WITH ITS LATEST MOVE? Ten years ago the European Commission and DOMESTIC PAYMENT SCHEMES SHIFTING VERIFONE NETWORK COMPROMISED BY the European Central Bank (ECB) announced a FOCUS TO NEW DIGITAL PAYMENTS SERVICES RUSSIAN HACKING GROUP common vision for the Single Euro Payments The development of new payment services Verifone is reportedly investigating a breach of Area (SEPA), which they described as an and the evolution of technology are currently its internal computer networks that appears to “integrated market for payment services which the top priorities for most domestic payment have impacted a number of companies running is subject to effective competition.” They schemes. An overwhelming majority of its point-of-sale solutions. Verifone confirmed described their role as “creating open and schemes are in favour of cross-border to security blogger Brian Krebs that the extent common standards that overcome technical collaboration. The top two rated actions are of the breach was limited to its corporate and commercial barriers and by fostering sharing of technical standards and jointly network and that its payment services network effective competition.” developing technical solutions. was not impacted. MARKET OVERVIEW 18-20 14-16 COVER STORY: PAYMENTS ISLAMIC FINANCE: TIME TO GO IN RUSSIA MAINSTREAM? The Islamic finance industry has expanded rapidly 22-23 in the last decade, growing at around 10-12 percent annually, according to the World Bank. We examine WHAT DO RETAILERS REALLY, REALLY WANT? the underlying Shariah principles and how this could inform banking and financial services within the Muslim world and more widely. 4 payments cards & mobile | March / April 2017 www.paymentscm.com contents 26-27 MOBILE PAYMENTS 31 E-COMMERCE 37 CONTRACTS MOBILE MONEY TEN YEARS ON EBA ADOPTS RISK-BASED APPROACH FOR OPTAL TO ACQUIRE B2B PAYMENTS A decade on from the launch of M-Pesa in ELECTRONIC PAYMENTS BUSINESS INVAPAY Kenya, mobile money has become one of the The European Banking Authority (EBA) Optal announced the acquisition of Invapay, in primary tools for reaching the underserved and published the final draft of its regulatory a deal which will significantly expand Optal’s boosting financial inclusion. We look back on technical standard (RTS) on strong customer capabilities in the global corporate ten years of mobile money, and forward to authentication at the end of February. It payments space. the future. received 224 responses to the previous draft, the highest number it has ever received for any KENYA DEVELOPS BANKING INDUSTRY MOBILE WALLET SUFFERING AN IDENTITY consultation. SWITCH WITH TIETO CRISIS IN EUROPE Kenya Bankers Association (KBA), the banking New research by Juniper, analysing the 33 POS TERMINALS industry’s umbrella body, has awarded mobile wallet market, indicates that Europe is Tieto the contract to develop Kenya’s first lagging behind almost every other region in its HAVE PAYMENT GATEWAYS ACHIEVED industrywide switching platform in a move that transaction value forecast. This is despite high PARITY WITH PROCESSORS? will see banks enhance efficiency across all levels of technology adoption and smartphone It has been almost 20 years since the paradigm digital platforms. penetration. So, what’s going wrong? shift in transaction transport, which made simple payment gateway integration available UK’S LINK ATM NETWORK UNDER PRESSURE US MOBILE PAYMENTS PROJECTED TO GROW to an exploding community of web developers. TO DEFINE NEW STRATEGY 80 PERCENT BY 2020 More than one in seven free-to-use cash Although the mobile wallet ecosystem is INTERCHANGE FEE CAPS SHAKING UP THE machines across the UK could start charging maturing, in-store mobile payments have yet MARKET FOR ACQUIRERS or be shut down if the row about the Link ATM to take off. Consumer disinterest, coupled with The merchant acquiring market in Europe network cannot be resolved, ATMIA delays in fully implementing the necessary is operating on solid grounds of continuous has warned. infrastructure, are preventing mobile wallets transaction growth, however the cost pressures from achieving mainstream adoption. in the industry increases are very high primarily 39 CONFERENCES due to new regulation, such as PSD2 and the 28-29 CONTACTLESS interchange fee regulation. MERCHANT PAYMENTS ECOSYSTEM AND RETAIL BUSINESS TECHNOLOGY EXPO MOBILE PAYMENTS FRAUD SET TO BECOME 35 PRODUCTS It was noticeable that Merchant Payments PAINFUL IN 2017 Ecosystem in Berlin, 14-16 February, was much The mobile channel can facilitate nearly any VISA TOKEN SERVICE EXTENDS MOBILE larger, not only in delegate numbers but also type of consumer payment, often with greater PAYMENTS INTO 12 EUROPEAN COUNTRIES in the range of exhibitors and the diversity of convenience than before.