Israel Sparking up Contactless Payments

December 2015/January 2016 Issue 526/527 www.cardsinternational.com

ISRAEL SPARKING UP CONTACTLESS PAYMENTS

• DEBATE: Digital Banking Club • FEATURE: Forecasts 2016 • GUEST COMMENT: SunTec • COUNTRY REPORTS: Morocco, Italy and the US

CI Dec-Jan 526-527.indd 1 18/12/2015 14:43:19 Multichannel digital solutions for ﬁ nancial services providers

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IE RBI final design.indd 1 17/09/2015 11:21:32 Cards International EDITOR’S LETTER

CONTENTS EDITOR’S LETTER 5 DEBATE: DIGITAL BANKING CLUB How far will digital go? This was the A pleasing year in the main; 2016 subject of discussion in the Digital Banking Club’s final debate of 2014. Experts, from established and new can be better still players, came together to discuss the part of the zeitgeist. Alexander As for the years highlights: one has to include Atkins writes he emphasis, perhaps ought to be on ‘in contactless growth, though this remains a work 8 FEATURE: 2016 FORECASTS the main’. in progress with so much scope for further spec- Industry experts comment on the First, a few negatives/moans. tacular growth. Outside London and other UK cards market and how they expect Interchange: it seems an age ago but it major cities, the majority of UK merchants still it to change over the next year. Twas actually only July 2013 when the European not accept contactless payments. Biometrics, blockchain, contactless Commission published its proposals for regula- and much more is discussed The delay on the part of certain major retailers, tion of interchange fees: 0.2% (of the value of the and I mean Sainsburys, in rolling out contactless 12 DIGITAL: ISRAEL transaction) for consumer debit card transactions terminals has been lamentable. Even at Tesco, the Robin Arnfield investigates the and 0.3% for consumer credit card transactions. country’s largest retailer, contactless acceptance payments market in Israel. While This proposal was the result of years of compe- NFC-enabled contactless payments around the country is far from universal. are taking off across the globe, tition law reviews by national regulators and the As CI goes to press, Barclays has estimated that Israel has not fully taken it on Commission. as much as two-thirds of UK merchants still do not board. However, WiseSec has found a For me at least, political interference and regula- accept contactless payment, despite the technology solution through Bluetooth tion of this sort is almost inevitably going to result having been available for about seven years. 14 COUNTRY SURVEY: MOROCCO in unfortunate unintended consequences. Other highlights: it has been a gratifyingly posi- 16 COUNTRY SURVEY: ITALY Think back to the US experience of Dodd- tive year for growth in payment card spending, up 18 COUNTRY SURVEY: THE US Frank. This placed a cap on debit card payments 8.2% year-on-year in September in the UK, the 20 GUEST COMMENT: SUNTEC of $0.21. The result: banks increased their fees to latest month for which results are to hand. compensate and consumers paid more. SunTec COO Max Speur gives Cards Annual growth in debit card spending contin- International his analysis of what Capital One was one of the first to cut back card ued to exceed that in credit card spending with to expect in the next 12 months in rewards, ending the 0.5% cashback perk for cus- growth rates of 8.7% and 6.9% respectively. the cards space. This includes hybrid tomers, telling cardholders that the change was as EMV liability shift in the US: this has to be banks, the Internet of Things and enhancements to security a result of the interchange regulations. included in the positive column. Now, tackling Avios (Air Miles as was), Sainsburys and Tesco fraud has to be be prioritised. It beggars belief also watered down their cardholder benefits. that, to date, US retailers and consumers have Others, inevitably, will follow. While the ben- struggled to adapt to the use of chip and PIN. efits for retailers are obvious, evidence of savings There is no excuse for fraud rates in the US to being passed on to consumers in the form of lower remain stubbornly high. For banks, issuers and all prices – as promised by the politicians - is awaited. involved in the cards sector: it really ought to be It is to be hoped that the interfering political obligatory for them to be locked into a room with classes are not being serious in taking aim at the the likes of FICO for as long as it takes to sort out prepaid cards sector as a result of the appalling practical strategies to get their act together. terrorist attacks in Paris. Apple Pay: a limited positive, at least thus far. David Parker, a longtime ally of and contributor 2015 was not exactly the year of Apple Pay, at to CI, was quick off the mark in ridiculing the idea least as measured by usage rates. The stats for of the French authorities imposing stricter controls 2016 will make for fascinating reading. on prepaid as a result of the terrorists apparently To all subscribers, freelance contributors, com- having used prepaid cards. mercial partners, the vendor community, analysts, The notion is about as logical as that of 19th consultants, press offices and PRs: a very hearty century politicians opposing the growth of the Merry Christmas and all best wishes for 2016. < railways, just because bank robbers had made Douglas Blakey their getaway via train. [email protected]

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LOYALTY RBC Rewards and Airbnb Canada partner to help customers earn bonus reward points RBC Rewards has joined forces with Airbnb RBC Rewards clients booking an Airbnb trip of a lifetime, Canadians love to travel. Canada to reward customers travelling dur- stay until 29 February 2016 through an “It’s often the little things that make ing the holiday season. RBC Rewards credit card receives dou- those travel experiences more reward- The deal will enable RBC Rewards cus- ble points for every C$1 ($0.73) in ing, such as staying in unique accom- tomers to receive double RBC Rewards bookings, while customers booking modation off the beaten track. points on booking an Airbnb stay anywhere on Airbnb for the first time can earn “This offer with Airbnb Canada worldwide, for a limited period. an extra 7,000 bonus points. allows us to provide RBC Rewards In addition, first-time Airbnb Canada RBC vice-president, global loyalty customers with greater value and flex- guests can secure an extra 7,000 bonus RBC programs and rewards, Athena Varmazis ibility, making their travel experiences Rewards points. said: “Whether it’s a weekend getaway or a even more rewarding.”<

SECURITY PRODUCTS Ahlibank rolls ANB launches petty cash card in out 3-D Secure Saudi Arabia

Ahlibank has deployed the 3-D Secure ser- Saudi Arabia-based lender ANB has intro- considerably eliminates the risks and costs vice for Visa cards in an effort to boost secu- duced a petty cash card, Cash Express, in the associated with carrying cash or keeping cash rity for credit cards. country. on business premises. The service offers an additional layer of The new offering is a secure electronic card- “Designated company employees receive security to better protect cardholders’ infor- based payment product. It will help customers reloadable prepaid cards, enabling the com- mation during online transactions, allowing replace their traditional petty cash-handling pany’s expense control department to exactly cardholders to identify themselves when methods. know how much and where spend is taking paying online. Spending activity on Cash Express cards place through Cash Express cards.” < The service allows a transaction to be can be viewed on the bank’s corporate elec- made only after entering username and pass- tronic banking channel and replenished word, thereby helping to reduce instances of through standing instructions based on pre- fraud. set replenishment limits, or through individual Ahlibank CEO Lloyd Maddock said: replenishments through the bank’s electronic “Convenience and security go hand in hand. channels. Online security, hence, remains a top prior- Refunds from remaining balances on these ity and we strive to constantly align with cards can be processed at any time in accord- the latest technological advancements with ance with the company’s instructions. international best practices. ANB deputy head of corporate banking “The new layer of security for credit cards Nizar AlTwaijiri said: “Cash Express uses the will enable our customers to experience a latest technology to make purchases on the safer and a more secure online shopping local POS network or withdraw cash at any experience than ever before, giving them ATM in the marketplace. more control over their transactions.”< It also facilitates expense management and

RESEARCH MasterCard and Visa continue to maintain upper hand in European payment card market: RBR In Europe, 90% of payments are made using cards were in circulation in Europe at the end of al schemes such as American Express, Discover, a Visa or MasterCard-branded card, the 2014, and made €2.9trn ($3.1trn) in payments JCB and UnionPay accounted for less than 2% highest share of any region, according to a during the year. of the regional card base. report by Retail Banking Research (RBR). Visa is the larger scheme in terms of payment American Express and Discover account for The study, Global Payment Cards Data and value, accounting for 54% of card expendi- a higher share of value than of cards, as they are Forecasts to 2020, said that 86% of all circulat- ture. Visa is the largest scheme in 19 European used for relatively high-value payments. ing payment cards in Europe are either issued by countries, while MasterCard is the largest in the However, domestic and private-label cards Visa or Master Card. remaining 14. account for lower shares, and their share of The data revealed that 1.5 billion payment The study also revealed that rival internation- value decreased in 2014.<

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MOBILE FreshBooks to launch mobile card reader for small businesses

FreshBooks, a cloud-based accounting soft- software for the web and iOS devices. FreshBooks Card Reader is the next step as ware service, has unveiled plans to release a The device will offer the latest security we continue delivering on our promise. mobile card reader to enable small businesses technology and feature dual chip-and-swipe “Around 75% of small businesses already to accept credit card payments securely using capability, allowing users to accept EMV use mobile devices to run their businesses, a mobile device. chip cards while protecting sensitive credit and the FreshBooks Card Reader will offer The pocket-sized FreshBooks Card Reader card data, the company added. them with yet another way to streamline plugs into an iPhone’s audio jack to allow FreshBooks co-founder and CEO Mike their workflow while on the go.” users to accept credit cards anywhere. McDerment said: “Since day one, Fresh- The card reader is compatible with iPhone FreshBooks said the product, scheduled for Books has been committed to helping ser- and iPod Touch devices running iOS 8 or release in spring 2016, will be fully integrated vice-based small business owners save time, newer, and also the latest version of the into its payments offering and accounting get paid faster, and look professional, and the FreshBooks iOS app. <

PRODUCTS Gulf Oil introduces Gulf Visa Card Gulf Oil, a US-based marketer of energy other items at any Gulf-branded station. and marketing officer Rick Dery said: “Mil- products, has launched the Gulf Visa Card. The points are redeemed in 2,000 point incre- lions of consumers make purchases at Gulf sta- The new card, issued through Gulf’s partner- ments, with every 2,000 points equal to a $20 tions every day and we are delighted to be able ship with First Bankcard, allows holders to earn Gulf Gift Card. The gift cards are offered to cus- to reward them for their loyalty, and in turn points at Gulf stations and elsewhere each time tomers automatically in increments of $20, $40, to benefit our dealers by giving customers yet the card is used. $60, $80 and $100. another great reason to increase their visits and Cardholders earn three points for every $1 The company has not set any limits on loyalty purchases at Gulf locations. spent on purchases at participating Gulf stations, points that can be earned through the card, and “The Gulf Visa Card is another example of and one point for every $1 spent elsewhere. no fee is charged to Gulf stations for processing our commitment to providing our dealers with Points can then be automatically redeemed as the card. loyalty programs designed to increase revenue Gulf Gift Cards, which can be used to buy gas or Gulf Oil senior vice-president and chief sales and maximise the value of the Gulf brand.”<

DIGITAL PRODUCTS ANZ Bank NZ unveils Mashreq introduces overseas shopping offers Android digital wallet for cardholders

ANZ Bank NZ is rolling out a digital wallet UAE-based lender Mashreq has launched any airline, hotel booking or international that allows customers to make contactless various overseas shopping offers for credit purchase made with a credit card. < payments through Android smartphones. and debit cardholders for the holiday season. The new goMoney Wallet is integrated Between 19 November and 31 December within the bank’s mobile banking app, ANZ 2015, Mashreq cardholders can receive an air goMoney, allowing payments to be made in ticket to the value of AED1,000 ($272.26) to a similar way to the bank’s contactless pay- any location by spending AED20,000 over- ment cards. seas in foreign currency. For purchases below NZD80 ($53), Cardholders can also earn a free trip worth goMoney Wallet customers can tap and go AED800 on spending AED15,000, an air tick- to make a payment, while purchases above et worth AED500 on spending AED10,000, NZD80 require customers to enter a PIN. and a free flight ticket worth AED350 on The wallet will support ANZ Visa debit spending AED5,000. and personal Visa credit cards. It will also In addition, cardholders can earn 5% incorporate the cloud-based Host Card Emu- cashback on minimum thresholds set for over- lation (HCE) technology to protect custom- seas cash withdrawals. ers’ financial information. Other benefits include discounts on air tick- ANZ Bank NZ can remotely disable the et purchases, complimentary travel insurance, goMoney Wallet service if a phone is reported reward points on international purchases, 0% as lost. < easy payment plans for up to 12 months on

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DIGITAL SECURITY VPaytm and ICICI Bank partner to introduce Co-op offers Visa virtual prepaid cards for wallet users Checkout service Mobile payment and commerce platform Paytm founder and CEO Vijay Shekhar US-based credit union Co-op Financial Ser- Paytm has joined forces with Indian private Sharma said: “Through this 16-digit, Pay- vices has joined forces with Visa to offer sector lender ICICI Bank to launch virtual tm-ICICI Bank co-branded virtual prepaid the Visa Checkout service for secure online prepaid cards for wallet users. card, our customers can shop at any retail shopping. The new co-branded card will be linked outlet that accepts Visa, MasterCard and Visa Checkout enables shoppers to store to an individual’s Paytm wallet, and can be Rupay.” shipping and payment information secure- used to make both online and offline pur- “We are also considering bringing this ly without having to re-enter the informa- chases. offering to customers through Paytm’s Pay- tion during online shopping. The partnership will also enable Paytm ment bank that starts operations next year,” Users of Visa Checkout can use the customers to top up mobile wallets at all Sharma added. majority of key debit or credit cards to ICICI Bank branches by cash or cheque. “This move will give universal access to make purchases from a smartphone, tab - Physical cards will also be offered to our consumers, who can shop at any estab- let, laptop or PC. selected customers for use at any merchant lishment that accepts, credit, debit and pre- The service also allows credit unions to accepting credit, debit or prepaid cards. paid cards.”< use their own cards.

PRODUCTS Thomas Cook (India) and MasterCard partner to launch One Currency Card

Thomas Cook (India) has teamed up with “With exponential growth in multinational MasterCard Worldwide to launch the Thom- travel, the need of the hour was clearly a as Cook One Currency Card. single-currency card, without the downside Co-op Financial Services president and The new card offers single-load currency of cross-currency charges. CEO Stan Hollen said: “Visa Checkout is and zero cross-currency conversion fees “As pioneers in the foreign exchange busi- a simpler, more secure way for credit union worldwide. ness, our innovative Thomas Cook One members to pay online almost anywhere The chip and PIN-enabled card enables Currency Card, the first of its kind in India, in the world. locking of funds to prevent cross-currency brings Indian travellers a strong value propo- “Visa Checkout is another advanced fluctuations, instant loading, emergency sition: zero currency conversion charges in a digital product that underscores Co-op’s cash disbursement, and encashment of the digital currency ecosystem.” commitment to helping our credit union residual balance or use for future travel. Customers receive a free replacement if clients keep their branded credit cards top- Thomas Cook India COO (foreign a card is lost or stolen, and 24-hour global of-wallet, regardless of what payment ser- exchange) and head (visas) Mahesh Iyer said: emergency assistance.< vices the member may choose. <

PRODUCTS Gemalto Payment HSM meets new secure mobile payment standards Gemalto has said that its SafeNet Luna payment applications that meet the new It incorporates a graphical user interface to EFT Payment hardware security module standards. facilitate configuration and management of (HSM) complies with new stand- The module helps protect pay- cryptographic and key component settings. ards set by the major credit card ment data by managing the cryp- Gemalto vice-president, data encryption, networks for secure mobile pay- tographic process that secures Todd Moore said: “Given the disruptive ment transactions and digitisa- the enrolment, provisioning, nature of being able to use your phone to pay tion of credit card credentials. and tokenisation of payment for goods and services, it is important that we The SafeNet Luna EFT card credentials and payment recognise the role that security will play in device supports cloud tokeni- operations. making it a reality. sation requirements to protect The SafeNet module offers “For any bank or service provider that processing of payment transac- FIPS 140-2 Level 3 security and wants to offer cloud-based payments they tions and digitisation of credit card complies with the PCI-HSM 2.0 must deploy an HSM, and our SafeNet Luna credentials. standard for physical and logical protec- EFT Payments HSM is certified to deliver the It will allow banks, card issuers and pay- tion to cryptographic keys to address security specific functionality required by major payment service providers to offer contactless of financial transactions. ment players.”<

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CI Dec-Jan 526-527.indd 4 17/12/2015 15:26:18 Cards International DEBATE: DIGITAL BANKING CLUB

“We have only seen about 5-10% of what digital banking can actually be”

The final Digital Banking Club debate of 2015, hosted in London, featured panellists from both established and challenger banks, as they discussed where digital would take the financial sector and if institutions are doing enough to fully realise digital’s potential. Alexander Atkins writes he Digital Banking Club’s final UK has adopted mobile banking. ditional bank but in a digital way or design debate of the year saw a wide vari - In terms of the opportunities from digital something that’s completely different? What ety of answers and opinions to the growth he said: “We’ve seen a lot of interest a challenger bank can bring to the table is major question that is circulating in mortgages, in self-serving mortgages, lots addressing customer’s three basic needs T of interest in areas that have been untouched the financial world today of ‘How far will which are that they need to pay someone, digital go?’ so far, such as vehicle and asset finance, they need to borrow something or they have A recent report by McKinsey reported that insurance and private wealth.” too much and want to protect it,” he added. only 20 to 40% of customer experience has This comes after Anthony Thomson, been digitised by retail banks suggesting that Digitisation vs being natively digital the co-founder of Atom and Metro Bank, the established banks still have a long way to As to how this digital disruption would released a forecast stating that in two or three go in terms of digitisation, and are begging change the traditional banks, Alessandro years, the established players may not exist the question of where the opportunity for Hatami, an advisory board member at in the same way as we recognise them now. growth will come from. Advanced Payment Solutions, believed that Tom Blomfield, CEO and founder of chal- Simon Cadbury, Director of Strategy and there is going to be a profound change in lenger digital bank Mondo, was of the same Innovation at Intelligent Environments, how banks would look in the future because opinion. “I totally agree. I think the really was quick to agree with the statement that of changing customer adoption. interesting future of banking is about data digital adoption still has a long way to go, “Customers feel increasingly comfortable and identity,” said Blomfield. stating that in the last twelve months, only in accessing financial services through these “But I think within that digital space, one quarter of all current accounts taken out digital devices and people in this country are you’ve got talk of digitisation versus being have been taken out through digital chan- extremely supportive of digital as a means of natively digital and that’s really important nels. He further stated that 58-62% of peo- engaging with banks,” he said. because some digitisation of processes only ple are now managing their accounts as an “But what must be asked now is if I was to means you take one or two steps forward. individual digitally, whilst only 30% of the build a bank today, would I design it as a tra- But having to fundamentally rethink what

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CI Dec-Jan 526-527.indd 5 17/12/2015 15:26:19 DEBATE: DIGITAL BANKING CLUB Cards International

banking is and then build from “Being able to talk to some- the ground upwards - that is the one is very important but you real challenge.” can provide that without a As to what this new bank branch. Often you go into should be offering, Blomfield branches to talk to someone agreed that simplicity was key: about a specific product and “By offering a very simple ser- they say you can use the phone vice that you can sign up to over there, and this is a result quickly, store your money, pay of banks being complacent people, pay bills, pay friends, because historically they’ve that’s all it is.” never been challenged,” he said. The right time for challengers He continued to talk about With new challenger banks how most processes didn’t need appearing more often now, the human contact but were made question over timing for new complicated through digitising entrants was raised. the traditional processes, such Chris Gledhill, CEO and as account opening, which he founder of digital challenger asserted should take thirty sec- Secco Bank, thought that the onds and could be done not in- timing for new challengers to branch, but on the smartphone. enter the market was almost perfect. The role of branches Blomfield brought up a useful example of “We’ve got a progressive regulator, we’ve The question of what role branches will play Blockbuster versus Netflix. “Blockbuster had got London which is the fintech ground zero in the future of banking has been asked fre- a huge market share and loads of branches and we’ve got a load of very good start-up quently and was sure to come up. and when the internet came along, its ver- technology,” he said. Wilkinson was quick to challenge the idea sion of digitising was to post people their But Gledhill was quick to differentiate that branches are dead and have no role to DVDs. Meanwhile, Netflix came along as a between challengers following traditional play any longer. “They serve a purpose, they truly digital business and took most of the methods and challengers doing completely are converting people, and they’re an educa- market,” he explained. new things. tional resource,” he said. “It’s figuring out what a branch should be He said: “There are plenty of challenger “So it’s not about should we have them or there for and what services do our customers banks but from our point of view they are not. You’ve got them, so how can we utilise want and then asking what is that transac- not really challenger banks, they’re like start- them better and the first thing to do is to stop tion going to look like and how do we get up banks doing the same thing as traditional thinking about them as branches,” he added. there?” said Berry, reiterating the point that players, just in a more agile way.” Hatami, however, was sceptical that banks branches needed to evolve. Outgoing head of group innovation at would see past the bottom line to make the Blomfield, continuing on the theme of the Nationwide, Daryl Wilkinson, also believed transition within branches. simplicity a digital bank could offer said: now is an exciting time for challengers. He Hatami said: “It’s about how you build “I feel like we’ve only seen 5-10% of what justified the reasons for his setting up Lab12 transition, because transition requires digital banking can really be. Right now it’s Innovation, explaining that current banks investment and a rethinking of the way you a statement with a list of transactions that’s and challengers had approached him for do business and looking at banks today, do two days out of date on your mobile, but help. they have the appetite to make that transition that’s not mobile banking, that is your state- “A number of current banks came to us when they are doing alright now?” ment on a mobile. There is ten times more we asking how they should translate their physi- The focus on branches also put the spot- can do with data functionality.” cal branches into online and mobile. And a light on the two challenger speakers, Gledhill few challengers also needed help with scale, and Blomfield, digital challengers with little Use of cash and Apple Pay structure, talking to the regulator and we apparent need for branches. The debate then turned to whether the big realised there’s a lot of opportunities here,” Blomfield asserted that the majority of banks and challengers could team up to tack- he explained. Mondo’s customers wouldn’t need to access le this digital future. Whilst Blomfield was From another perspective, digitisation a branch, but for that ‘one in 1,000 custom- adamant that a challenger should aim to stay cannot be limited to specific sectors of the ers who has a cheque from their granny and away from the reputation associated with financial industry as Rhys Berry, director of needs somewhere to put it, we have a box big banks and ‘turn down the offer’, Hatami collections technology and operations for somewhere that you can put that cheque in’. offered a different view. Santander, explained. He stated that the col- Gledhill stated that Secco wouldn’t have a He said: “There’s nothing wrong with a lections industry had experienced little digital physical channel in the traditional sense. “In big bank buying a start-up. All they are doing change in the last twenty years and was still Secco, the customer’s smartphone is essen- is adapting their business model and making going through the same processes, trying to tially their bank,” he said. “They can just as investments in the ideas of the smaller chal- replace systems that worked well in 1997. easily become an ATM to other customers lengers so that if they succeed then they have He added: “The other challenge with col- just walking around.” their beta bank.” lections is regulatory change and how to Asked whether they felt that some sort of Gledhill did not seem hostile to the idea digitise a process when the regulator is rede- human contact was needed, Blomfield con- but pointed out the danger of non-banking fining what that process is, it’s a practical ceded that there certainly is still a need for it, players using challengers as a way of getting issue.” but that it is done in the wrong way. their foot in the door.

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CI Dec-Jan 526-527.indd 6 17/12/2015 15:26:21 Cards International DEBATE: DIGITAL BANKING CLUB

The subject of the role of non-banking players in innovating inevitably led to Apple Pay and what it has brought to the table. Cadbury was quick to state that the stats show it still has some way to go. “Apple Pay adoption in the US is at 1.6% and it’s a great sign of where things are going, but it comes back to the issue of cash,” he said. He added: “Cash still represents 60% of transactions in the UK and I suppose the thing for the start-ups is that every time a customer needs an ATM, they are going to incur an ATM fee of whatever amount of pence just for a cash withdrawal. “We’ve got other banks here such as Bank of Ireland or Sainsbury’s Bank and one of their biggest revenue streams is their ATM network.” However, Blomfield asserted that, despite the continuing high use of cash, Apple Pay had begun a process that could lead to digital to have now is about how they can improve at that point in time” payments, something that would add to the and disseminate their support better,” he Gledhill concurred on the importance of strength of digital-only challengers. said. data: “People will start to realise the value “The main challenge to going cardless is However, Hatami reminded everyone of their data and they’ll start using banking that you have to get the merchants to adopt what the actual role of the regulator is and to invest their data. We’ll start to see people it as well as the customer. You need very high why they exist. realising the value of their information.” adoption rates to achieve success and I think He said: “We must not forget that these “I think digital will go all the way” assert- Apple is one of the few companies in the guys are there to protect the financial well- ed Blomfield, stating that the process of digit- world who can achieve that,” he argued. being of the whole population and if they get ising would kill the incumbent banks. Few seemed to doubt that Apple Pay was it wrong, the cost is not just a few pennies, Furthermore, he believed that data would a serious disruptor and that a key strength you might lose your livelihood, your savings, be the key to providing a digital relation- lay in being a non-banker as Hatami argued: so they have to be very strict.” ship with the customer that covered all their “The other thing about Apple Pay is that it Rhys Berry concurred with this, talking needs. does not care about financial services. It just about how the regulator was going through a “I think we have only seen about 10% of wants to sell products.” lot of challenges trying to keep up with such what is possible with data usage,” he said. a changing industry and, at the same, was Daryl Wilkinson was in partial agreement Regulator: help or hindrance consistently under pressure to both help and believing that digital would kill the current The debate then moved onto the role of the protect the industry. banking model. regulator and whether they had been a help However, he believed that it will only be “I think we’ll see some of the incumbent or a hindrance in digitising banking. a matter of time until the regulator can get banks become utility providers and I think Blomfield held the view that there had defi- comfortable with business models that fin- some banks are already having the conver- nitely been improvements. tech start-ups are bringing to the market. sation now, asking how do they become a He said: “The number of new challengers Finally, the question of where digital utility,” he said. in this market is growing, so there has been would be in ten years was put to the panel. Finally, Berry concluded that the banking some movement. I think that they are wor- Simon Cadbury believed that the 50s rela- model will change hugely. “Banks will look ried about the possibility of a new challenger tionship model of banking where the banker to digitising as a means of reducing costs and failing on their watch but I think we need to knew the customer personally and antici- I think they will have this issue of how they accept the possibility of some new banks fail- pated their needs will be gone but replaced leverage digital to reduce their costs versus ing to really push innovation further. in a digital way so that technology will help the test of having to reinvent as a proper “Ultimately, the net result will be beneficial people to understand the vision of what challenger,” he said. for customers because you try lots of differ- one’s needs are, underpinned by the ability “As a result banks will have a spate of ent business models, and while many fail, a to make contact digitally. partnering up with small firms to help them few succeed.” He added: “I think people won’t be going reinvent themselves whilst at the same time Wilkinson agreed with this, and stated he into branches, it will be fully digital, but I do pushing a very slow digitising process as a believed they were beginning to understand think some form of the human element will means to reduce costs,” he added. their changing role. remain.” The conclusions differed slightly and the “I think the regulators help in hindering Hatami focused on how data would bring opinions throughout the debate varied. the potential for poor business models to the customer and the bank closer together What did emerge, however, was that digiti- emerge under their watch that impact inno- so that they would both know much more sation is changing the financial industry and vation in a different way. about each other and stated: “I see a future the players will have to change with it. As “But I think they have recognised that they where banking is a service that is an exten- for how far digital will actually go, only time are hindering and the conversation they need sion of me through whatever means I choose will tell. <.

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CI Dec-Jan 526-527.indd 7 17/12/2015 15:26:23 FEATURE: 2016 FORECASTS Cards International

The way ahead for card payments This is been a big year for cards: new technologies, the EMV liability shift in the US, the cap on interchange fees and PSD2 are just a few examples of developments this year. But how has this affected 2015, and how will things change in 2016? Industry experts comment on what lies ahead for the card payments industry

TJ Horan, vice-president, fraud solutions, FICO The biggest news this year from a card fraud both rose. declines; perspective was, of course, the liability shift in the We also saw the continuance of large unused • Criminals that had targeted the US may look for US and the mass introduction of chip cards there. exposure levels, which warrant reviews of both usage other countries where they can exploit weaknesses This was a milestone in reducing the amount of card and risk. in defences; fraud in a country that has become a global target for • Criminals will also migrate from card fraud to fraudsters. Across both the fraud and risk dimensions, we saw an increasing focus on customer experience. This application fraud, deposit fraud and other areas, According to The Nilson Report, the US theme has been particularly strong for the past few and accounted for 48% of global card fraud in 2014, years since the recession. • New payment channels – P2P, mobile payments, while it accounted for just 21% of card sales. The and wearables – will present new opportunities vulnerability in the US has had global repercussions: Contactless consumer use and mobile banking 50% of UK counterfeit fraud is in the US, and the are part of this trend. I have seen growing interest for fraud. US drives high levels of counterfeit fraud for many in communication services that enable issuers to Authentication will continue to be a hot topic other countries as well, including Spain (42%), the send an interactive SMS to cardholders when a card for card issuers, and will drive innovative new Netherlands (60%), Mexico (42%), Japan (41%) and is blocked, or before, so that the cardholder can approaches. We are already seeing the push for new Canada (47%). instantly validate spending activity. standards in this area, with initiatives such as the In May 2015, EMVco, the organisation that develops Mobile Identity Authentication Standard (Midas) Alliance in the UK. and administers Europay, Mastercard and Visa (EMV) 2016 schemes, reported that just 7.3% of US cards were From a risk perspective, I anticipate further chip-enabled, compared to 84% in Europe Zone 1, Next year promises to be a dynamic one on the regulatory compliance requirements. There is 60% in Canada and Latin America, 50% in Africa fraud front, as criminals change tack to make up for a concern that in the UK, poor-performing new and the Middle East, and 25% in Asia-Pacific. Both the increased protection from chip cards in the US accounts will move into the ‘established’ vintage, retailers and consumers struggled to adapt to the use and mobile/frictionless payments strive to exceed and unless issuers improve decisions on the front of chip cards. customers’ expectations. end, they could end up with a portfolio that contains Despite the liability shift, card fraud remained Some of the trends we predict for the US are: increasingly bigger numbers of risky accounts. This could lead to a tightening of originations criteria. high. Large-scale data breaches at retailers, credit • Card-not-present (CNP) fraud will soar. While bureaus and telecommunications firms have exposed EMV reduced payment card fraud in the UK, it In some countries, we expect to see continued millions of cardholders’ account data, which FICO saw was accompanied by a spike in CNP losses, and implementation of annual fees to counteract turning into card fraud in 2015. in the years since CNP transactions have grown drops in interchange fees and to subsidise reward For example, in April FICO reported that card and tremendously. US issuers should prepare for a schemes. As margins suffer, the use of optimisation PIN skimming points of compromise at bank-owned similar spike, raising CNP fraud above even the — analytics for determining decision strategies that ATMs in the US had increased 174%, comparing the level where it is today; meet specific portfolio goals — will become more widespread, in pricing, credit limit-setting, credit first four months of 2015 to the same period in 2014. • Counterfeit fraud will decrease – except where limit changes and collections. Non-bank ATM compromises increased by 317%. issuers have adopted EMV poorly; This spike appeared to have been part of attempts We also see the expanded use of smartphones as a • New point-of-sale (POS) processes and changes to ‘get it while the getting is good’ before the EMV communications channel for payments, marketing, liability shift took place and chip cards became more will lead to opportunities for POS fraud because of collections and fraud messages. prevalent in the US. the need to train both merchants and consumers on the new terminals; I will also have my eyes on how the UK’s Financial FICO also benchmarks card risk and performance Conduct Authority moves forward in spring with its in the UK. While we saw continued stability in • Non-chip ATM locations will be targeted; credit card market study — the potential remedies mature accounts, there were worrying signs for new • EMV is likely to exacerbate tensions with listed would require issuers to change strategies, accounts, as over limit spending and delinquencies merchants (and consumers) over fraud rates and policies and systems. <

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CI Dec-Jan 526-527.indd 8 17/12/2015 15:26:31 Cards International FEATURE: 2016 FORECASTS

Mike Pierides, Marco Santori, and Sarah Atkinson, Pilsbury Law n the UK, the launch of the new Pay- tions issued by the PSR as well as by trade ment Systems Regulator (PSR) was a guidance issued by Payments UK. development which in of itself indi - The move towards greater direct access, I cated the increasing focus on pay - in particular to Faster Payments, through ments as a standalone sector, and is a accreditation of technology providers will signal of further changes to come. also continue. The support from the PSR for The PSR operates independently of the accreditation programmes and its proposals other banking regulators in the UK, and has to improve technical access will continue its own statutory objectives including the to encourage existing operators and new promotion of competition in the sector. The entrants to develop and progress new ser- PSR’s impact will, of course, take a number vice offerings. of years to be determined; however, opening The New Access Model white paper was up access to new market players will be at published by the Faster Payments Scheme in the centre of much of what it does. Mike Pierides December 2014; however, the accreditation For example, we expect the PSR to take programme has been progressing through a more prescriptive approach to indirect would enable all parties on the network to 2015, on completion of which four technol- access terms and services than the sector cur- take part in verifying and confirming the ogy providers will be accredited: AccessPay, rently has under Payments UK’s (the sector’s transactions that take place on it. Aevi, Compass Plus and Dovetail. trade body) voluntary code. Less than two years ago, banks, securities Increased competition is likely to be seen Faster Payment transactions continued to exchanges and financial services companies in the tap-to-pay mobile payments market; grow in 2015, and the PSR announced its looked at Bitcoin with disdain because of in the Next Generation of Payments Atti- support for initiatives which encourage and its currency use in connection with now- tudes to Payments Research Report 2015 progress development of technical solutions defunct internet dark markets like the Silk report issued in September, Vocalink com- to facilitate access to payment systems. Road. mented on the potential opportunity for In December 2014, Faster Payments pub- Now, nearly every large bank in the world banks to enter this market, benefitting from lished its New Access Model, which set out has begun to dedicate significant financial the trust customers have in their banks. plans for a technology accreditation pro- resources, brainpower and political will to In October, US bank Capital One became gramme. developing the blockchain platform for use the first US bank to release a tap-to-pay Whilst the PSR has stated that it believes within their organisations. functionality in its Android app; further that the industry is best placed to design banks are expected to follow. and develop solutions to facilitate technical Looking forward As banks and financial institutions invest access to payment systems and is not pre- The direction of travel will continue to be money in blockchain technology, there scriptive in its approach, it will nevertheless towards more entrants and overlay services may well be a re-emphasis on cryptocur- encourage commercial operators to develop within the payments sector. This should be rency technology. Blockchain, as a data- service propositions, therefore we anticipate influenced by the PSR, which has amongst base behind cryptocurrencies, can itself be an increasingly competitive market pursuant its central statutory objectives the promo- implemented to create a so-called ‘private’ to which payment service providers will not tion of competition in the sector. or ‘permissioned’ blockchain that may be require access through ‘traditional’ sponsor The terms of sponsor banks for indirect used by trusted or semi-trusted members of banks. access and the indirect access service pro- the general public who are granted access to Generally, 2015 saw a continued move vided are coming under increasing scrutiny, the network. towards the opening up of the sector to a by the sector’s trade body as well as the There are cases for uses of blockchain larger number of participants. This includes PSR. We can expect a greater emphasis on without cryptocurrency, in particular in the continued growth of fintech entrants better and clearer terms of service, and an B2B and bank-to-bank transactions, includ- such as Transferwise, and new service inter- improvement in the way in which sponsor ing in the payments arena by replacing set- mediaries who overlay the existing payments banks and the non-bank indirect payment tling transactions between networks of semi- and banking system. service providers engage, as a result of direc- trusted financial institutions. Apple Pay arrived in the UK, storing bank However, a cryptocurrency itself does details on users’ mobile phones and mak- away with the need for centrally controlled ing it easier to pay for goods. Innovations and regulated money supply, and its applica- in technology, of course, continue to drive tion in the world of banking and payments many of the changes in the sector, both in could be truly disruptive to existing systems terms of the services being provided and the and institutions. identity of the providers. Finally, it’s a fair guess that the cyber resil- Probably the most disruptive technologi- ience of technology solutions and overall cal development in 2015 has been block- corporate organisations to attacks will no chain technology. Blockchain, once imple- doubt come into further focus in 2016. mented, would in theory remove the require- This is, unfortunately, a topical issue, as ment that the parties to a transaction use a global geopolitical issues, in addition to ‘reg- trusted intermediary. It does so by replacing ular’ financial crime, may no doubt lead to the intermediary’s central database with a greater pressures on banking and payments distributed consensus mechanism which Sarah Atkinson systems. <

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John Marsden, fraud and identity expert, Equifax Need to log onto something? Then, like me, I suspect, more significantly, has prevented me from switching within a trusted framework? you just head for the ‘forgotten password’ link from my bank. I have actually opened another account, First, we need to consider what an identity is, the outset, as the futile efforts to remember different tempted by the cashback offers, but the new account otherwise we could be enrolling the account holder complex passwords seem fruitless. goes largely unused – it has just too much friction to to an identity which does not belong to them. In The very human condition of forgetting seldom- deal with. simple terms, impersonation may start before a used passwords or PINs for credit cards is natural. We So what implications does this have for biometrics facility is opened. Without some underlying ‘absolute are told to keep complex and different passwords for – the use of technology to digitally assimilate a truth’, the system will always have the ability to be every login, to keep PINs different between cards, particular biological pattern and recognise it again compromised. and never write them down. I suspect that there are – authenticating against something the typical Joe I suspect that the fraudsters’ attacks may focus some very capable people that can recall 30 different Bloggs can’t forget? Be it fingerprints, iris, facial, on the compromise of the electronic signalling passwords and 15 PINs at will, but unfortunately I – voice, heartbeats, vein patterns, ear shapes or even that constitutes the biometric; if a signal can be and I’m sure many others – can’t. just how you use your device – they are considered intercepted, it can be replayed. We only need look unique, can’t be forgotten and can be produced on This gives a rise to particular problems, for example at the compromises of PIN cards, despite this chip demand. In combination, two factors of biometric those unused cards at the back of my wallet. They vulnerability being fixed. Basing our trust on the authentication can be extremely robust. simply don’t get used either at point of sale or with PIN card chip enabled the attack by introducing an 3-D Secure, despite the password reset function on Following the biometric authentication already additional layer which changed messages between 3-D Secure being as simple as the issuers can make it. seen with Apple Pay and contactless payments, the chip and the point-of-sale terminal. MasterCard’s initiative with Zwipe to issue fingerprint Biometrics offer significant advantages to the After four to five password resets I become lost in -enabled cards, for example, is significant with consumer, enabling security and convenience, as a lake of special characters, destined never again to the PIN requirement dropped and replaced with a well as delivering competitive advantage for card remember the password I seek. Card issuers therefore fingerprint scanner embedded into the card itself. operators. The fear of being biometrically profiled need to make cards easier to use to get them to the With no need for any external technology, such as a seems to have disappeared for individuals. In a USAA ‘front of the wallet’ if they want to be the card of smartphone, this is a card that would fast become a case study, for example, when financial services choice for an individual’s spending. front-of-wallet choice for me. customers were offered enrolment to a face-and- Despite the various opinions about the use of As yet, I have not been offered this choice, I voice-verification service, adoption by over 50s was adaptive authentication with certain cards within 3-D suspect due to the cost of the card itself, which is as quick as for the younger generations. Secure, these cards rarely prompt for a password, and unfortunate as the announcement of this technology Biometrics offer convenience, far from a new therefore relatively quickly became front-of-wallet. was made more than a year ago. battleground as providing convenience is why card This goes some way to demonstrating that reducing But even though this new technology is harnessing systems exist. The functionality offers a solution password fatigue massively changes cardholder biometrics and creating a frictionless experience to the friction needed to increase trust within the behaviour. for the consumer, how does fraud continue to creep system, and a solution to the password fatigue and A debit card empowered by this adaptive into such an ecosystem, where personal traits are PIN overload we as consumers suffer in today’s technology is by far my most used card and, probably recorded and replayed to both enrol and operate world.< Philip King, founder and CEO, myPINpad Overall, I would be surprised if there were continue to disintermediate and will gain emerge, some of which will assist PSD2 any major new trends in 2016. footholds, having achieved access to compliance. Rather, I would expect to see the bank account information, enabling all Authentication will slowly be recognised continuation and consolidation of what we sorts of propositions such as up-selling. as key to the ‘glue’ that holds all saw in 2015: 5. Consolidation: With such a diverse together. 1. Biometrics: vendors will continue to and huge market of propositions and Identity and, in particular, federated push their wares while they have the solutions, the consolidation of large- identity will continue to be debated and chance and banks will adopt almost all scale or strategic domestic operators sought at length, but no single solution of them in order to look progressive and to produce a number of pan-European is possible so it will not emerge, but stay competitive in the face of the far processors is inevitable. debate will be consistent and building. more nimble ‘challenger’ banks. 6. Identity Assurance: Authentication will 7. Privacy Concerns: The vast increase in 2. Regulation: PSD2 will open the doors continue its decentralisation down to the mobile device functionality naturally to ‘money’ managers. With the ability mobile device, and will slowly be seen as involves a vast increase in the to centralise every aspect of a person’s an important step in the right direction requirement for identity assurance, financial record into a single app, brand toward proper identity assurance. There which has an equal and direct negative new services – for the EU market anyway will be a proliferation of services similar impact on privacy. The more functionality – like instalment payments, instant to miiCard. you want, the more of your privacy you credit, loyalty / reward consolidation Software PIN will be implemented, have to be willing to surrender. and so on will begin to replace individual representing a major threat to hardware 8. Security: Both handset and mobile banking apps. manufacturers and a huge opportunity application development have 3. Banks will struggle to keep up: Leading for every other ecosystem player and primarily focused on either aesthetics on from this point, banks will struggle to the terminal manufacturers if they grasp or functionality. The continuing keep pace with innovation. Will they be the need to build alternative business decentralisation of authentication able to take on challenger banks? More to models. and payment functionality will demand the point, will they want to? There could be a race to be first in stricter standards for security. 4. The progress of the “Pays”: GooglePay, market, but it will be a marathon Regulatory compliance will be far behind, ApplePay, PayPal and Samsung Pay will not a sprint, and new use cases will but it is coming. <

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CI Dec-Jan 526-527.indd 10 17/12/2015 15:26:36 Cards International FEATURE: 2016 FORECASTS

Christoph Tutsh, founder and CEO, Onpex f one thing is certain in the world of fully EMV-compliant; • Omni-channel conversion: E-commerce payments, it is that it is fast-moving and, latterly, mobile commerce have made • Fraud prevention: 2015 saw data breach- and ever-changing. This means that consumers more demanding. And rightly predictions are difficult, but critical. es like never before. High-profile data so. Part of this means that customers are I breaches, some by hackers, others, it As an industry, we are still searching for increasingly demanding to pay on the plat- unifying standards in payments, in security would seem, by governments, focused the form they want, with the payment method and in authentication. minds of the industry and consumers in they want and in the currency they want. This means that the pressures and chal- general on security and fraud prevention. In 2016, more and more merchants will lenges that one company might face will be What went from being something we took start to offer omni-channel payments as the same for many others. for granted in our financial technology they try to keep up with demand; became something that new technology is What we saw in 2015 being built around, and • Data security, identity and authentication: • Bitcoin and cryptocurrency: At the begin- The fear of data breaches means that there • Markets of interest (China and Brazil): ning of 2015, cryptocurrencies started is more demand for secure, identity-based For Onpex, we put focus on China and moving into the mainstream. It was in the authentication. From ID scanning to latter half of the year that the legal status Brazil this year. China is, of course, a biometrics, we will see more development of bitcoin and other cryptocurrencies was booming market; indeed, it is the booming and more products coming to market. confirmed, and more and more payment market for payments. Yet, at the other side But, will they be able to offer the unobtru- sive authentication that consumers want? providers are accepting cryptocurrency of the world, so are Brazil and the wider payments; Latin America. • Banks vs fintech or banks and fintech: Just like 2015, next year will see a vast increase • Mobile payments: Mobile commerce is The global growth of mobile has democ- in fintech companies that are popping out booming. Figures from earlier this year ratised e-commerce as never before. So, of the group. However, the majority of fin- suggested a 77.8% growth in mobile com- in markets such as China and Brazil, con- tech companies see banks as old dinosaurs merce on 2014. To put this into perspec- sumers who might not have the resources and their aim is to replace them. However, tive, retail from desktop computers grew to access a laptop or Wi-Fi certainly have fintechs fail to realise that they cannot sur- by only 2%, according to MyCustomer. the resources to access 3G and a smart- vive without banks; com. Mobile is now the consumer plat- phone – putting commerce in the palms form of choice; of their hands. • Fintech faces regulation: As just stated above, fintech startups are increasing rap- • EMV liability shift: 1 October saw the idly. The majority are not recognising the EMV liability shift in the US, and this, What we can expect in 2016 massive regulations that they have to face. ironically, was one prediction that many • Blockchain: As cryptocurrencies were Regulation is simply a must, and might have either got wrong, or certainly hyped in 2015, 2016 will see the growth mistimed. The predicted wave of CNP of blockchain technology to regulate and • Go east! Asia, Australia and New Zea- fraud has yet to materialise, and this is assure cryptocurrencies. More than this, land will see the focus of Onpex’s activity largely because despite the fanfare of pub- though, the potential of blockchain to in 2016. Fertile grounds for fintech and licity, the US was not ready for the liabil- work with other payment methods and fertile grounds for commerce. We predict ity shift. It could be years before the US is currencies is significant; great things for these regions. < Tamer El-Emary, SVP & Group Head, Issuing, UK & Ireland, MasterCard 2015 was a seminal year in the way we pay for things. landed in July, and we’re seeing increased retailer This year’s Rugby World Cup was the first to see Every year has its milestones but this one is marked acceptance of the payment option for transactions all of the stadia fully equipped for contactless, by large scale behaviour change among consumers above £30 and most card issuers are now on board. but I expect 2016 to see the reduction of queues and retailers. As the new entrants arrive next year in the form and payment forms changing in social and cultural This was the year that electronic payments overtook of Samsung Pay and Android Pay, I expect this to scenarios. cash payments for the first time in the UK. We saw have a multiplier effect on adoption and use of all And for the owners of SMEs, banks will next year 560% year-on-year growth in contactless payments of the mobile payment schemes, and further use of develop more attractive and relevant card products across our network but we experienced growth in biometrics in the marketplace. targeting this group that squarely meet their needs, many other European markets. Fingerprint is already well established as an as opposed to the consumer propositions they tend We’re embracing contactless payments like never authenticator but 2016 will be a huge year with more to leverage today. before. Just look at Transport for London passenger applications and biometric types gaining traction Lastly, looking ahead at 2016 we can expect banks use – and the effect that has in onward use of cards to – including our Identity Check product which uses to make a more aggressive play in the mobile banking tap and pay for everyday items – and it represents a facial recognition, and the Nymi wristband which space and offer customer much more. seismic shift in confidence and adoption. works off the users’ electro-cardiogram or unique Consumers are surrounded by new payment choices This opened the door for the increased £30 payment hearth rhythm. but even in this digital age they continue to trust limit later in the summer and the recent news that Pay-at-table solutions took off this year, with their banks the most for their financial needs. While London taxis will soon accept contactless. It has also Wagamama, MasterCard’s lead partner, allowing we are working closely with digital giants such as paved the way for all kinds of digital payment forms customers to pay from their phones whenever they Apple, Samsung and Google to roll out their payment and applications. chose. More and more restaurants, cinema and stadia services, we’re also working with the banks to create Most notably, contactless is the solution-of-choice have seen the business benefits this has and are their own payment functionality embedded within for the big mobile payment schemes. Apple Pay starting to adopt the Qkr! app. their existing hugely popular banking apps.<

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WiseSec pushes Bluetooth for m-payments and cardless ATM withdrawals

While NFC-enabled payments are taking the market by storm, some areas are yet to adopt them in full force. Israeli start-up WiseSec hopes its Bluetooth technology will facilitate widespread adoption of mobile payments, which is currently being hampered by the lack of NFC in the region. Robin Arnfieldreports

he big issue in mobile payments “We’ve developed a bridge between the their main payments functionality.” is that NFC technology is still Bluetooth and the NFC worlds,” says Maor. Maor says the dongle is currently going only on around 30% of smart - “Our converter is a low-cost, plug-and-play through PCI (Payment Card Industry) certi- “Tphones worldwide, but Blue - device which translates Bluetooth communi- fication. tooth is on all smartphones,” says Vadim cations from the customer’s smartphone to Apart from plugging in the dongle, mer- Maor, WiseSec’s CEO. NFC format.” chants don’t have to make any changes to Yokneam, Israel-based WiseSec, which Guy Frak, WiseSec’s Executive Vice Presi- their payments acceptance infrastructure, was founded in 2011, has developed Blue- dent, International Business, says the con- and they don’t need to download any soft- tooth Low Energy (BLE) based mobile loca- verter works with existing terminal-based ware, Maor says. tion technology which enables consumers POS systems or other types of payment ter- “The dongle will plug into any make of to carry out NFC-like transactions without minals such as card readers in public transit POS system, including closed-loop termi- requiring NFC infrastructure. The privately- stations. nals,” he says. held company says its partners include US “Metro transit operators want to be able to When the customer taps their smartphone telecoms carrier AT&T and telecoms indus- accept mobile payments for tickets, but they against the touchpad to initiate a pay - try customer experience software vendor need to replace their existing card-accepting ment, WiseSec obtains their payment card Amdocs. terminals with NFC-enabled terminals,” data including their card’s Track Two data BLE is a protocol that enables Bluetooth he says. “With our converter, POS termi - from their issuer. “WiseSec tokenises this 4.0-based smartphones to communicate with nals and metro transit terminals can accept card data all the way from our server to the in-store BLE-based wireless transmitters Bluetooth and NFC payments without any dongle or convertor,” says Maor. “The user known as Beacons. change to their hardware or software.” can’t access this data as it is protected by our In WiseSec’s business model, merchants system, and trying to hack the server will fail Mobile location and banks can either pay a licensing fee per because, after tokenisation, the original data Because it uses Bluetooth, WiseSec’s sys - WiseSec device, or they can install free Wise- is deleted and not stored on the server.” tem isn’t dependent on cellphone networks, Sec devices and pay WiseSec a per-transac- WiseSec encrypts all transaction data in Wi-Fi links or GPS communications. tion fee, Maor says. transit between the merchant and its server A WiseSec BLE-based beacon senses when “We aim to be a cross-platform alternative using military-grade encryption, and uses an a customer with a smartphone, with the to Apple Pay, Android Pay and Samsung additional layer of tokenisation to protect retailer’s mobile app running, has entered Pay, the drawback of which is that they only data in transit. the store. The beacon locates the customer’s work on specific makes of smartphone,” says Tokenisation is a security technology smartphone, and, assuming the customer Maor. “Another benefit of our mobile pay- which replaces actual payment card numbers has consented, sends promotional messages ment system is that it can operate in online with one-time numbers, so a customer’s real about nearby items in the store to the phone. and offline mode.” card number isn’t visible to a merchant. Only Once the customer is ready to make a pur- the tokenisation service provider can restore chase, the beacon triggers the launch of the Touchpad tokenised numbers to actual card numbers, a customer’s mobile wallet, enabling them to Initially, WiseSec just offered a point-of-sale process known as detokenisation. make a point-of-sale payment by tapping touchpad connecting via cable to a POS ter- Frak says WiseSec is seeing considerable their smartphone against a WiseSec-supplied minal’s USB port. It has now developed a interest in its payments technology from BLE touchpad. USB-based Bluetooth dongle which works in banks and payments services providers in WiseSec’s technology verifies the custom- combination with a WiseSec-supplied wire- China, especially in the public transporta- er’s identity, smartphone and location and less touchpad to enable mobile payments at tion field. passes this information to their card issuer PC-based POS systems. “We will be rolling our mobile payments to authenticate the customer’s phone and “A merchant wanting to accept mobile system out at the beginning of 2016 with one mobile payment app. payments can either use the converter or the of the Israeli banks,” says Maor. dongle, depending on whether they have a Converter PC- or terminal-based POS system,” says Financial communications WiseSec has developed a patent-pending Maor. “The dongle plugs into a POS system’s Maor says a financial institution can deploy Bluetooth-to-NFC converter which enables USB port, but the touchpad is stand-alone, WiseSec beacons in its branches to identify consumers to make NFC payments with any as it is wireless, so it doesn’t need to be next and communicate with customers’ smart- smartphone on the market, even if it isn’t to the POS device. Both the convertor and phones which run its mobile banking app. NFC-enabled. the dongle behave as a beacon in addition to “By placing our beacons in their branches,

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banks can offer personalised marketing messages to their customers,” says Maor. “Also, the beacons can alert the staff when customers enter the branch. For example, if a VIP customer comes in, the beacon can send a message to the manager to greet the customer personally.”

Cardless ATM access WiseSec has developed a version of its technology enabling consumers to withdraw cash from ATMs using smartphones. ATM deployers need to install a WiseSec BLE sensor inside their ATM which recog- The advantages of Bluetooth Low Energy nises customers who have downloaded their • Compatible with any iOS- and Android- • Completely compatible with existing wire- issuer’s cardless ATM withdrawal app. To less networks make a withdrawal, the customer taps their based device smartphone on the designated area on the • Available on 100 percent of smartphones, • Enables an NFC-like experience, without ATM – identified with a sticker - enters a PIN while NFC technology has limited adoption needing NFC infrastructure on their phone and then enters their ATM • Client devices require minimal user PIN on the ATM’s PIN pad. • Highly reliable compared to NFC “Our location system requires zero distance intervention and minimal battery con- proximity, which means it is triggered when • Not dependent on cellular or GPS networks sumption < the customer’s phone is one centimetre from the ATM,” says Frak. “Zero proximity is technology is the only cardless ATM access NFC antennas and SIM cards, just as they one of the security factors for our ATM tech- system to have been approved by the Bank of all have cameras today.” nology. Waiting in line, even second in line, Israel,” says Maor. Cardless ATM transactions are an excel- won’t activate a request for the customer’s The Bank of Israel, the country’s Central lent use case for BLE, says Knieff. PIN.” Bank, acts as a regulatory and approval body “WiseSec’s technology seems well adapted Like WiseSec’s mobile payments system, for the Israeli Ministry of Finance. to cardless ATM transactions compared to its cardless ATM access technology uses “The Bank of Israel took nearly a year to some other efforts that have been put for- tokenisation to protect customers’ card data. approve WiseSec’s technology, which shows ward in the UK and Japan,” he says. “The how seriously it investigated the system,” improved customer convenience and authen- Comparison with other cardless ATM says Maor. “We’re now working with sev- tication associated with the mobile device technologies eral large banks around the world including plus location data can be very secure and Unlike mobile ATM withdrawal systems that some Asian banks to launch pilots of our powerful.” use QR codes and one-time authentication cardless ATM technology.” However, Knieff says that, while there has codes, WiseSec’s technology requires mobile been a big push to use BLE-enabled beacons ATM withdrawals to happen without any The analysts’ opinion in US retail outlets to identify customers for delay, similar to plastic card ATM withdraw- BLE has immense potential for a variety of marketing purposes, actual in-store beacon als. use cases from retail to financial services to deployment has been limited so far. One “With QR codes or one-time PINs, custom- manufacturing,” says Ben Knieff, a Senior example is Target which in August 2015 ers may be given several hours to pre-stage Analyst at US-based consultancy Aite Group. launched a Bluetooth beacon pilot in 50 and complete their transaction, which intro- He says: “Beacons can help connect the stores across the US enabling customers who duces a security risk,” says Frak. “Another online and offline worlds in very interesting have downloaded the Target iPhone app to advantage of our system is that, whereas QR and powerful ways, and, for many use cases, receive product offers and recommendations codes and NFC-based ATM withdrawals particularly consumer applications, BLE on their smartphones. operate only at the transactional level, we could be a much better approach than NFC. Knieff adds that GPS technology provides can leverage Bluetooth to enable two-way Using BLE dramatically extends the con - a lower-cost alternative method to locate and messaging between customers and their sumer reach as a large portion of the devices identify customers compared to Bluetooth. issuer. This means that the ATM can trans- on the market today support BLE, while far “The advantage of using GPS over Blue - mit promotional messages to the customer’s fewer support NFC.” tooth is that you don’t need to use extra phone.” “There’s definitely a lot of interest in using hardware,” he says. WiseSec says its technology enables card- the Bluetooth channel for mobile payments,” He concludes: “My research has found less ATM withdrawals at considerably less says Christie Christelis, president of Cana- that, with GPS you only have to be accurate cost than upgrading an ATM to accept NFC dian consultancy Technology Strategies to around 500 metres about the user’s loca- transactions. Installing an NFC reader at an International. tion to prevent fraud. If someone is carry- ATM can cost an estimated $4,000. He adds: “But, to succeed, WiseSec will ing out a card transaction, for example, and In March 2015, WiseSec signed an agree- need to develop relationships with a lot of their issuer can locate their mobile phone to ment with two major Israeli banks to deploy players in the financial services industry. 500 to 1,000 metres, they can be fairly con- its smartphone-based cardless ATM technol- Also, eventually the lack of availability of fident the transaction is genuine. They can ogy. “These banks are now using our tech- NFC-enabled phones will no longer be an also send the customer an SMS message as a nology at their ATMs,” says Maor. “Our issue, as all smartphones will come with challenge.” <

www.cardsinternational.com December 2015/January 2016 y 13

CI Dec-Jan 526-527.indd 13 17/12/2015 15:26:43 Morocco’s cards recovering post-crisis While the financial crisis of 2008 affected many economies, few were as adversely affected as Morocco’s. However, an improved payments infrastructure and a boost in debit cards has helped the economy recover with a growth in retail and m-payments starting to show its face

orocco’s economy was adversely campaigns, the government is also keen to Improved payment infrastructure affected by the financial crisis. encourage electronic payments to bring Banks and retail outlets in Morocco expand- However, the government took Morocco’s large unbanked population into ed infrastructure into rural areas, to increase preventive measures such as the the formal banking system through its finan- customer bases and improve financial access M cial inclusion (FI) programme. establishment of a Strategic Monitoring for consumers. The rising acceptance of pay- Committee in February 2009 to help cope FI is a key priority for the central bank and ment cards at retail outlets and a consumer with the crisis. the Ministry of Finance, and are continu- shift towards making purchases directly with Domestic demand for goods and services, ously monitoring the programme’s progress. cards resulted in a rising number of POS driven by stimulating fiscal policy and pro- The central bank directed banks to provide transactions between 2010 and 2014. Pay- tection of purchasing power, helped to sus- services in rural areas, expand banking infra- ment cards are therefore expected to become tain non-agricultural activity and was a key structure, and introduce products and servic- widely accepted over the next five years. growth engine for Morocco’s cards and pay- es for low-income groups. Similarly, contactless technology is being ments industry between 2010 and 2014. The central bank is also working with gradually rolled out in Morocco. In 2012, In 2014, cheque payments and credit trans- the World Bank and domestic microfinance M2M Group, an electronic transactions fers were the most popular payment instru- institutions to design a programme to extend processing solutions provider, installed a ments, having a combined industry share of access to finance among households. contactless ticketing system on the Casablan- 97.1% in terms of transaction value, while According to World Bank statistics, the ca tram system; the technology was extended the share of payment cards doubled from number of total deposit accounts relative to the M’Dina bus network in January 2014. 0.5% in 2010 to 1% by the end of 2014. to the population rose to 50% in Decem - The share of payment cards is rising as the ber 2010, 54% in December 2011, 57% in Debit cards dominate the market government and banks promote awareness December 2012, and 58% in June 2013. In terms of transaction value, debit cards and associated benefits among consumers ATM transaction values were the main remained the most popular payment card. and merchants. The adoption of EMV stand- contributors in the last five years, represent- Morocco’s largely Muslim population gener- ards, and growth in e-commerce and retail ing a dependence on cash. However, with ally avoids credit cards for religious reasons. also supported the industry’s growth. governments and domestic banks making Consequently, the debit card market regis- While leading card issuers push for sustained efforts to increase awareness of the tered growth in terms of volume and trans- growth by offering improved products and benefits of electronic payments, a gradual action value over the last five years. To spur services and running aggressive marketing shift is anticipated all the way up to 2019. card sales, banks and card issuers are offer-

n VALUE OF CREDIT TRANSFERS ($BN) n VALUE OF CHEQUE PAYMENTS ($BN) IN n VALUE OF PAYMENT CARDS ($BN) IN IN MOROCCO, 2010–2014 MOROCCO, 2010–2014 MOROCCO, 2010–2014

2.0 80 120

70 100 60 1.5 80 50 1.0 40 60

30 40 0.5 20 20 10 0 0.0 0 2010 2011 2013 2014 2010 2011 2013 2014 10 11 12 13 2012 2012 20 20 20 20 2014 Source: Central Bank of Morocco and Timetric Source: Central Bank of Morocco and Timetric Source: Central Bank of Morocco and Timetric

14 y December 2015/January 2016 www. cardsinternational.com

CI Dec-Jan 526-527.indd 14 17/12/2015 15:26:51 Cards International COUNTRY REPORT: MOROCCO

n n M-payments gradually gaining prominence MOROCCAN DEBIT CARD MARKET SHARES BY MOROCCAN DEBIT CARD MARKET SHARES BY M-payments are gradually gaining promi- ISSUER (%), 2014 SCHEME (%), 2014 nence in Morocco as they offer users a great- MasterCard er level of convenience. 3.1% Maroc Telecom collaborated with mobile financial solutions provider Comviva to introduce the Mobicash mobile debit payment service in 2010. This service enables CMI Maroc Telecom to offer subscribers ser- Others Banque Centrale 35.9% Populaire 19.6% vices such as bill payment, mobile banking, 37.0% international remittance and money transfer platforms. Subscribers are offered the service without opening a bank account and can be Visa 77.2% activated by registering with Maroc Telecom BMCE agencies. International money transfers by 10.1% mobile phone are anticipated to rise over the Attijariwafa next five years. Crédit du Maroc – Bank 13.2% Crédit Agricole 3.9% Mopay, a leading payment solutions provider for online merchants, implemented an initiative in 2012 in 15 countries, including Source: Timetric Source: Timetric Morocco, to facilitate m-payments. The solutions enable consumers to make transactions n MOROCCAN CREDIT CARD MARKET SHARES BY n MOROCCAN CREDIT CARD MARKET SHARES BY directly to merchants through mobile and ISSUER (%), 2014 SCHEME (%), 2014 landline accounts, resulting in a convenient and secure payment system. Similarly, BMCE offers mobile bank - ing solutions in collaboration with Maroc Telecom. The Librity service enables customers to book travel tickets online, receive MasterCard Others Banque Centrale information about credit accounts and access 24.3% 27.4% Populaire real-time stock exchange information. 32.7% Growth in retail and e-commerce Morocco’s retail sector is developing, with numerous shopping centres being erected, BMCE Visa 75.7% and purchasing power and domestic con- 10.1% Attijariwafa sumption rising. Enthusiasm for Morocco Bank 22.6% as a retail destination is evidenced by the many leading international brands moving there. Zara, Celio, Aldo and French retail giant Carrefour are gradually growing their Source: Timetric Source: Timetric presence: in 2009, Carrefour invested $80m through its Label’Vie franchise. Rising acceptance of card-based transac- ing EMV-compliant cards and bespoke prod- industry, after years of false starts. The tions at POS terminals, consumer demand ucts to meet specific customer needs. draft bill will allow both domestic and for- for high-quality products, and growing The average transaction value for debit eign banks to establish Islamic branches in urbanisation resulted in the increased use of cards declined marginally at a compound Morocco. cards at retail stores. Banks have partnered annual growth rate (CAGR) of -0.17%, from The new bill, which also contains legisla- with retailers to offer benefits such as reward $99.50 (MAD837.40) in 2010 to $98.90 in tion pertaining to the establishment of a Sha- points, cashback and discounts to serve the 2014. As consumers and merchants, especial- ria committee in coordination with the cen- rising number of retail customers. ly in rural areas, prefer cash for purchases, tral bank, will help build a robust regulatory E-commerce grew from $2bn in 2010 to the total average transaction value for debit environment for the financial sector. $3.2bn in 2014, at a CAGR of 13.40%, due cards fell between 2010 and 2014. Presently, Attijariwafa Bank, which is to rising number of online retailers, online Banks are trying to encourage customers part-owned by Moroccan King Moham - and mobile penetration, rising consumer to spend at POS terminals using debit cards, med VI’s holding company Société Nation- confidence in online transactions and the offering benefits such as reward points and ale d’Investissement, has an Islamic banking increasing presence of online gateways. discounts. subsidiary. The value of e-commerce is expected Anticipating the approval of the new to record a CAGR of 10.96%, to reach Islamic banking offers growth prospects banking law, other banks such as BMCE and $4.9bn in 2019. Growth in online shopping In June 2014, the Moroccan government Banque Centrale Populaire du Maroc have is expected to create opportunities for the approved a new banking law relating to equipped themselves to set up new banking cards and payments industry over the next establishing a fully fledged Islamic finance branches adhering to Islamic standards. five years. <

www.cardsinternational.com December 2015/January 2016 y 15

CI Dec-Jan 526-527.indd 15 17/12/2015 15:26:56 Italy rejecting cheques for cards While slowly recovering from the global financial crisis in 2008, Italy has begun to heavily reject cheques and move towards other, more modern, forms of payment. Simultaneously, the Italian government is hoping to push the public away from cash and in the direction of cards

taly is one of the world’s most devel- $13.9bn lost to processing cash payments. can be recharged online, by mobile phone or oped economies, although it was The government introduced a regulation in at retail stores. adversely affected by the eurozone July 2014 requiring wholesalers and retailers According to Timetric research, Poste Itali- crisis between 2010 and 2014. The to install POS terminals for transactions over ane, UniCredit and UBI Banca are the leading I companies in the Italian prepaid cards mar- country’s real GDP growth fell from $39.80. These initiatives are set to reduce 1.7% in 2010 to -0.4% in 2014. dependence on cash. ket. To maintain their dominance, the banks The economy is expected to stabilise, with are entering into partnerships with compa- GDP growth rising from 0.6% in 2015 to Traditional credit-averse environment nies to offer co-branded products: UBI Banca 1.1% in 2019. In a bid to revive the economy, The debt crisis and subsequent austerity poli- offers prepaid cards for readers, disco enthu- the Italian government introduced austerity cy led to a drop in consumer spending. siasts and the Alpine club. measures and shifted its focus to increased The traditionally credit-averse nature of Card personalisation is a key strategy financial inclusion through the Save Italy Italian consumers is expected to result in a adopted by issuers to market prepaid cards. plan in December 2011. fall in credit card-based transactions. This Issuers now enable customers to customise The plan included mandatory openings is expected to reduce new credit card issu- cards by adding photos, themes or company of free current accounts or a basic payment ance over 2015 to 2019 and increase the use logos: Intesa Sanpaolo offers card personali- accounts by financial institutions for socially of prepaid cards, as customers prefer pre- sation services on its Flash Visa payWave and disadvantaged customers with an annual planned or budgeted spending. Flash Card Expo prepaid cards. income of less than $9,950.50 (€7,500). The number of prepaid cards in circulation According to a study by the European increased at a compound annual growth rate Foundation for Financial Inclusion in May Government initiatives to limit cash (CAGR) of 18.13% from 12.4m in 2010 2013, the cost of a current account for con- While France, Spain and the UK are moving to 24.1m in 2014, and is expected to reach sumers in Italy is higher than in other Euro- towards becoming cashless economies, cash 32.4m by 2019. Growth can be attributed to pean countries, as they are charged stamp is still the preferred instrument for Italians, improved POS terminal infrastructure, secu- duties, banking fees and charges. accounted for 85.6% of total transaction rity features, and issuers’ promotional offers. To mitigate the high costs associated with volume in 2014. To capitalise on rising consumer demand current accounts, banks now offer Inter- The government banned all cash-based for prepaid cards, issuers are now adding national Bank Account Number (IBAN)- transactions over $1,390 on 8 December features such as online functionality, global enabled prepaid cards with current account 2011, as part of efforts to reduce the annual usability, easy reloading and contactless functionality. The cards are exempt from tax loss of nearly $139bn, and an additional functionality. Intesa Sanpaolo prepaid cards stamp duties and can be used for card-based

n VALUE OF CREDIT TRANSFERS ($TRN) IN n VALUE OF CHEQUE PAYMENTS ($BN) IN n VALUE OF PAYMENT CARDS ($BN) IN ITALY, ITALY, 2010–2014 ITALY, 2010–2014 2010–2014

200 12 1,200

10 1,000 150 8 800

600 6 100

400 4 50 200 2 0 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Source: Central Bank of Italy and Timetric Source: Central Bank of Italy and Timetric Source: Central Bank of Italy and Timetric

16 y December 2015/January 2016 www. cardsinternational.com

CI Dec-Jan 526-527.indd 16 17/12/2015 15:27:02 Cards International COUNTRY REPORT: ITALY

n n in the country are mediashopping.it, yoox. ITALIAN DEBIT CARD MARKET SHARES BY ITALIAN DEBIT CARD MARKET SHARES BY com, youbuy.it, and mediaworld.it, offering ISSUER (%), 2014 SCHEME (%), 2014 consumer goods and electronics. Italy ranks fifth in Europe in terms of MasterCard online retail sales, behind the UK, Germany, 8.2% France and Spain. The growth of e-commerce in Italy was facilitated by the development of Poste online and mobile payments. Italiane While the shares of payment cards and Others 21.1% Visa 31.7% 16.5% cash on delivery fell, digital wallet, credit transfer, direct debit and mobile wallet and Unicredit carrier billing increased their shares during 19.2% Bancomat 75.3% 2012–2014, as consumers increasingly use Banco Intesa mobile phones to make payments. Popolare 4.6% Sanpaolo A survey by Italian e-commerce associa- 17.6% tion Netcomm in April 2015 indicated that BNL 6.0% 16.9m consumers, representing 55.1% of Italians with internet access, made online purchases in the first three months of 2015. Books, travel tickets and clothing were the Source: Timetric Source: Timetric preferred product categories for online shoppers, accounting for 15.4%, 13.1% and n ITALIAN CREDIT CARD MARKET SHARES BY n ITALIAN CREDIT CARD MARKET SHARES BY 12.5% respectively of total purchases. ISSUER (%), 2014 SCHEME (%), 2014 Growing POS terminal installations The number of POS terminals recorded a American Express Others 1.5% CAGR of 2.56%, rising from 1.5 million in 2.2% 2010 to 1.7 million in 2014. The potential for card payments is expected to grow due to Others Cartasi a rise in the number of POS terminals at retail 22.3% 29.2% outlets. The rise is a result of the central bank MasterCard regulation on tax evasion, restricting use of Deutsche 38.0% cash for purchases up to $1,326.70. Visa 58.4% Bank 11.2% There has been a notable growth of m-POS Intesa solutions in Italy. Payleven introduced an Sanpaolo Unicredit m-POS solution in September 2012, allow- Agos 13.6% 11.7% ing merchants to accept payments from Visa, 12.0% MasterCard and American Express credit and debit cards. SumUp launched a similar product in November 2012 that accepts credit and debit cards from MasterCard, Visa Source: Timetric Source: Timetric and American Express. UBI Banca along with the 3 Italia and Car- taSi payment systems launched an m-POS transactions such as salary payments, pay- issued 500,000 SmartPass contactless cards solution in July 2014. The service is compat- ment of utility bills such as gas, electricity as of April 2014. ible with major payment networks such as and water, and online or store purchases. Poste Italiane launched the Postepay Evo- PagoBancomat, Visa and MasterCard and lution card in July 2014, a reloadable pre- offers a reader and a free Android or iOS Rising adoption of contactless technology paid card with an IBAN. In addition to basic smartphone or tablet app. Retailers are also Contactless technology has been widely prepaid features, the card allows customers offered UBI Banca’s Enjoy Business prepaid adopted by Italian customers. Visa Europe to transfer funds by wire transfer. It is also card, which enables transaction amounts to signed an agreement with Telecom Italia in embedded with contactless technology. Poste be credited directly to the account linked 2013 to provide mobile payments services to Italiane had issued 500,000 Postepay Evolu- with the prepaid card. 31 million Telecom Italia Mobile (TIM) cus- tion cards as of March 2015. Telecom Italia and Payleven offer a chip- tomers in Italy. TIM consumers are offered and-PIN card reader which can be used to TIM-branded Visa cards which can be used Growing e-commerce market make payments by smartphone or tablet. to make mobile contactless payments. Users E-commerce’s value increased rapidly from Users register with Payleven and download a are required to enter a PIN for transactions $10.5bn in 2010 to $18.8bn in 2014, at a free app from Google Play or the Apple store. above $33.20. CAGR of 15.54%. The value is expected to The app connects to the chip-and-PIN card Vodafone launched SmartPass in April record a CAGR of 13.64% to reach $31.1bn reader by Bluetooth, and customers input 2014 to enable customers to make contactless by 2019. The trend was supported by the rise amounts directly into the app and make pay- mobile payments. According to Italian uni- in mobile and internet penetration. The lead- ments by providing a PIN or digital signa- versity Politecnico di Milano, Vodafone had ing business-to-consumer e-commerce sites ture. <

www.cardsinternational.com December 2015/January 2016 y 17

CI Dec-Jan 526-527.indd 17 17/12/2015 15:27:06 The US expands its large card market The United States is the holder of the world’s largest payment market with new and innovative solutions coming to market with ever-increasing frequency. However, banks are struggling to keep customers and remain profitable. How are new entrants to the market going to exacerbate their worries?

he US has the world’s largest pay - The shift to electronic payments has ly to intensify further with the launch of ment market, and one of the highest also been aided by contactless technol - CurrentC and Chase Pay in 2016. levels of card penetration. In 2014, ogy, which launched in 2004 and is In a highly competitive and mature the US accounted for 86.6% and now gaining significant momentum. US market, banks and card issuers are fac - T ing changing regulatory, competitive and 88.2% of North America’s transaction consumers have a variety of contactless value and volume respectively. choices, as all major payment networks customer dynamics. Electronic payments steadily gained – Visa, MasterCard, American Express While card issuers are subject to ris - ground in the US between 2010 and and Discover – offer contactless cards. As ing regulatory requirements and increased 2014, and in terms of transaction volume contactless becomes more widely accept- competition, consumer behaviour has also they have overtaken the once-dominant ed, card transaction values and volumes changed; they are becoming increasingly cheque. The decline in cheque transac - are expected to rise further. value-driven and are looking for benefits tions gathered pace in the last 10 years, Focus on m-payments has also risen, beyond traditional products or services. largely due to a surge in the conversion with the launch of Samsung Pay, Android This has put increased pressure on prof - of cheques into automated clearing house Pay, Apple Pay and the Starbucks mobile itability, forcing issuers to reassess prod- (ACH) debits. wallet. Competition in the industry is like- ucts, costs and revenue streams.

n VALUE OF CREDIT TRANSFERS ($TRN) IN THE n VALUE OF CHEQUE PAYMENTS ($TRN) IN THE n VALUE OF PAYMENT CARDS ($TRN) IN THE US, 2010–2014 US, 2010–2014 US, 2010–2014

5 120 35

30 100 4

25 80 3 20 60 15 2 40 10 1 20 5

0 0 0 2010 2011 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2012

Source: Bank for International Settlements and Timetric Source: Bank for International Settlements and Timetric Source: Bank for International Settlements and Timetric

18 y December 2015/January 2016 www. cardsinternational.com

CI Dec-Jan 526-527.indd 18 17/12/2015 15:27:14 Cards International COUNTRY REPORT: THE US

n n vious industry average of $0.44. The new US DEBIT CARD MARKET SHARES BY ISSUER US DEBIT CARD MARKET SHARES BY SCHEME limit took effect in the summer of 2011. (%), 2014 (%), 2014 Checking account fees, which many banks have found necessary to charge to compensate for revenue losses due to the Durbin Amendment, are gradually driving Others Bank of consumers away from debit cards. In the America 10.0% Wells Fargo Star US, the regulatory burden on retail bank- 11.8% 10.0% 7.9% ing has compelled many to raise charges

JPMorgan on current accounts to remain profitable. Wells Fargo ended its free checking Chase 6.6% Visa 57.9% Others MasterCard accounts in August 2012, imposing a PNC 2.2% 67.5% 24.2% USAA 1.9% monthly service fee of $7 on all essential checking accounts. However, the Durbin Amendment only applies to financial institutions with assets of more than $10bn – a small proportion of the number of US debit card issuers, but most of the cards in circulation. As a result, many larger banks have reduced Source: Timetric Source: Timetric focus on debit cards; some are investing more considerably in credit cards. n US CREDIT CARD MARKET SHARES BY ISSUER n US CREDIT CARD MARKET SHARES BY SCHEME For many smaller banks and issuers, (%), 2014 (%), 2014 however, debit cards remain profitable, and with big banks’ shifting emphasis, there may be a greater opportunity for them to develop debit card business. American Others E-commerce offers scope for card payments Express 22.7% 19.9% E-commerce is growing rapidly in the US, Others driving the payment card market growth by 67.5% converting potential brick-and-mortar sales Visa 51.5% JPMorgan to digital sales, as consumers increasingly Chase 19.5% MasterCard use smartphones while shopping in-store. 25.8% Mobile wallets are expected to change the dynamics of payment cards by creating new participants. Capital One 6.5% Bank of The growing market for e-commerce in Citibank America 8.2% the US is a primary factor for the expan - 7.7% sion of the country’s payment cards market, especially for credit and debit cards; Source: Timetric Source: Timetric these still dominate due to promotional offers offered by issuers. Benefits offered by online retailers, Credit card market recovering with low credit ratings. For consumers such as low cost and high convenience, The US economy and employment levels with poor or fair credit histories, the aver- are expected to further increase credit and were badly hit by the global financial crisis age percentage rate is higher than normal, debit card ownership in the US. However, of 2008-2009, forcing many consumers to and cardholders are required to make a online retailers and regulatory authorities default on credit card payments. Banks sub- security deposit with the bank. should concentrate on increasing consum- sequently recorded high volumes of bad debt. er confidence in online retail safety. Most banks cleaned their customer bases and Banks’ profitability under pressure The rising young and urban populations deactivated bad credit accounts; the number Profitability in the US cards and payments have a strong inclination for mobile of credit cards in circulation fell as a result. industry decreased following the regulation phones and online media use, giving a Employment opportunities have on interchange fees in 2011. Consequent- platform for e-commerce companies to improved with US economic growth ly, large banks saw revenues on checking reach more potential customers. Online since 2010. Supported by a strengthen - account and debit cards fall, forcing them to shopping’s rise is expected to create ing economy and low credit card delin - adopt new strategies. Banks increased check- opportunities for the cards and payments quency, banks have again started to focus ing account minimum balances and mainte- industry. on credit card business, albeit adopting a nance fees, and limited reward programmes. Banks and card issuers offer cashback, more cautious approach in terms of issue. The Durbin Amendment caps the reward points, discounts, purchase pro- In addition to targeting consumers with amount banks can charge retailers for tection cover, extended warranties, zero high FICO scores, banks and card issuers swiping debit cards to an average of card fraud liability and flexible repay - are now also offering cards to consumers $0.21 per transaction, instead of the pre - ments to encourage online shopping. <

www.cardsinternational.com December 2015/January 2016 y 19

CI Dec-Jan 526-527.indd 19 17/12/2015 15:27:18 GUEST COMMENT: SUNTEC Cards International

What should the banking sector look out for in 2016?

As services become increasingly digitised, an array of opportunities open up for banks to improve services dramatically. But what will this mean in practical terms? SunTec COO Max Speur gives Cards International his analysis of what to expect in the next twelve months

he retail banking sector is undergo - because they ing significant changes as technol- have higher ogy advances to a point where all accuracy T services become digitised. This year rates than we have seen in the UK the arrival of digi- any com- tal only banks such as Tandem and Atom. mercial bio- This is what the banking sector should metric secu- look out for in 2016. rity product. While Utilising the Internet of Things (IoT) to its efficiency full effect and privacy Analyst firm IDC forecasts that the world- concerns wide market for Internet of Things (IoT) have to be solutions will grow from $1.9trn in 2013 to addressed, $7.1trn in 2020. this new As IoT technology becomes cheaper and wave of bio- its capabilities expand, the banking sec - metric secu- tor should look at how they can use IoT to rity could improve banking services. offer the IoT can improve the processes involved in best protec- collateral and loan arrangement verification. tion against hackers and scammers. With the expansion of IoT, new payment For example, corporate borrowers from Whilst biometric security is still in its products will enter the market, even tattoos the manufacturing industry often have to infancy, adopting two factor authentication will be able to hold key personal information monitor inventory levels to ensure the loan (2FA) is widespread among banks. used to pay for services. agreement is being followed and the borrow- Security keys are now widespread most Yet the growth of the omnichannel will er is not participating in fraudulent practices. notably with HSBC, Nationwide and First not cause the death of a physical presence Using IoT, the bank can install sensors on Direct improving security protocol for both for banks. the premises to examine the inventory and banks and their customers. Physical outlets will become ‘experi - complete checks more efficiently. While these new security measures are ence centres’ where customers can enjoy an making customers more secure it can slow immersive hybrid banking experience. New security enhancements to cope with down the login process, or cause frustration They can access their data and receive per- new concerns if customers cannot login due to forgotten sonal support using digital tools in a high- Security is becoming the number one concern passwords or security keys. street branch. across the banking sector for both customers Banks need to strike the balance between The hybrid banking experience is seeping and vendors. security and convenience to provide a secure into payments as well. As hackers develop more sophisticated seamless banking experience. Listening to their customers’ demands, methods to steal personal information, banks banks have reduced the importance of the need to rise to the challenge. Hybrid banking entering the forefront of physical bank branch, becoming digital ser- One interesting avenue that banks are finance vices providers. beginning to consider is the use of biometric Mobile applications and internet banking Competing with technology companies technology. have become the norm rather than the excep- like Apple Pay and Google Wallet, banks are More than 770 million biometric authenti- tion, but the omnichannel banking experi- beginning to utilise the wealth of customer cation applications will be downloaded each ence is growing. data and expertise to improve customer year by 2019, fuelled by the popularity of the With the introduction of Google Wallet retention. thumbprint verification on the iPhone 6. and Apple Pay the availability to pay for ser- This is a good time for banks to go out- It is not surprising that the biometric mar- vices is spreading to every aspect of a con- side the industry and partner with retailers ket value is predicted to hit $13.8bn by the sumer’s online presence. and healthcare providers because custom- end of 2015. Barclays is leading the charge in the sector ers could be further incentivised to use the Commercial retina and iris scanners, by introducing bPay by allowing contactless banks’ mobile payment service by receiving which cost between $2,000 and $10,000, payments through stickers, wristbands or fob individualised offers and deals based on pre- could be how banks protect customer data, for customers. vious purchases.<

20 y December 2015/January 2016 www. cardsinternational.com

CI Dec-Jan 526-527.indd 20 17/12/2015 15:27:19

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