2016 The year of convergence of Market & Regulation Prepaid Summit Europe 2015 10.11.2015 - Milano Ugo Bechis e-Payment & SEPA Advisor to UBI Banca former EPC CWG Chair - CSG Co-Chair © 2010 Colt Telecom Group Limited. All rights reserved. 2016 - Market & Regulatory convergence The Retail commerce context & payment needs How the pre-paid impacts on new payment solutions Challenges , focus areas to be competitive EU Regulation - New degrees of freedom & opportunities Digital culture is more than tech innovation Ugo© Bechis2010 Colt Telecom Group Limited. All rights reserved. The (e)Commerce ecosystem - what Retailers want The new Retail model Convergence of in-Store and in-App Mobile as a way to attract / retain / sell (geo-location , offers , loyalty) Retailers goals : To close the sale, get paid ; no abandonment (30%) No friction : easy , quick , intuitive The “one button” trx (1 click to buy & pay , in-App) Retailers “mobile powered” sales process Mobile Paym Apps use friendy & “open” to payment/non-payment (eg: loyalty) , decupled Ugo©Bechis 2010 Colt Telecom Group Limited. All rights reserved. Mobile powered in-store/in-App convergence “In-APP” emulation of the in-store processes geo-localization , in-store to in-cloud , in-App emulation , e-Comm /e-Paym The “mobile powered” customer interaction Attract : geo-localization + beacons + sales incentives Retain : giving a in-store “enhanced” experience by emulating in-App the physical interaction Buy : Loyalty/Fidelity cards in-wallet , decupled Buy & Pay : user friendly Mobile Apps - “one click” trx Ugo© Bechis2010 Colt Telecom Group Limited. All rights reserved. Payment solutions : too much choice = no choice ... Ugo Bechis© 2010 Colt Telecom Group Limited. All rights reserved. The role of the entry Gateway Buyer Seller PSP App Pay app Online platform Pay app Various SPs Pay platform Pay app Online Bank Online Bank Ugo Bechis Gateways models : Mobile access via wallet Apps PayPal - white label open platform (Dan Schuman) : . PayDiant : in-App wallet tailored to merchants . Braintree : open “agnostic” wallet (P2P, cards, loyalty) . Venmo : Mobile P2P (PayPal instrument) . One Touch tech : shopping cart - one click Buy&Pay ApplePay : in-Store NFC + in-App AndroidPay : in-App/finger access to mobile wallet Google multi-option wallet : P2P, card-to-card, card-to-bank Amazon : Mobile wallet , WePay P2P , mPOS stopped Take aways Flexible wallets, open to mix of paym/non-paym Wallet mix not too much “retailer focused” Ugo© Bechis2010 Colt Telecom Group Limited. All rights reserved. Payment trends : a shift to P2P options Mastercard Send (05.2015) P2P to / from debit card account, not just MC Funds available within 30 minutes, not ACH process > VISA Canada Virtual Bank Accounts (06.2015) Funds deposited / transferred card-to-card prepaid “position” , no traditional bank account ApplePay P2P Patent (09.2015) instrument, paym data pack agreed between payer & receiver Apple devices [iPhone, iPad] ; trx execution request sent to “third party” (payor/payee’s bank, third-party fin institution) Take aways P2P pre-paid card based : faster payment, higher revenue Open wallet host card & non-card payment initiation Ugo© Bechis2010 Colt Telecom Group Limited. All rights reserved. The role of the entry Gateway Buyer Seller PSP App Pay app Online platform Pay app Various SPs Pay platform Pay app Online Bank Online Bank Ugo Bechis EU Regulations : Highlights Regulatory Act What Market Impact PSD.II • TPP (“access agents”) • Access role open to any TPP (EP 08.10.2015) • TP Info Providers • Multi -Bank info at TPP • Secure authentication • Payer Credentials security • Security TPP-ASPSP • Secure ID PSP-to-PSP • TPP-to-Bank protocol • Standard TPP APP interfaces e-ID & Trusted Serv. Reg. • e-Identity EU validity • Distant secure Identification (EP 08.2014 ; Implementing • e-ID Schemes • Customer“ownership” via e-ID Acts due end 2015) • Role of Trusted party • Third party Trustee role • Time stamping • Thrid party guaranty on time & • Contents encryption contents between two parties ECB - EBA Authority • Two-factor “strong” • 1 “dynamic” factor needed - e-Payments Security authentication • 1 credential for all instrument, Guidelines • 1 credential entitled to not limited to one only (a card) all payment services • TP legitimacy to handle wallets • Trx and info channels split multi-instruments, multi-bank - PSD2 TPP-Bank protocol • TPP-to-Banks standard • Bank must give consent (PSD.2) protocols and data set • Bank to open (APIs) to TP APPs Ugo ©Bechis 2010 Colt Telecom Group Limited. All rights reserved. EU Regulation : key impacts 1) e-ID Reg : Identification & legitimacy of entry gateway (re: Sweeden Bank-ID for access to PA via Banks HB) (eg: mobile e-ID bundled with payment cerdentials) 2) PSD.2 : TPPs App.s to be granted access to Banks > (TPPs/Bank APP stores ; Bank to open APIs) 3) ECB-EBA : choice at TP wallet > routing to Banks >> 4) PSD.2 : Info/data consolidated by TPP Agent UgoUgo©BechisBechis 2010 Colt Telecom Group Limited. All rights reserved. Business impacts of new roles in the chain Impacts Customer ownership via security of entry gateway & ID “broker fees” claimed by TPPs . Google offered rebate by a Card Scheme . ApplePay wallet rebates from card schemes Payment non-IF revenues to be enhanced . Pre-paid cards benefit from float . Pre-paid P2P card-to-card have lower processing costs Merchants increasing interest in non-4corner options . P2P card-to-card models favour pre-paid . P2P allows non-card models . Open, agnostic wallets more attractive to users Ugo Bechis© 2010 Colt Telecom Group Limited. All rights reserved. Opportunities - key factors to focus on The battle is on access , front-end App.s , tech efficiency Cutomer interface usability (the “3 click” golden rule) “Bespoke” wallets , Digital master issuing Banks/P.I.s have a chance to play TPP role vs other PSPs Business models not only based on its own direct issuing Ugo Bechis© 2010 Colt Telecom Group Limited. All rights reserved. The Digital culture challenge “You cannot inhibit the speed of the fastest” (Paul Marsch , former Head UK Card Association) “You have to structure the chaos” (Thom Luyckx , Chair PayYou) New market proposals and Regulatory openings converge New models fit into the new EU Regulatory framework Do not wait , speed up ! Ugo© Bechis2010 Colt Telecom Group Limited. All rights reserved. Ugo Bechis e-Payments & SEPA Advisor [email protected] [email protected] Ugo Bechis© 2010 Colt Telecom Group Limited. All rights reserved..