The new mobile wave Are smartphones about to make cards redundant? - Electronic Payments International
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October 2016 Issue 352 www.electronicpaymentsinternational.com
The new mobile wave
Are smartphones about
to make cards redundant?
•
••
Sibos 2016: Transforming the landscape?
SWIFT: Europe’s changing payment infrastructure
Comment: combating professional fraud
• Surveys: New Zealand, South Korea, Ukraine
EPI 352.indd 1 11/11/2016 12:32:10
Multichannel
digital
solutions
for financial
services
providers
To find out more about us please visit:
www.intelligentenvironments.com
Intelligent Environments is an international provider of innovative mobile and online solutions for financial
services providers. Our mission is to enable our clients to always stay close to their own customers.
We do this through Interact®, our single software platform, which enables secure customer acquisition,
engagement, transactions and servicing across any mobile and online channel and device. Today these are
predominantly focused on smartphones, PCs and tablets. However Interact® will support other devices, if
and when they become mainstream.
We provide a more viable option to internally developed technology, enabling our clients with a fast route to
market whilst providing the expertise to manage the complexity of multiple channels, devices and operating
systems. Interact® is a continuously evolving technology that ensures our clients keep pace with the fast
moving digital landscape.
We are immensely proud of our achievements, in relation to our innovation, our thought leadership, our
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calibre of our partners.
For many years we have been the digital heart of a diverse range of financial services providers including
Atom Bank, Generali Wealth Management, HRG, Ikano Retail Finance, Lloyds Banking Group and Think
Money Group.
IE RBI final design.indd 1 05/05/2016 10:36:41
NEWS
EDITOR’S LETTER
CONTENTS
NEWS
3: NEWS DIGEST
A
FEATURE few landmark events for elec- night Eastern Time, during electoral proceed-
tronic payments have taken place ings, the cryptocurrency climbed to $732, almost
6: SIBOS
over the last month. Firstly, and $120 more than the same time a month prior.
The theme for this year’s Sibos conference
was ‘transforming the landscape’. Anna most probably least significantly, Speculation started the night before the elec-
Milne reports back from Geneva every black cab in London now takes tion. If Clinton were to win, this was not expect-
8: SWIFT card payment- and they have scrapped ed to have much effect on the value of bitcoin. A
With the ECB looking to merge the Target2 the surcharge, instead adding 20p to the Trump win, however, would be a different story.
real-time gross settlement payment base fare. Hardly something that will put And true enough, as Trump garnered more
system with the T2S securities settlement
mechanism, Anna Milne speaks to SWIFT at
people off. Is it too little too late, in light and more votes, so the value of bitcoin rose in
Sibos about its plans for 2017 of Uber’s storming success? I wouldn’t tandem, rising 3.4% in the two hours after mid-
10: CONTACTLESS
like to say. night on 9 November.
The global contactless card transaction At more or less the same time there was the A similar spike occurred during Brexit, when
value will almost quadruple between 2016 world’s highest ever (probably) Apple Pay trans- bitcoin spiked 7%, resulting in a $100 increase
and 2020. Why is contactless affecting the action in the form of the remote purchase of a in the price of bitcoin during one trading session.
payments world with so much vigour? Patrick
Brusnahan takes a closer look vintage car at British auctioneer Coys. All this amid the pound taking a serious bashing.
The first ever purchase of a classic car via social In an interview for CoinDesk, a hedge fund
SURVEY media using mobile app Vero for the sale of a manager dealing in bitcoin said a Trump presi-
1964 Aston Martin DB5 for £825,000 ($1.01m) dency, despite being an “epic disaster” in most
13: NEW ZEALAND was completed by a buyer who made the pay- respects, would be “great for bitcoin”, adding,
14: SOUTH KOREA ment using Apple Pay. “in the fear and chaos bitcoin would be a defen-
Mobile payments are on the increase and will sive asset people could turn to”.
15: UKRAINE
likely follow an upward trajectory for quite some He wasn’t the only one. As a result of Brexit,
COMMENT time longer. many analysts had predicted a boost for bitcoin
Recent research by Timetric suggests that in the event of success for Donald Trump.
2: JOHN MARSDEN, EQUIFAX mobile NFC payments will overtake contactless Other analysts suggested that even if there was
card transactions both in volume and value, a spike, it would be shortlived. Either way, any
16: RALF OHLHAUSEN, PPRO GROUP
although the latter won’t take much to beat, given positive fluctuation would indicate that bitcoin
the low value maximum limit on contactless card is a go to measure for many to safeguard against
payments. See page 10 for a more comprehensive economic uncertainty.<
rundown on the contactless payments landscape,
based on this research.
And further west, the US election result has
ANNA MILNE, anna.milne@timetric.com
come up trumps for bitcoin. Shortly after mid-
Editor: Anna Milne Sub-editor: Nick Midgley For more information on Timetric, visit
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Email: anna.milne@uk.timetric.com
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www.electronicpaymentsinternational.com October 2016 y 1
EPI 352.indd 1 11/11/2016 12:32:12
COMMENT
EQUIFAX Electronic Payments International
How to combat professional fraud
With some unwanted recent findings regarding fraud, as well as major breaches in cybersecurity, a stronger
strategy towards security is needed now more than ever. John Marsden, head of ID and fraud at Equifax,
gives an overview of the problem and offers critical advice for individuals and businesses
R
ecent ONS crime figures show bank- and the security signs visible in a brows- thinking when we create a password, mak-
ing and credit fraud is up 13% in the er. Make sure you log on to a banking ing them all too easy to crack. This is why
year ending June 2016. website at a web address you know, not businesses need to invest in new technology
Companies have stepped up their via a link. like biometrics and device recognition creat-
fraud protection with multiple layered fraud 4. Never provide any banking details to a ing multiple layers of defence.
defences, but this often moves criminal activ- third party you do not know or are unsure The criminals do not stand still, and busi-
ity to channels that are less well protected. about – in part or as a whole. nesses of all sizes need to work hard to stay
Fraud is a surprisingly professional indus- 5. Avoid unnecessarily sharing details such ahead.
try. The number of cases continues to rise as as your name, address and date of birth.
criminals find new ways to access informa- Stolen passwords and usernames
tion, often fuelled by a deep understanding Fraud losses rise Around 500m Yahoo passwords and user-
of their target’s identity. Underlying this is The latest FFA UK report reveals a 25% year- names have been stolen since 2014.
the sharing of knowledge and consumers’ on-year increase in financial fraud losses for Passwords are continuing to topple like
personal information across dark web mar- the first half of 2016 to £399.5m. dominos, and the rate of major breaches is
ketplaces. Cyber and ID fraud dominate the fraud increasing at an alarming rate. The Yahoo
Consumers must take steps to protect landscape, and online scams and attacks con- breach is a super-sized domino that is going
themselves from falling prey to fraudulent tinue to rise. E-commerce is growing, and is to have huge effects on people for years to
behaviour. People are without doubt con- a tempting prospect for fraudsters looking to come.
fused about where to store and share confi- use identity and payment data such as credit This is a game changer in the online fraud
dential information like their bank account and debit card information they have gained world; aside from Gmail being cracked, there
number, sort code and even date of birth. via the vast ‘carders’ markets’. is no other single event that could happen
As consumers seek the convenience and Fraudsters are sophisticated, and can easily that will cause more fraud and damage over
speed offered by digital correspondence, gather information which can then be used the next five years.
they expose themselves to fraudsters who to open accounts and make purchases online The breach has been a major blow to
will steal this information to gain access to fraudulently. This situation is exacerbated Yahoo, with personal details of around 0.5bn
accounts and financially exploit individuals. by an increasing frequency of data breaches users now up for sale on the dark web. This
Data shared on the dark web cannot by hackers who can then sell this data on to information will spread quickly and globally,
be treated as a one-time event; the data other criminals. with no chance of recovery. There will be a
never truly vanishes and can spread glob- In addition, a frightening number of con- long-lasting impact for consumers and busi-
ally in a short amount of time, enabling sumers are also still being tricked into hand- nesses as hackers attempt to use the breached
criminals to fraudulently takeover accounts ing over personal data. This usually occurs data to access other online accounts.
and identities. when a criminal is able to convince an indi- We urge businesses to be on high alert for
To reduce the risks and damage associated vidual that they are emailing or calling from any customer contacting them from a Yahoo
with fraudulent activity, more needs to be a legitimate organisation and they need to email address, as there is a high chance that
done to educate the public and give them a verify their personal details. Using this infor- their details have been comprised. One par-
stronger chance of protecting themselves. mation, criminal fraud networks can create ticular area to watch are requests to reset
The advice is very clear: remain vigilant, high-quality ID data to sell via the dark web. passwords; sending a ‘click here to reset pass-
only share your details when you are sure The financial services industry has to work word’ link to a Yahoo address is not advis-
the channel is secure, and keep the follow- together, educating consumers and sharing able given the size of the breach.
ing guidelines in mind when handling your information to help collectively tackle this Passwords are no longer effective as a
personal information: criminal activity. standalone measure, and companies must
1. Do not do your online banking in public The focus must be twofold. It is vital that act sooner rather than later to improve their
places, and definitely do not use public any organisation holding personal data con- online security.
Wi-Fi – criminals can set up bogus pub- tinuously evolves the systems and processes The normal advice of complex password,
lic Wi-Fi hotspots to access devices and in place to keep that information safe. numbers and numerals no longer works
information. Equally, any business handling financial in a world where there are now billions
2. Never respond to unprompted banking transactions has to take every possible step of cracked passwords; companies should
messages unless you are absolutely certain to ensure the customer they are dealing with instead introduce a second layer of authenti-
the request is genuine, for example you is genuine. cation processing, such as device recognition,
have spoken with your bank to confirm. It is clear that passwords alone are no to help build the necessary barriers to keep
3. Be very aware of domain names online longer enough, fraudsters are wise to our data safe.<
2 y October 2016 www.electronicpaymentsinternational.com
EPI 352.indd 2 11/11/2016 12:32:13
NEWS
Electronic Payments International DIGEST
STRATEGY PRODUCTS
Visa appoints new CEO Dion introduces
Payment giant Visa has named Alfred Kelly, global payments technology company, into
instant bank solution
Jr, a current Visa board member, as its new a technology-driven digital commerce com- Dion Global Solutions has launched a Real
CEO. pany, and has led a strategy that will benefit Time Payment Engine (RTPE) solution,
Kelly will replace Charlie Scharf, who is this company for years to come. which will enable banks to comply with new
resigning as CEO with effect from 1 Decem- “The board of directors is extremely grate- regulatory directives and also meet customer
ber 2016. Kelly is president and CEO of ful for Charlie’s leadership and wishes to demands.
Intersection Co., and the former president of thank him for his outstanding four-year A modular payment hub, RTPE will sup-
American Express (Amex). tenure, which saw total shareholder return port processing of real-time payments and
According to the succession plan, Kelly increase by more than 130%, outperform- will allow banks to become compliant with
will join the company on 31 October 2016 ing both the overall stock market and our new European regulation, European Pay-
as CEO designate, while Scharf will act as an peer group.” ment Services Directive, which becomes
advisor to Kelly from 1 December 2016 for During his 23-year tenure at Amex Kelly effective in 2018.
several months. assumed numerous management roles, The multi-channel solution, according to
Visa independent chairman Robert Mats- including president of Amex and head of the company, will allow banks to connect to
chullat said: “Charlie has been a visionary the global consumer and consumer card ser- customers via corporate, internet, mobile or
CEO, highly successful by any set of metrics. vices groups. At present he is on the board of branch banking.
He has helped transform Visa, the leading directors at MetLife. < The solution supports the ISO20022-
based Common Global Implementation-
STRATEGY
Market Praxis standard for customer con-
Alipay partners with payment nectivity.
Developed on Dion’s SEPA Gateway solu-
platform Zapper in the UK tion platform, RTPE’s architecture provides
24-hour availability that supports existing
SEPA workflows as well as foreign currency
Chinese online payment platform Alipay outside of China and pay with Alipay. and domestic payments.
has collaborated with Zapper, a mobile pay- “Meanwhile merchants, in addition to the Dion Global Solutions chief technology
ments platform, to allow Chinese tourists Alipay payment solution, can better connect officer Andreas Wagner commented: “The
visiting the UK to pay using the Alipay app and understand hundreds of thousands Chi- PSD2 directive requires banks to rework the
at more than 1,000 locations in the country. nese tourists travelling in the UK.” payment processing cycle and implement a
The partnership will enable over 450m Zapper CEO of UK and Ireland Gerry far more efficient and quicker method.
Alipay users to pay for goods through the Hooper said: “This is an incredibly exciting “Using Dion’s messaging technology,
Alipay app at affiliated Zapper businesses in opportunity for us, pioneering the way by X-Gen, our RTPE application is a real-time
the UK, Europe and North America. combining our synonymous QR code pay- payment hub that will support banks to
Alipay app consumers will be able to use ment technology. comply with the upcoming payment initia-
mobile-based QR code technology in the “This is a huge development, enabling Chi- tives.
country; nearly 85% of mobile payments in nese tourists to seamlessly continue using the “We provide a cost-efficient solution, as
China are made using QR technology. highly popular Alipay app when travelling it embeds into the existing application and
Alipay’s head of Europe, the Middle East to the UK, and our partnered Zapper ven- process landscape.
and Africa, Rita Liu, said: “With Zapper as a ues to appeal more favourably to travelling “Due to its modularity customers can select
partner, Alipay can further enhance our user Alipay users and stand out from the competi- only what they really need to improve pro-
experience as they can conveniently shop tion.”< cess efficiency.” <
PAYMENTS
WorldRemit launches remittance service to Cameroon
UK-based online money transfer service “WorldRemit remains committed to secure “By opening its 700 points of sale to the
WorldRemit has partnered with financial and instant money transfers, tapping into the beneficiaries of WorldRemit transfers from
company Express Union to launch its instant unrivalled local knowledge and operational abroad, Express Union is showing its civic
remittance service to Cameroon. excellence of trusted partners like Express commitment to solidarity, generosity, popu-
The deal will enable WorldRemit clients Union.” lation welfare and Cameroonian develop-
to transfer money instantly, to be picked up Express Union general manager Charès ment thanks to money transfers”.
as cash at over 700 Express Union locations. Nghoguo added: “For Express Union – the According to the World Bank, Cameroon
WorldRemit co-founder and executive number one money transfer company in received $244m in remittances in 2015, more
director Catherine Wines said: “Adding hun- Cameroon – the partnership with WorldRe- than double the amount in 2010.
dreds of new cash pickup locations to our mit is geared towards providing an addi- In May this year WorldRemit partnered
Cameroon corridor translates into improved tional means of connecting Cameroonian with UAE Exchange to expand its reach
service, better choice and more convenience migrants to their relatives back in the coun- in Morocco, Uganda, Rwanda, Kenya and
for our customers and their families. try, and local economic actors to foreign ones. Zambia. <
www.electronicpaymentsinternational.com October 2016 y 3
EPI 352.indd 3 11/11/2016 12:32:13
NEWS
DIGEST Electronic Payments International
STRATEGY SECURITY
Payment startup Affirm raises UK financial
$100m from Morgan Stanley fraud losses up
Affirm, the company started by PayPal co-
founder Max Levchin, has obtained a $100m
what they will owe, with no hidden fees or
surprises.
25% in first half
lending facility from financial services giant Affirm also offers advanced technology Total financial fraud losses in the UK dur-
Morgan Stanley. and analytics that look beyond traditional ing the first half of 2016 increased by 25%
The financial technology company said it FICO scores. Affirm currently has agree- to £399.5m ($490m) for payment cards,
will use the facility to continue its expansion ments with more than 750 merchants. remote banking and cheques, according
of consumer-friendly POS financing at lead- The fresh round of funding comes with the to new data issued by the Financial Fraud
ing online and offline retailers. news that Affirm has tripled the volume of Action UK (FFA UK).
Affirm offers consumers an alternative to its loans in the last year. Losses on payment cards, including
traditional credit with a transparent loan Levchin co-founded PayPal with Peter remote purchase fraud, lost and stolen cards,
product that enables consumers to pay for Thiel, and was its chief technology officer card-not-received, counterfeit card and card
purchases over time. for four years before it was bought by eBay ID theft, grew by 31% to £321.5m, com-
Affirm shows customers upfront exactly in 2002. < pared with £244.6m in the first half of 2015.
The FFA data shows that the prevented
MOBILE
loss for cards stood at £475.7m.
Apple Pay arrives to ANZ Between January and June, remote pur-
chase fraud increased by 31% to £224.1m,
customers in New Zealand compared to £171.7m in the first half of
2015, the report said.
Banks’ security systems continued to pre-
vent the majority of fraud from taking place,
with prevented fraud totalling £678.7m,
according to FFA UK. This is equivalent to
£6 in every £10 of attempted fraud being
stopped.
There was a small increase in remote
banking losses, up from £66.2m in the first
half of 2015 to £70.6m, with a prevented
loss of £103.2m.
FFA UK director Katy Worobec com-
mented: “Banks use a range of robust secu-
rity systems to protect their customers, but
as these systems become more sophisticated,
ANZ Bank New Zealand has announced actions are contactless, and this number is criminals have increasingly been turning to
that customers with a Visa debit or personal steadily increasing as more retailers adopt scams and exploiting data breaches to con
ANZ Visa credit card can now use Apple Pay contactless technology. victims out of their personal and security
to make transactions in the country. “Adding Apple Pay to our mobile payment information, as well as money.
When a consumer adds a credit card to offering will make it fast and convenient for “Banks will continue to invest in advanced
Apple Pay, the actual card numbers are not more customers to securely make everyday verification methods, including biometric
stored on the device or on Apple servers. purchases wherever there is a contactless validation and dynamic card security codes.
Instead, a unique device account number is terminal. “We ask all consumers to be alert to
assigned, encrypted and securely stored in “Following on from our highly success- scammers, which is why we recently
the secure element on the device. ful goMoney mobile banking app, ANZ is launched the Take Five campaign,” Worobec
In stores, Apple Pay works with Apple’s pleased to continue leading the industry with continued.
latest iPhones, including the iPhone SE, innovative solutions for customers.” “The industry takes its responsibility to
iPhone 6 and later, the iPad Pro, iPad Air 2, ANZ New Zealand head of digital and combat fraud extremely seriously, but banks
and iPad Mini 3 and later, and Apple Watch. transformation Liz Maguire said: “Our cus- cannot stop all fraud on their own. It is
Customers will be able to use Apple Pay tomers asked us for Apple Pay and we’re essential all organisations with a role to play
anywhere in New Zealand where contactless thrilled they can now use it, continuing our work together to better protect individuals
payments are available, such as BP, The commitment to giving our customers innova- and companies.”
Warehouse, Warehouse Stationery, Noel tive digital ways to do their banking. In an attempt to prevent future data
Leeming, Torpedo 7, McDonald’s, Domi- “We’re confident they will enjoy this easy, breaches, the FFA UK has also requested
no’s Pizza and Burger King. They can also simple and secure way to pay without having all organisations that manage personal and
use Apple Pay to purchases online via apps to present cards or cash.” financial data to improve their security sys-
and websites. On 5 October 2016, Russia-based Sber- tems, and urged customers to beware of any
ANZ CEO New Zealand David Hisco bank launched Apple Pay for its customers unsolicited phone calls, text messages and
said: “More than 50% of ANZ Visa trans- and MasterCard cardholders. < emails. <
4 y October 2016 www.electronicpaymentsinternational.com
EPI 352.indd 4 11/11/2016 12:32:15
NEWS
Electronic Payments International DIGEST
PAYMENTS
Seamless launches contactless payment feature in UK
Swedish m-commerce software firm Seam- According to Seamless, the UK is one rapidly establishing itself as the standard
less has introduced a contactless payment of Europe’s most advanced markets for way for customers to pay with their mobile,
feature for its Seqr mobile payment app in contactless payments, with nearly 500,000 adding contactless payments and direct bank
partnership with UK-based payment net- terminals currently activated. account linking the UK will cement this posi-
work GoCardless. Seamless CEO Peter Fredell said: “The tion further.”
The contactless feature, called Tap & launch of these two new features represents Linking bank accounts is facilitated by
Pay, will allow Seqr customers to link bank a major leap forward for Seqr in terms of GoCardless, whose partnership with Seam-
accounts to the app and make payments customer acquisition and payment accept- less was announced in June. Tap & Pay is
directly from them. ance in the UK. At a global level, Seqr is available to Android smartphone users.<
STRATEGY PAYMENTS
Wells Fargo forms new payment Vodafone and PayPal
team up to enable UK
division; shakes up management contactless payments
American banking giant Wells Fargo has cre- includes dealer services, including indirect Vodafone has teamed up with payment
ated a new business division that will focus auto lending and commercial services, and giant PayPal to allow UK customers to
on payments, virtual solutions and innova- personal lending, including direct auto, per- make contactless payments through PayPal
tion. sonal lines and loans and student lending. accounts with Android smartphones.
The Payments, Virtual Solutions and Inno- Perry Pelos, currently head of commercial The partnership will enable PayPal users
vation group will be headed by Avid Mod- banking services, has been named head of to link accounts to Vodafone Pay to make
jtabai, who is currently head of the bank’s the banking wholesale banking division. purchases at over 400,000 restaurants and
consumer lending group. Codel, Pelos and Mary Mack, head of shops that accept contactless payments.
Commenting on the move, Wells Fargo community banking, have also been added Customers can also make payments on
president and COO Tim Sloan said: “Creat- to the group’s Operating Committee. public transport in and around London
ing this new group will significantly enhance “There is nothing more important to our where contactless and Oyster are accepted.
our ability to transform products, services leadership team than for our customers and Customers can also make purchases of
and technologies to deliver simple, reliable clients to be proud of banking with us,” said up to £30 ($36) at any contactless terminal
and compelling new experiences for today’s Sloan. using a phone integrated with a Vodafone
and tomorrow’s customers.” “I have huge confidence in our leadership NFC SIM. They can also use Vodafone Pay,
In conjunction with the creation of the team, and believe these new appointments a subsidiary of the Vodafone Wallet app, at
new division, the bank also unveiled a raft will enable us to manage our business and retailers by using a PIN.
of management changes. engage with customers and clients in compel- Customers can also add MasterCard bank
Franklin Codel, currently head of home ling ways as we serve their varied and evolv- credit and debit cards to Vodafone Pay.
lending, will assume an expanded role that ing needs.”< Vodafone Pay can be used to make a pay-
ment even when the phone is switched off
M&A or out of battery, because the terminal uses
NFC technology embedded in the Vodafone
Euronet Worldwide completes SIM card.
Vodafone UK head of consumer services
YourCash Europe acquisition Kate Wright said: “Our customers told us
that being able to use PayPal when making
Electronic payment provider Euronet World- convenience to customers, and has a proven mobile payments was important to them
wide has completed the acquisition of Your- track record of delivering strong growth in so we’re delighted to now offer this on
Cash Europe, a UK-based ATM operator. new and existing markets. Vodafone Pay.
YourCash Europe operates around 5,000 “This is a great opportunity to leverage “The service also works with any Visa and
cash machines in the UK, Netherlands, Bel- the benefits that each organisation brings to MasterCard credit or debit card offering cus-
gium and Ireland. the partnership in order to expand Euronet’s tomers greater choice than any other mobile
The company, which processes millions ATM coverage across Europe, create addi- payment service.”
of transactions every year while dispensing tional value for all of our customers, accel- PayPal UK director of mobile commerce
billions of pounds and euros to consumers erate revenue growth and achieve market Rob Harper said: “Mobile payments have
via its European ATMs, generated revenues synergies across the businesses.” long been at the heart of what we do; this
of around £29m ($35m) in 2015. The com- Jenny Campbell, CEO and principal year marks 10 years since we first launched
bined businesses will operate independent shareholder of YourCash commented: “We a mobile payment service in the UK.
ATM networks in 21 European countries. are excited to join the Euronet family. After “As mobile technology continues to evolve,
Euronet CEO – EFT Europe Nikos Foun- years of excellent organic growth and expan- we will continue to look at new ways to
tas said: “YourCash has a management team sion into new markets, we are excited to be make it easier and faster for our customers
that shares our vision of bringing financial able to leverage Euronet’s global scale.”< to pay.” <
www.electronicpaymentsinternational.com October 2016 y 5
EPI 352.indd 5 11/11/2016 12:32:15
FEATURE
SIBOS Electronic Payments International
The two big questions for banks
The theme for this year’s conference programme at Sibos in Geneva in late September was ‘transforming the
landscape’. Anna Milne reports back with an essential overview of the main points made by key industry
participants during the Payment Strategies for the Future panel discussion
B
anks have two questions to ask • To produce more collateral to help trade finance, because this area has a lot of
themselves as they move into an members navigate the field paper-based processes, and stakeholders in
open banking environment: where • To monitor development in the market different areas need information to proceed
are they sourcing their products and • To use regulation and technology to with the next stage.
services, and how are they distributing them? inform business model The instant exchange of information there-
Previously a bank would only produce and • To produce papers informing whether fore makes a massive difference, and speeds
develop its own products and services, and the environment now is actually new, things up tenfold; goods can be sent sooner
distribute them to its own customers. or whether it is a matter of pulling the once transactions are transparent.
Now they can bring in other providers’ strands of themes together from the last
offerings, and there are also platforms as few years A pertinent use case: a permissioned ledger
well, providing interplay between products Daniel Szmukler, MD at the EBA Group, There is a huge mountain to climb to trans-
and services. said the EBA workgroups do not value block- form this. How do you make it interoperable?
During the Payment Strategies for the chain in itself, but aim to evaluate use cases The view was that blockchain/DLT will
Future panel at Sibos, the EBA Group out- of how beneficial it would be to financial not replace the entire legacy environment
lined some very real prospects for banks with services, particularly in transaction banking. with something new unless a whole new
regard to evolving in the emerging ‘open They analysed possible use cases on inter- environment is put in. It would just be tanta-
banking’ and PSD2 landscape. bank and intrabank transactions, but could mount to spending a whole lot of money just
“At EBA we have a four-point focus,” not find much of a use case for interbank; it to do something in a different way.
explained Vincent Brennan, head of group was, however, much more relevant to intra- Stakeholders need to build new value ser-
operations at Bank of Ireland and deputy bank, for example in cases where a parent vices to exploit the technology.
chairman of the EBA Group. company distributes among subsidiaries. The role of a bank has always been to fill
The four points are: There is a whole raft of opportunities in a gap, provide a service; this needs to evolve.
Sibos soundbites
Blockchain hype has died down somewhat, or Standards, standards, standards as aggressively as it might have seemed.
rather the camps have become distinctly more If one word echoed around the conference hall, It was only too keen to point out there will be
polarised. it was standards. a point in time, if it is not already here, where
There are those who are happy to dismiss Everybody is in agreement about the need to Ripple would be only too delighted to join
it outright, and those who proclaim its agree on a common standard in payments, so it forces with SWIFT, and possibly vice versa. They
profundity in shaping the future. is just a matter of time. have market share and scalability respectively
It must be said, however, that there is
to be play for.
a little more understanding around the Segmentation of banks
different types of blockchain: permission/ Banks need to figure out what they are best at
permissionless, mutable/immutable (thanks and, based on this, decide who to partner with. The future
to Accenture’s curveball release last week), IBM calls it Cognitive Business: digital today,
and so on. CBW Bank is coming to Europe, and had a
“great week” drumming up business at Sibos. cognitive tomorrow.
IBM’s CEO Ginni Rometty said: “This will Watch this space. “It is more than machine learning,” said
have profound impact on how the world
IBM’s Rometty: “Very few will be able to keep Rometty. Augmented intelligence, or, as
works. Efficiency will be improved [to the
tune of] over $100bn. Blockchain will do up with our cloud development – the amount futurologist Gerd Leonhard, speaking at the
for transactions what the internet did for we invest. Innotribe arena, referred to it (in a human
information.” “Banks need to make strategic decisions about evolutionary way), exponential humanism.
She was referring to IBM’s work on and with partnership, for those segments they decide Leonhard explained: “There will be a shift of
the Linux Foundation and Hyperledger, they will not and should not specialise in, and value from selling commodities to creating
w
for which IBM has contributed significant then focus on what they are good at.” experience. Airbnb doesn’t own property; Uber
amounts of code, open source, so anyone can doesn’t own cars.
work with it. SWIFT’s gpi vs Ripple’s global payments
To summarise it differently: “IBM puts 38% steering group “The future of the financial industry is creating
of its revenue ($31bn) into helping clients Despite fierce gossip to the contrary, Ripple experiences – value trust and relationships,
become digital,” Rometty added. has not been throwing down the gauntlet quite and having tech support it.”<
6 y October 2016 www.electronicpaymentsinternational.com
EPI 352.indd 6 11/11/2016 12:32:17 Digital to
FEATURE
Electronic Payments International SIBOS
It might not be just based on transactions “We need to think outside the box, which of short, medium and longer term. In the
or account holding fees; the business model is difficult in the day job when bound by short to medium term, banks are tied to
is intimately linked to the opportunity that the culture of the organisation in the day complying with upcoming deadlines, tech
technology can bring. job. Culture comes into play – everything is standards and PSD2; that has to take prior-
Thomas Egner, board member, CEO and pulled into play. ity. Real change will not happen between
CFO at EBA Group, said: “The point is to “Also, you cannot build everything your- now and 2018.
rethink the process and then seek to digit- self, otherwise you become a jack of all “There are multiple layers to this answer,”
ise, rather than give in to the temptation to trades, master of none. The culture inherent Brennan continued. “For our bank we have
digitise the process and then rethink the pro- in banks, however, is to own the process, end made life far too complicated for ourselves,
cesses. to end.” and that is not disclosing sensitive informa-
“There is not a common view on what Brennan added: “Firms once considered tion; we are not the only ones.
open banking really means.” competitors are now potential partners and “Banks need to think out the journey in
Brennan added: “The topics now all colleagues.” stages, need to take a view at product level,
require collaboration, even within the bank. This led to the question of whether it was at channel level, etcetera.”
Cards practitioners, channel, IT, products, possible to provide a clearer picture of how Egner continued: “At EBA Day there
they all need to coalesce, and it is intertwined banking might evolve, in terms of rethink- was a question put to bankers on PSD2 and
with cybercrime and data. Banks have had to ing the processes before digitising rather than whether it was a strategic or compliance
become very good at dealing with regulation vice versa. proposition.
– fintechs are not as good at this. “It is about everything: the pricing model, “The majority view was that it was com-
“KPMG research stated that 80% banks the strategy, the revenue strategy,” Brannan pliance. Now you ask the same question and
expected to be disintermediated by a third explained. the answer is ‘strategic’; this between May
-party player.” “For example, who is going to pay for and September.
Szmukler said: “Who would have thought instant payments? Are we going to introduce “Something has changed and banks are
we would be sitting here today talking about a flat fee? We cannot charge the customer for realising they need to act and react, introduce
cryptocurrencies six years ago? Such lingo an instant payment, therefore something else an element of proactivity in response to regu-
would not have even been acceptable in a has to give. lation, from a strategic point of view, and not
bank six years ago. “Also you need to break it down in terms just trot out the requirements.” <
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EPI 352.indd
Digital 7
touch briefings ad copy - CI 18042016.indd 1 11/11/2016 12:32:19
18/04/2016 11:17:37
FEATURE
SIBOS Electronic Payments International
The future of Europe’s payment
infrastructure – an update
With the ECB telling Sibos that it is looking at merging the Target2 real-time gross settlement payment
system with the T2S securities settlement mechanism, providing a single platform for cash and securities
processing in the eurozone, Anna Milne speaks to SWIFT’s Carlo Palmers to get the gen on its plans for 2017
I
f the ECB’s proposed merger of Tar- started. The system will be going live next SWIFT is also eagerly watching how the
get2 and T2S goes ahead, SW IF T year, after stress tests. announcement Yves Mersch made pans
stands to lose its status as sole pro- The SWIFT board said in June that any out regarding the consolidation of the T2
vider of the Target2 network, which solution should be applicable across differ- and T2S platforms. How would this affect
it has had since 2004 when the central ent communities. SWIFT?
bank selected SWIFT. Palmers explains that there are slight dif- T2 runs on SWIFT. The new system is
At the time it made sense for SWIFT to be ferences everywhere, so the board said to likely to go multi-network so SWIFT would
the network provider as it already had a sys- analyse differences and come up with a com- no longer have exclusivity, and the harmo-
tem in place, but it meant SWIFT employed mon solution harmonising different sets of nised solution SWIFT would build for retail
its own proprietary solutions, differentiating requirements for all parties. payments would also have to support ECB
it from the network-agnostic T2S, the single If sufficient community support is gar- real-time payments.
pan-European platform for securities settle- nered by June 2017, SWIFT will rebuild the “We need to see the development first to
ment in central bank money. Australian solution and build the standard- make sure we build the right thing,” adds
The ECB now wants to consolidate the ised system. But what does Palmers expect Palmers.
two systems in an open, agnostic solution, thereafter? Asked whether there is more uncertainty
and is even looking at blockchain as a means “That depends on what community sup- now than ever before, Palmers replies: “Last
by which to achieve this. port we achieve but, for example, we are year we had uncertainty as to whether there
For now, SWIFT’s stance is clear: “We’re closely following Europe, where there are would be real-time payments in Europe.
eagerly watching how the ECB study will lots of systems – Nets, Equens, EBA. “Now we know for certain real-time pay-
evolve; how far will the ECB step into the “In Hong Kong we are closely following ments are going to happen, but the question
European market, we really don’t know,” the UK as it looks to revive Faster Payments is how it will happen,” he explains.
says Carlo Palmers, market infrastructures and also anything not on CHAPS. To what extent do the banks need to work
solution manager at SWIFT. We will look at Canada later, after it has together? As far as SWIFT is concerned, this
“For us it will be one of the potential cus- built its new payments platform. is essential. Palmers worked in standards at
tomers we would be able to provide a solu- “In the UK you have Bacs and ACH, so [it SWIFT for many years, and drew compari-
tion for, but we really don’t know and I’m involves] looking at whether it makes sense son with this.
not sure they know either, which is why they to harmonise into one single solution for all “We need to bring the banks round the
are studying it.” retail payments. Who will build and operate, table to build a messaging standard. We need
SWIFT is currently working intensively on potentially bringing people together? The to get the operators round the table in the
its Australia rollout, for which testing has PSR is looking at this.” same way.”
8 y October 2016 www.electronicpaymentsinternational.com
EPI 352.indd 8 11/11/2016 12:32:20FEATURE
Electronic Payments International SIBOS
But how do you get everyone together? Do how this will be achieved between two oper- “Otherwise it’s very difficult for the bank
they not just sit and watch, and wait for the ators needs to be figured out. each time they want to connect to a new or
first movers? “The UK, Denmark, Sweden and Australia different real-time network because they
“We have talked to a number of opera- do not need this, but across Europe we do.” have launched a full-scale project.”
tors this week and they are prepared to work
together. It makes it easier for them; they US market plans On blockchain
have to do it. The US is already working on instant pay- We know, and Palmers reiterates, that
“There is a necessity, definitely in the ments, and TCH has chosen VocaLink as the SWIFT is looking into blockchain, however
eurozone, for operators to be interoperable. operator – using its own network, not relying he remains sceptical as to its current potential
Banks being connected to different operators on the SWIFT network. capacity for real-time retail payments.
need to be able to exchange the payment in SWIFT’s approach is to see if there is “It doesn’t seem to be ready yet today to
seconds – it’s not up to the consumer. demand for a connecting platform for larger step into the real-time retail market for high-
We believe only a common solution can institutions. volume, low-latency, high-capacity traffic; it
support that.” “Our interface – AMH, for larger institu- does not seem ready to handle this yet.
So what, briefly, are the different systems tions – needs to be upgraded for real time, “Maybe in the future, but other areas, such
and how do they differ? but we are seeing if there is demand for a as trade finance and correspondent banking,
“That’s the million-dollar question. That is connector to hook up to TCH,” explains are areas where blockchain is more appropri-
the task at hand, to establish the differences. Palmers. ate right now than real-time payments.
It is very detailed. “The other thing about AMH is that it is “It’s good in those areas because you dis-
“Specifically in the eurozone, interoper- one thing to build a connector, but AMH is tribute the proof of the data, but in real time,
ability across currencies is a different story. A a multi-network interface not bound to the because of the speed it requires, it doesn’t
common settlement scheme has been agreed SWIFT network. seem to be the right solution at the moment.”
with the ECB. A scheme on service levels, “Larger institutions in the US have said If someone said the SWIFT network was
SEPA credit transfer and now ECT SEPA if they used AMH they would also use it in old-fashioned, how would Palmers respond?
Credit Transfer Inst. have also been agreed,” other communities with real-time systems, “Speak to Wim Raymaekers! I didn’t think
Palmers explains. which is yet another reason for us to harmo- anyone holding real-time payment systems in
“All the details – including how quickly nise the communities to come up with the the retail space was looking at Ripple; only
the payment will happen, how to reject it if same real-time payments offer so all banks once they go cross-border, cross-currency do
need be, how to abort, how to decide if the have the same connector, and therefore a they look at Ripple.”
payment is too slow, how to stop execution similar experience when connecting to dif-
– all this has all been agreed, but technically ferent systems. Common standard
One of SWIFT’s goals is standardisation in
Anatomy of an instant payment the financial services industry.
“It has always been, and we’ll do every-
thing we can to achieve that.
“Members don’t want to kick off big pro-
jects from scratch for every community they
want to connect to each time they want to
connect to a new real-time system,” Palmers
explains.
“The challenge now is there is no time to
do conversions; before there was time when
systems were off, for example at night.
“Everyone now seems to agree on ISO
20022 as a common payments standard, but
next come different protocols such as for
security and tech, and if these are not har-
monised the end consumer standing in the
shop wanting to pay on their mobile won’t
be able to do so in real time.”
So who is doing what and where? Palmers
explains that Belgium has issued a request for
The key points of the Single Euro Payments • A maximum still needs to be set, but SLAs
proposals and is choosing a system that will
Area (SEPA) Instant Credit Transfer (SCT Inst.) will expect much faster figures – this is up serve the Belgian market.
scheme are as follows: to individual banks and operators. In the Netherlands each bank is choosing
• SEPA Inst. will cover the largest area in • 99.999% of payments will be expected to its own operator, already assuming that these
the world for an interoperable instant operators will be able to work together.
be completed within two to four seconds.
payments scheme. “Otherwise you will never be able to do a
• In Australia it was agreed that 99% of five-second payment in the Netherlands.
• The EBC has set a maximum time of 20
payments have to be made within one “The ECB is saying you should not look
seconds for a real-time payment. An
second, and 90% in five seconds; beyond at this domestically; you need to look at it
additional five seconds can be applied for a
eurozone-wide. They don’t like the fact they
reply to come back. 10 seconds the payment is aborted.<
are all choosing their own solution.” <
www.electronicpaymentsinternational.com October 2016 y 9
EPI 352.indd 9 11/11/2016 12:32:23FEATURE
CONTACTLESS Electronic Payments International
Contactless mobile makes waves
The global contactless card transaction value will almost quadruple between 2016 and 2020, while the
global mobile NFC transaction value will grow more than fivefold, Timetric’s latest research reveals. What
are the factors contributing to this change? Patrick Brusnahan takes a closer look
I
n the mid-term, contactless cards are contactless card transactions in the UK rose History and progress
set to dominate the global contactless by 212.2% year on year in January 2016. Contactless has certainly come a long way
payment environment, according to The number of bank-owned contactless from its origins. The first incarnation of
a recent report from Timetric. POS terminals in the UK reached 309,706 in contactless was launched in the US in 1997
However, smartphone penetration is December 2015, representing roughly 17.8% through Speedpass. Introduced by Exxon
destined to increase, causing mobile NFC of the overall number of POS terminals. and Mobil, it was a key chain powered by
capability becoming more widespread, pos- As of May 2016, there were a total of Radio Frequency Identification (RFID).
sibly leading to mobile NFC overtaking 460,000 contactless POS terminals in Technological advances, the shift from
contactless card payments. the country, equivalent to a 50% annual cash to electronic payments, media attention
A number of European countries, as well increase. and an evolving retail environment have all
as Australia and Canada, are outpacing the Contactless card shipments more than contributed to the rise of contactless from its
rest of the world in terms of adoption of trebled between 2012 and 2015, indicating humble beginnings.
contactless; these countries currently account a rapid increase in the global adoption of However, in terms of use case, mass public
for most of the world’s contactless payment contactless card payments. transport has proven to be a crucial catalyst
activity.
Europe is also ahead of the US in terms
n EMV CARDS AS A PROPORTION OF TOTAL n EMV/NFC CAPABLE-POS TERMINALS IN THE
of contactless adoption. According to CARDS IN THE US, 2012-2016 US (MILLION), 2012-2016
MasterCard, contactless transactions in
Europe grew by 150% in 2015 from the pre- % m
50 8
vious year.
Global demand for NFC acceptance is 7
accelerating, and in May 2016 Visa Europe 40
6
reported 3bn contactless transactions on
both cards and mobile devices. In addition, 30 5
one in five in-store Visa-processed card pay- 4
ments were contactless during the 12 months
20
to April 2016. 3
Visa reported 165m contactless cards in 2
circulation and 3.2m NFC-enabled POS 10
terminals in Europe, and has mandated that 1
all Visa-accepting POS terminals should be 0 0
NFC-enabled by 2020. 12 13 14 15 16
E 12 13 14 15 16
E
20 20 20 20 20 20 20 20 20 20
Contactless payments have become
Source: Timetric Source: Timetric
commonplace in the UK. The number of
10 y October 2016 www.electronicpaymentsinternational.com
EPI 352.indd 10 11/11/2016 12:32:28FEATURE
Electronic Payments International CONTACTLESS
Canada leads in North America contactless was a huge boost. The attention n CONTACTLESS CARD CIRCULATION IN EUROPE
gathered by anything launched by Apple is
2014 2015 Growth
huge, and Apple Pay directed a huge spot-
light onto contactless. Romania 1.1m 2.5m 127%
Netherlands 8m 15m 88%
The US Finland 2m 3.3m 61%
Contactless cards may have missed their
Switzerland 4.6m 7.1m 53%
golden opportunity in the US. Due to a lack
of migration of cards to EMV in the US, Italy 10.2m 15.1m 49%
mobile payments have picked up the slack. Croatia 1.4m 2m 43%
Main players in the US payments indus- Austria 6.4m 9m 40%
try are focusing on mobile NFC payments.
Contactless has quietly become a UK 58m 79.3m 37%
This could lead to the region going straight
mainstream payment method in Canada. to mobile NFC payments, leapfrogging Spain 7.8m 10.4m 34%
During 2015 contactless transactions in contactless cards. Ukraine 1.1m 1.5m 33%
Canada grew by one percentage point a Acquirers and card schemes have taken Hungary 3.7m 4.8m 30%
month on average to reach around 10% of various initiatives to expedite the migra-
total domestic card transactions at the end tion process and support merchants. For Turkey 17.7m 23m 30%
of the year. example, to promote EMV adoption among France 31.5m 40m 27%
The Canadian government has been merchants, schemes announced that if more Czech Rep. 6.6m 8.1m 23%
fully supporting this, which has helped than 75% of merchants’ Visa or MasterCard
contactless to gain traction. Slovakia 3.2m 4m 23%
transactions originated from EMV-compliant
According to Visa, the average proportion Portugal 4.5m 5.5m 22%
POS terminals which support both contact
of in-store contactless purchases rose from and contactless, they may apply for relief of Poland 25.7m 28.1m 9%
12.1% in June 2014 to an estimated 25% in
PCI audit requirements. Source: Timetric
June 2015.
Many want an accelerated rate of NFC
MasterCard has also captured a significant acceptance expansion. Bundled deals are However, mobile NFC has taken the initia-
market share, with 27% of its in-store
being offered by POS vendors and acquirers tive once again. In a recent announcement,
purchases in September 2015 being
contactless. so merchants can simultaneously upgrade the Metropolitan Transport Authority of
terminals to EMV and NFC. New York launched a mobile ticketing app,
The launch of Apple Pay achieved a higher
As a result of the US EMV liability shift eTix, enabling commuters to use smart-
profile in Canada than in the US, and this
only helped the contactless market to in October 2015, EMV adoption rates grew phones to buy tickets and board transit on
grow.< from 7.7% in 2014 to 42.3% in 2015. certain routes on the system. Apple Pay and
MasterCard were recently added to the app.
for adoption wherever it has been imple- What is stopping contactless cards? This is likely to accelerate growth in
mented. Companies such as Ingenico and VeriFone mobile NBC, particularly if similar initiatives
EMV migration is another key driver. Mer- have already distributed thousands of EMV- are taken up in the rest of the US.
chants, PSPs and schemes can take advan- enabled POS terminals in the US, the major- In addition, from a merchant perspective,
tage of a mandated upgrade to terminals by ity of which are equipped with contactless contactless was not a priority when upgrad-
matching it with an upgrade to NFC-capable technology. ing terminals ahead of the October 2015 lia-
terminals. In many cases, the shift from EMV Merchants can also benefit by making a bility shift. This was attributed in part to the
to contactless is a simple software upgrade. single investment that would result in the higher costs of hybrid EMV and contactless
As a default, many major POS terminal delivery of combined EMV and NFC pay- terminals.
manufacturers such as VeriFone and Ingen- ments. Also, as consumers increasingly make
ico are integrating contactless technology in payments using mobile wallets, merchants n NEW SMARTPHONE SUBSCRIBER ADDITION BY
all newly distributed EMV POS terminals. could actually lose customers if mobile-based REGION (MILLION), 2015-2021
contactless options are not available.
The smartphone factor As a result, banks and issuers are not push- North
Latin America
Smartphones are another crucial factor. ing contactless cards to customers; instead, 90
America
According to the Ericsson Mobility Report they are promoting NFC-enabled mobile 230
2016, there are more than 3.2bn smartphone payments.
subscriptions worldwide, equivalent to The price of NFC chips is offputting for
Europe
around half of the world’s total population; banks. In addition, the huge level of mar- 290
the figure is expected to reach 6.3bn in 2021. keting from mobile players highlighting
Following the adoption of smartphones NFC solutions has eclipsed campaigns for Asia-Pacific
was the launch of the ‘Pays’, Apple Pay, Sam- contactless cards; there is little incentive for Middle East & 1,700
sung Pay, and Android Pay. banks to roll out contactless EMV cards. Africa 730
The entry of payment solutions from some More work also needs to be done with pub-
of the world’s most valuable brands, includ- lic transit systems to push contactless cards,
ing the ‘Pays’, instantly raised consumer but with so many different state systems and
awareness of new payment technology. a general cultural preference for driving over
The decision by Apple – seen by Forbes as public transport in most US states, there has
Source: Ericsson Mobility Report 2016
the world’s most valuable brand – to adopt not been a push for contactless cards.
www.electronicpaymentsinternational.com October 2016 y 11
EPI 352.indd 11 11/11/2016 12:32:31You can also read
