2017 European Payment Systems Competitive Strategy ... · 2017 European Payment Systems Competitive...

2017 European Payment Systems Competitive Strategy Innovation

and Leadership Award

EUROPEAN PAYMENT SYSTEMS COMPETITIVE STRATEGY INNOVATION

AND LEADERSHIP AWARD

2017

BEST PRACTICES RESEARCH

© Frost & Sullivan 2017 2 “We Accelerate Growth”

Contents

Background and Company Performance Industry Challenges ......................................................... 3

Strategy Innovation and Customer Impact ........................................................................... 4

Conclusion ........................................................................................................................ 7

Significance of Competitive Strategy Innovation and Leadership .................................................... 8

Understanding Competitive Strategy Innovation and Leadership .................................................... 8

Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices .....10

The Intersection between 360-Degree Research and Best Practices Awards ....................................11

Research Methodology ......................................................................................................11

About Frost & Sullivan .............................................................................................................11



Background and Company Performance Industry Challenges

As online payments and e-commerce become ubiquitous across the globe, the security,

flexibility, and reliability of payment services become paramount to facilitate transactions.

Frost & Sullivan research projects that by 2025, 75% of financial transactions will flow

through cloud-based platforms (i.e., cloud computing).1 As private clouds, collaboration

approaches, and multi-channel messaging gain greater acceptance, demand for cloud

computing will only grow and spur development in infrastructure as a service (IaaS)

offerings. Increasingly, business agility, time to market speed, and uptime will become

unavoidable imperatives for processors working for e-commerce operations and financial

institutions. Consumers expect merchants and financial institutions to provide more

convenient and frictionless options, attendant to the rise of mobile apps, ubiquitous

Internet penetration, and cashless technologies. Providers seeking to service the new

markets of payment systems and processing must break down silos and expand their

reach to meet the demands required for real-time electronic payment solutions.2

E-commerce options, while increasingly popular, require significant attention to develop

an ecosystem of payment acceptors at the endpoints, remain apprised of security

developments, and connect an international network of transaction and compliance

mechanisms. Data management will automate and disintermediate legacy systems, but

providers must strategize effectively now to take advantage of emerging technologies

such as blockchain, machine learning, fraud analytics, and artificial intelligence. Smart

contracting and process automation are enabling preset protocols to decrease the time

required for transactions based on concrete regulations which significantly reduce the time

required for processing.3

Frost & Sullivan research projects serious disruptions creating growth opportunities in the

payment systems and processing space. The payment infrastructure—from consumer

transactions to large enterprise applications and central banks—will experience

automation like never before and must adapt to the rapid imperatives of global

transactions. The Internet of Things and blockchain-based applications will grow

precipitously in the next two to three years as more applications and industries adopt.

Security will remain an ever-present concern as the number of endpoints involved open up

potential vulnerabilities to the system and risk for fraud or malfeasance.4

1 Future of Financial Services: Growth in FinTech is Shaping the Future of Invisible Finance & Virtual Banking (Frost & Sullivan, November 2016). 2 Digital Disruption in the Global Financial Services Sector: Innovations Around AI, ML, and Robo-advisory Will Drive Disruptions Over the Next 5 Years (Frost & Sullivan, November 2016). 3 Future of Financial Services: Growth in FinTech is Shaping the Future of Invisible Finance & Virtual Banking (Frost & Sullivan, September 2016); and Convergence of Artificial Intelligence (AI) and the Finance Industry: Robo-trading, Robo-advisors, Consumer Smart Wallets, Insurance, and Fraud Analytics Set the stage for Massive Disruption (Frost & Sullivan, April 2016). 4 FinTech in Europe, 2016: Advanced Technologies to Become Mainstream in the Next 5 Years, as Adoption Increases across the Region (Frost & Sullivan, January 2017).



Technological innovations for the point of sale, online transfer applications, and mobile

wallets extend the reach of the banking sector and enable new webs of commerce,

inclusion, and competition among merchant service providers. The result of which is

downward pressure on transaction fees. A fee per transaction remains the dominant

business model, and competition among payment processors and solutions providers

grows fierce. Technological innovations represent merely one field of competition among

processors—other competitive variables include flexibility, ecosystem integration,

international reach, security, and client service quality. Providers must adapt and

incorporate these multiple factors to lead this highly competitive and complex market

successfully.

Strategy Innovation and Customer Impact of ACI Worldwide

With over 40 years’ experience in the payments sector and offices in 35 countries, ACI

Worldwide (ACI) enables payment capabilities across payment types, channels,

currencies, and networks. ACI offers a spectrum of electronic payment solutions geared

toward consumer payments, transaction banking, merchant payments and digital

commerce, and bill payment services. ACI connects a portfolio of local payment methods,

acquirers and networks through a single integration for streamlining cross-border

commerce. Since deciding to expand focus, which historically included banks and

intermediaries, to encompassing digital commerce and electronic payments up and down

the value chain, Frost & Sullivan believes ACI’s record of adaptation demonstrates

exemplary strategy and execution.

Local Reach

ACI offers a comprehensive set of products for the European market, with more

connectors and gateways accepting more payment types across the world, from e-

commerce payment gateways to payment engines with embedded fraud detection. ACI

finalized consolidation of its data housing and performance with the opening of its

Limerick, Ireland data center in October 2016. The cutting-edge facility ensures reliability,

security, and compliance with European data privacy laws, in addition to expanding the

capabilities, such as hosted private cloud services. This center builds on top of ACI’s

existing infrastructure and local office locations in Belgium, France, Germany, Greece,

Ireland, Italy, Netherlands, Romania, Russia, Spain, Sweden, and the United Kingdom,

among others. Local offices operate with sufficient autonomy to make decisions fast and

speed up implementation and deployment processes, as well as give feedback to

countrymen on-site to effectively allocate resources. ACI connects customers through the

breadth and depth of its international reach for locally preferred payment methods, with

more than 350 card acquirers and alternative payment methods and approximately

12,000 connections available.



Integrating Strategic Acquisitions Create Unique Value

Beginning in 2012, ACI realized that it lacked e-commerce capabilities to cope with

expected demand and developed a significant acquisition strategy that it implemented

over the ensuing years:

2012: The acquisition of Distra Pty Ltd (Distra) included technology for its service-

oriented-architecture-based platform infrastructure that augmented ACI with greater

flexibility and time to market. With the integrated platform, customers, such as financial

institutions, processors, and retailers, can meet rising market trends with agility and

develop new features in multichannel engagement and payment service hubs.

Also in 2012, the acquisition of S1 extended the company's global reach for merchant

payments processing as well as strengthened its corporate banking capabilities.

2014: The acquisition of UK-based Retail Decisions (ReD) bolstered ACI’s fraud protection

measures as more crime moved online and e-commerce security grew. ReD’s solutions not

only help prevent and reduce fraud loss, but supplement fraud management teams to

become more efficient. ACI profited from the rise in card-not-present transaction fraud as

(Europay-MasterCard-Visa) EMV chip card adoption increased.

2015: The acquisition of Germany’s PAY.ON significantly expanded ACI’s applicability to

alternative payment methods and card acquirers and accelerating cross-border commerce

across multiple channels.



The combination of ACI with the PAY.ON payment gateway and the ReD Shield real-time

fraud prevention software comprise the UP eCommerce Payments solution, offering omni-

channel solutions for online merchants and global customers. Acquisitions helped

consolidate market share, upgrade feature functions, and extend distribution for the UP

eCommerce Payments solution. With these acquisitions ACI has invested in growth and

retained the employees and infrastructure of the acquired companies.

Providing Exceptional Value

ACI focuses on building a competitive moat around its expansive portfolio with a long-

term value offering. Across its segment, with specific offerings (for e-commerce,

processors, commercial and retail banks), ACI strives to maintain its reputation for

“always-on” availability and enabling the features and functions that customers require for

new revenue generating operations. The white label UP eCommerce Payments solution

includes embedded fraud and risk management, as well as a record of boosting conversion

rates. Moreover, ACI requires less capital investment for scaling up; whereas competitors

would require purchasing new hardware, ACI can scale up the software with faster and

easier implementation to cope with greater volume. The reliability and flexibility of ACI’s

software and software as a service offerings reduce a customer’s configuration schedule

and time to market; typically, e-commerce implementations are up and running in 3

months rather than 7 to 12 months with other providers. Furthermore, ACI’s automated

dispute management system resolves issues faster and with fewer errors than a client’s

legacy paper-based system.

Dedication to Value

ACI demonstrates astute concern for ensuring that its solutions maintain trust, addressing

customer concerns for the ongoing security and performance of systems. The company

invests approximately 17% of its annual budget into research and development, keeping

abreast of the latest technology developments. For example, ACI is modeling, and already

running a proof-of-concept, for a project enabling central banks and clearing houses to

operate on a blockchain. Through its technical expertise, ACI already runs some of the

fastest transactions through its UP Immediate Payments solution deployed in Singapore,

the UK, and Australia, among other regions. Moreover, ACI’s presence in Europe validates

a commitment to rigorous fraud protection with machine learning and artificial intelligence

capabilities available to clients. ACI works closely with its customers to coordinate

customized versions of its real-time integrated fraud prevention, in addition to fraud

detection analytics, adaptive machine learning, sanctions filter, and anti-money laundering

measures. Fraud attempts denied by ACI’s solutions save customers money, save time by

reducing manual reviews required, and bring chargeback rates down precipitously.

Further, the protections afforded by ACI’s solutions are a drop in the bucket compared the

hundreds of millions of dollars and Euros in fines potentially levied against organizations

shirking due diligence to prevent money laundering.



Differentiating through Customer Experience

With a keen awareness of the competitive environment, ACI systematized efforts to make

customer experience a point of differentiation, particularly when technology does not

provide a reassuring touch. ACI is currently designing a signature method of customer

interaction, built around core principles of building trust in the relationship. Across

interactions with ACI, from pre-sales to sales, to implementation, to product management,

or back end, the comprehensive customer experience will ensure satisfaction with ACI’s

business model. Moreover, concentrated efforts already underway to improve the

customer experience in the back office operations (billing and invoicing) are already

achieving tremendous feedback and yielding improved results. The global support team

includes more than 300 individuals providing 24-7-365 assistance through web, phone,

and email.

Conclusion

With competitive pressures on payment initiators and compliance burdens on financial

institutions, ACI expedites processes and relationships in the payments ecosystem. ACI

demonstrates a keen awareness of future developments and invests in organic and

inorganic growth to capitalize on emerging trends. With a string of strategic acquisitions,

investment in technology, and commitment to customer service, ACI efficiently executes

plans to grow its strengths in the payment systems space. Differentiating itself from

competitors, ACI facilitates painless transactions across borders and channels. In the fast

moving world of cashless payments and online transactions, ACI provides proven solutions

making commerce frictionless for clients up and down the value chain.

With its strong overall performance and rigorous pursuit of differentiators, ACI Worldwide

earns Frost & Sullivan’s 2017 Europe Competitive Strategy Innovation and Leadership

Award for the payment systems market.



Significance of Competitive Strategy Innovation and Leadership

Any successful approach to achieving top-line growth must (1) take into account what

competitors are, and are not, doing; (2) meet customer demand with a comprehensive,

value-driven product or service portfolio; and (3) establish a brand that resonates deeply

with customers and stands apart from other providers. Companies must succeed in these

three areas—brand, demand, and positioning—to achieve best-practice levels in

competitive strategy.

Understanding Competitive Strategy Innovation and Leadership

As discussed above, driving demand, brand strength, and competitive differentiation all

play a critical role in delivering unique value to customers. This three-fold focus, however,

must ideally be complemented by an equally rigorous focus on Strategy Innovation and

Customer Impact.



Key Benchmarking Criteria

For the Competitive Strategy Innovation and Leadership Award, Frost & Sullivan analysts

independently evaluated two key factors—Strategy Innovation and Customer Impact—

according to the criteria identified below.

Strategy Innovation

Criterion 1: Strategy Effectiveness

Criterion 2: Strategy Execution

Criterion 3: Competitive Differentiation

Criterion 4: Executive Team Alignment

Criterion 5: Stakeholder Integration

Customer Impact

Criterion 1: Price/Performance Value

Criterion 2: Customer Purchase Experience

Criterion 3: Customer Ownership Experience

Criterion 4: Customer Service Experience

Criterion 5: Brand Equity



Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices

Frost & Sullivan analysts follow a 10-step process to evaluate Award candidates and

assess their fit with select best practice criteria. The reputation and integrity of the

Awards are based on close adherence to this process.

STEP OBJECTIVE KEY ACTIVITIES OUTPUT

1 Monitor, target, and screen

Identify Award recipient candidates from around the globe

Conduct in-depth industry research

Identify emerging sectors

Scan multiple geographies

Pipeline of candidates who potentially meet all best-practice criteria

2 Perform 360-degree research

Perform comprehensive, 360-degree research on all candidates in the pipeline

Interview thought leaders and industry practitioners

Assess candidates’ fit with best-practice criteria

Rank all candidates

Matrix positioning all candidates’ performance relative to one another

3

Invite thought leadership in best practices

Perform in-depth examination of all candidates

Confirm best-practice criteria Examine eligibility of all

candidates Identify any information gaps

Detailed profiles of all ranked candidates

4

Initiate research director review

Conduct an unbiased evaluation of all candidate profiles

Brainstorm ranking options Invite multiple perspectives

on candidates’ performance Update candidate profiles

Final prioritization of all eligible candidates and companion best-practice positioning paper

5

Assemble panel of industry experts

Present findings to an expert panel of industry thought leaders

Share findings Strengthen cases for

candidate eligibility Prioritize candidates

Refined list of prioritized Award candidates

6

Conduct global industry review

Build consensus on Award candidates’ eligibility

Hold global team meeting to review all candidates

Pressure-test fit with criteria Confirm inclusion of all

eligible candidates

Final list of eligible Award candidates, representing success stories worldwide

7 Perform quality check

Develop official Award consideration materials

Perform final performance benchmarking activities

Write nominations Perform quality review

High-quality, accurate, and creative presentation of nominees’ successes

8

Reconnect with panel of industry experts

Finalize the selection of the best-practice Award recipient

Review analysis with panel Build consensus Select recipient

Decision on which company performs best against all best-practice criteria

9 Communicate recognition

Inform Award recipient of Award recognition

Present Award to the CEO Inspire the organization for

continued success Celebrate the recipient’s

performance

Announcement of Award and plan for how recipient can use the Award to enhance the brand

10 Take strategic action

Upon licensing, company may share Award news with stakeholders and customers

Coordinate media outreach Design a marketing plan Assess Award’s role in future

strategic planning

Widespread awareness of recipient’s Award status among investors, media personnel, and employees



The Intersection between 360-Degree Research and Best Practices Awards

Research Methodology

Frost & Sullivan’s 360-degree research

methodology represents the analytical

rigor of our research process. It offers a

360-degree-view of industry challenges,

trends, and issues by integrating all 7 of

Frost & Sullivan's research methodologies.

Too often, companies make important

growth decisions based on a narrow

understanding of their environment,

leading to errors of both omission and

commission. Successful growth strategies

are founded on a thorough understanding

of market, technical, economic, financial,

customer, best practices, and demographic

analyses. The integration of these research

disciplines into the 360-degree research

methodology provides an evaluation

platform for benchmarking industry

participants and for identifying those performing at best-in-class levels.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth

and achieve best in class positions in growth, innovation and leadership. The company's

Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined

research and best practice models to drive the generation, evaluation and implementation

of powerful growth strategies. Frost & Sullivan leverages more than 50 years of

experience in partnering with Global 1000 companies, emerging businesses and the

investment community from 45 offices on six continents. To join our Growth Partnership,

please visit http://www.frost.com.

360-DEGREE RESEARCH: SEEING ORDER IN

THE CHAOS

http://www.frost.com/

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