The PAYMENTS Model An Overview of Eight Key

Dimensions of Change in Payments

Vilnius, November, 2017

BANKING REPORTS

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David Gyori: FinTech and Banking Innovation

• Financial Technology Trainer

• Banking Innovation Trainer

• Consultant, Writer, Researcher

• CEO of Banking Reports

• Co-Author of The FinTech Book

• Member of Panel of Judges of the European FinTech Awards

• Member of Judging Panel of UK National Technology Awards

• Member of the Advisory Board of multiple FinTech companies

• Founding Member of the World FinTech Association

• Mentor of SuperCharger Alliance

BANKING REPORTS

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David Gyori: FinTech and Banking Innovation

The Driving Forces of FinTech: GPT What is holding FinTech back?

REGULATORY PATCHWORK

COMPLIANCE

DIGITAL FINITY

TECH: GAFA

ICT is GPT

Writing 3500 BC

Printing 1500 AD

Steam Engine 1790 AD

Electricity 1890 AD

30 AREAS OF FINTECH IN

COMPETITIVE/COOPERATIVE VIEW

RiskTech

Digital Currencies

Others

RegTech

Compliance

COOPERATION Video Banking

Interbank Blockchain

ATM Innovation

Neo-Banks

Back-Office Blockchain

APIs

IoT

P2P Lending

Virtual Reality

Crowdfunding

Biometric Identification

Digital Identity

Micropayments

Wearables

Augmented Reality

Personal Finance Dashboards Roboadvisors

Social Trading

Big Data

Back-Office Artificial Intelligence

Wallets

Phone-Related-Solutions

Remittances

Card Substitutes COMPETITION

15 000 Companies

USD 150 bn Invested InsureTech

30 AREAS OF FINTECH IN

COMPETITIVE/COOPERATIVE VIEW

RiskTech

Digital Currencies

Others

RegTech

Compliance

COOPERATION Video Banking

Interbank Blockchain

ATM Innovation

Neo-Banks

Back-Office Blockchain

APIs

IoT

P2P Lending

Virtual Reality

Crowdfunding

Biometric Identification

Digital Identity

Micropayments

Wearables

Augmented Reality

Personal Finance Dashboards Roboadvisors

Social Trading

Big Data

Back-Office Artificial Intelligence

Wallets

Phone-Related-Solutions

Remittances

Card Substitutes COMPETITION

15 000 Companies

USD 150 bn Invested InsureTech

I

I

I

D

D

N

D D

D N

D I I

I

D D

N I

D N

D N

N

N N

I I

N

N

I

1st DIMENSION: -> Physical to Digital

-> Access to Account Regulated

-> Yes to Competition and Cooperation

-> Millennial Focused

-> E-Wallet Oriented

-> New Security Challenges and Solutions

-> Tied to Commerce

-> Smartphone Centered

1

35 DIGITAL-ONLY BANKS IN THE UK:

PERFECT COMPETITION vs OLIGOPOLY

The Services Family Bank

(UK Military Personnel)

Charter Savings Bank

Hampden & Co Bank

(Private Banking)

Tide Bank (SME)

Thinkmoney Bank

(Money Worries) SCOPE

Secco Aura Bank

(Message Banking)

Monzo Bank

(Formerly Mondo)

BFC Bank

British Business

Bank (SME)

OakNorth Bank Together Money Bank

(Mortgages)

Civilised Bank

(SME)

Cambridge & Counties

Bank (SME)

Copernicus Bank

(Corporate)

Aldermore Bank (SME)

Monese

(Pan-European)

Tandem Bank

(Call Center)

Loot Bank

(Students)

Paragon Bank

Axis Bank

ICBC UK (Wholesale Banking)

Starling Bank

FCMB UK

Atom Bank

Ffrees Bank

(No Credit)

OneSavings Bank

Fidor Bank SIZE

Abacus Bank

Lintel Bank

(Migrant Workers & Students)

Monizo Bank (Freelancers, Tax)

Masthaven Bank

(Mortgages)

Private and

Commercial Finance

Group (loans)

Shawbrook Bank

(SME)

Templewood Bank

(Merchant Banking)

The VR Payment Technology means people using virtual

reality goggles to browse virtual reality shopping malls will be

able pay for purchases without taking off the goggles. They can

just nod or look instead. (VR Pay by Alibaba)

Alibaba is currently beyond the stage of initial piloting of the VR Payment Technology. VR Pay means

people using virtual reality goggles to browse virtual reality shopping malls and paying for purchases

without taking the goggles off. They can just nod or look in a focused way (specifically by staring at a point

on the virtual display for longer than 1.5 seconds) to initiate the payment. “VR Pay” by Alibaba is in a

nascent stage but it combines three key areas beautifully: online purchases, virtual reality and biometric

payments. VR Pay already has a logo and a publicly available beta application. Alibaba recently created a

separate, dedicated, focused VR Pay Team within its financial subsidiary Ant-Financial. It is now clear that

VR industry is branching out to be more than just an entertainment device (it is becoming a ‘tool’ not just a

‘toy’) and most early adopters of VR Pay use it not to be interrupted in their online VR gaming experience or

VR live broadcast session. One barrier to the spread of VR technology is that current Hardware and

Software capabilities are typically limited in VR capacity or basically too expensive for the average

consumers.

BANKING REPORTS

NUMBER OF COMMERCIAL BANK BRANCHES

PER 100 000 ADULTS: DENMARK

BANKING REPORTS

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Why Old People Buy / Not Buy Digital Services

BANKING REPORTS

The Holy Grail:

On-Demand Transactional Video Banking

FUNCTIONAL

ON-DEMAND

TRANSACTIONAL

SCHEDULED

CALLS

TO DISCUSS

THINGS

SCHEDULED

TRANSACTIONAL

INSTANT

ON-DEMAND TO

DISCUSS THINGS

BANKING REPORTS

16 ACCOUNT OPENING and INSTANT CARD

ISSUING machine by Bank of Beijing

This is an

ACCOUNT

OPENING and

INSTANT CARD

ISSUING

machine by Bank

of Beijing.

You have to push

your ID Card in

and provide

Fingerprint to get

identified. (Bank

of Beijing has

total assets of cca

USD 300 bn, it is

a State Owned

Enterprise.)

2nd DIMENSION: -> Physical to Digital

-> Access to Account Regulated

-> Yes to Competition and Cooperation

-> Millennial Focused

-> E-Wallet Oriented

-> New Security Challenges and Solutions

-> Tied to Commerce

-> Smartphone Centered

2

• MNOs

• GAFA

• BAT

• Chat Giants

• Large FinTech: Moven /

PayPal / TransferWise

• IT Companies

• Small FinTech: Social

Trading, ForEx, etc.

• Gaming

• Retailers

• Card Schemes, Prepaid

• Digital Wallets

• Challenger Banks

• THE SMART BANKS

BANKING REPORTS

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Key Dates of PSD2: IN FORCE but 0 effect

• Euro Created by Maastricht Treaty: February 1992

• Euro Banknotes and Coins: January 2002

• PSD1 Enters into Force: December 2007

• PSD1 Transposed into National Law: November 2009

• PSD2 Consultations, Preparations Begin: June 2010

• PSD2 Formal Official Proposal by EC: July 2013

• PSD2 Approved, EU Parliament, Council: November 2015

• PSD2 Enters into Force: 12th of January 2016

The main goal of PSD2 is to create a more

uniform, transparent and open EU payment

market that keeps innovation, competition and

security to the fore.

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Key Dates of PSD2: IN FORCE but 0 effect

• PSD2 Enters into Force: 12th of January 2016

• PSD2 EC Publishes Formal RTSs: June 2017 -> Dec 2017

• PSD2 Transposed to National Law: 13th of January 2018

• PSD2 RTSs Enter into Force: December 2018 -> June 2019

At least 3 major rounds of postponements have already

occurred. How many more will?

PSD2 will enable individuals and businesses to give Third Parties

access to their payment accounts. These players will facilitate

payments by accessing the customer’s payment account (with their

prior consent) and initiating transfers in their name. Third Parties may

also propose other services, such as aggregating information from all

of the customer’s payment accounts in one place to help them better

manage their finances.

117 Articles, 25th of December 2015 Published in the Official Journal of the EU

3 key types of API BANKING

Front to Back PSD 2 Platformification

BANK

INTERFACE

PROVIDER

BANK BANK BANK

INTERFACE

PROVIDER

BANK

INTER-

FACE

PROVI-

DER

INTER-

FACE

PROVI-

DER

INTER-

FACE

PROVI-

DER

INTER-

FACE

PROVI-

DER

BANKING REPORTS

Accenture: Data Black Holes, Negative Spirals 22

“With less customer data, the

legacy banks would enter a

negative feedback loop in which

their ability to compete would

steadily decline, eroding a key

competitive advantage that banks

currently enjoy through their

wealth of customer data and

insight.”

2 Paradigms of Openness

3 key types of API BANKING

3rd DIMENSION: -> Physical to Digital

-> Access to Account Regulated

-> Yes to Competition and Cooperation

-> Millennial Focused

-> E-Wallet Oriented

-> New Security Challenges and Solutions

-> Tied to Commerce

-> Smartphone Centered

3

BANKING REPORTS

JAMIE DIMON: CEO of J.P. Morgan

26

“When I go to Silicon

Valley…they all want to

eat our dinner. Every

single one of them is

going to try. That’s

capitalism and I think

that’s a good thing.”

BANKING REPORTS

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Competition vs Cooperation

• COOPETITION: banks and

FinTech companies, tech

companies with each-other

• FRENEMIES: banks and

FinTech companies, tech

companies with each-other

• CO-MARKETING: cafes,

payments opportunities,

FinTech companies are doing

it much more openly, banks

have been reluctant... to

share distribution channels

• ... communicate in a

FinTech dress

4th DIMENSION: -> Physical to Digital

-> Access to Account Regulated

-> Yes to Competition and Cooperation

-> Millennial Focused

-> E-Wallet Oriented

-> New Security Challenges and Solutions

-> Tied to Commerce

-> Smartphone Centered

4

BANKING REPORTS

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Moven from New York -> from 1 to 5 mn clients

BANKING REPORTS

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The Computer Gaming DASHBOARD

BANKING REPORTS

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USA -> Canada -> Australia -> UK

Banks like the

Moven app

because it

reduces

attrition and

develops

stronger ties

between

customers

and the bank.

Amazon Web Services: AWS is a huge enabler for

Moven and the fact that Amazon has data centers in

Ireland, the UK and Frankfurt means Moven can meet

whatever regulatory regimes it needs to after Brexit.

Westpac runs Moven on AWS in Sydney, and by using

the ASW cloud Moven can stand up a new instance

almost anywhere in the world within half a day.

Moven was

founded in 2011

BANKING REPORTS

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Generations: 5 SECONDS vs 5 MINUTES

The iPad VIDEO

BANKING REPORTS

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Loyalty of Millennials: the problem for banks

Digital Loyalty: The Lock-In Effect

Do you want to transfer

money?

Just say it out loud!

5th DIMENSION: -> Physical to Digital

-> Access to Account Regulated

-> Yes to Competition and Cooperation

-> Millennial Focused

-> E-Wallet Oriented

-> New Security Challenges and Solutions

-> Tied to Commerce

-> Smartphone Centered

5

http://finanteq.com/superwallet/

The SuperWallet!

6th DIMENSION: -> Physical to Digital

-> Access to Account Regulated

-> Yes to Competition and Cooperation

-> Millennial Focused

-> E-Wallet Oriented

-> New Security Challenges and Solutions

-> Tied to Commerce

-> Smartphone Centered

6

ID Now Explained

https://www.miteksystems.com/mobile-verify

Digital Onboarding via

Smartphone

ID NOW

Secure & legal personal identification and electronic signatures for the digital age.

Video-Ident: Verify customers online - reliable and optimized for conversion

Integrate IDnow into your offering within a few hours: IDnow verifies your customers

via web browser or smart phone EU-wide. Fast and reliable. IDnow eSign: Bring

your customer acquisition into the digital age with legally binding, digital

contract signing.

The final element for your digital customer experience: Digital signatures in your

customer acquisition channels cut process costs and optimize your customer

experience.

BEHAVIOSEC

Continuous Authentication

Continuous Authentication

BehavioSec analyzes activity from login to logout, looking at behaviors like keystroke

dynamics, touch and mouse motion, and compares it to previous interactions from

the same user. It creates a session ticket and a score, using the full score from the

session. That score is fed into your risk engine, so you can automatically step up

security if you need to. You can also use BehavioView dashboard to see the score

breakdown, and identify behaviors or anomalies BehavioSec has flagged.

Adaptive Security

The algorithm stays up to date with user behaviors and skills, so that as they change

and improve, so does the security layer — reducing false positives. The core

algorithm is continually improved for session-based intelligence and enhanced role-

based management. Machine learning algorithm to spot individual anomalies in real

time.

Voice Intelligence LLOYDS BANK

Lloyds Banking Group has collaborated with security firm, Pindrop, to roll out the

latest telephone fraud prevention technology, which creates an ‘audio footprint’ of

each call by analysing 147 unique call features such as location, background

noise, number history and call type.

The Phoneprinting technology highlights any unusual activity, identifies potential

fraud cases and flags up any potential criminal activity – without the need for

customers to provide any additional information.

+ USA, UK, India

7th DIMENSION: -> Physical to Digital

-> Access to Account Regulated

-> Yes to Competition and Cooperation

-> Millennial Focused

-> E-Wallet Oriented

-> New Security Challenges and Solutions

-> Tied to Commerce

-> Smartphone Centered

7

BANKING REPORTS

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ApplePay: COMING SOON!

2014. October: USA

2015. September: UK

2016. February China

BANKING REPORTS

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SelfPay from Toronto + Even Beyond

http://digitalretailapps.com/

BANKING REPORTS

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Korea: The Answer to ApplePay and beyond...

BANKING REPORTS

And Taking Payments Even One Step Further:

The New Amazon Stores COMING in 2017

8th DIMENSION: -> Physical to Digital

-> Access to Account Regulated

-> Yes to Competition and Cooperation

-> Millennial Focused

-> E-Wallet Oriented

-> New Security Challenges and Solutions

-> Tied to Commerce

-> Smartphone Centered

8

BANKING REPORTS

Smartphone: Multifunctional Touch-Point

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Smartphone: Multifunctional Touch-Point

KEY APPLEPAY ROLLOUT DATES

USA: October, 2014

UK: September, 2015

China: February, 2016

Canada: May, 2016

Singapore: May, 2016

Switzerland: July, 2016

France: July, 2016

Hong Kong: July, 2016

New Zealand: October, 2016

Spain: December, 2016

Ireland: March, 2017

1. Use Your Online Bank With It

2. Use Your Online Bank Through an

Application With It = Mobile Banking

3. Pay With It

4. Withdraw Money With It

5. Use it for Identification

6. Use it for Text Message Transactions

7. Sales Platform for Banking Services

8. Cross-Sell Platform

9. Advertisement Platform

10. Social Media Platform

11. Turn it into a POS

12. Turn it into a P2P ATM

13. M-Commerce Platform

14. Call Your Bank with It

15. Retrieve Data for Credit Score

16. Deposit a Check

17. Video Banking

18. Use it for AR

19. Use it for VR

20. Education, Gamification

+ Australia, Russia, Japan, Taiwan already happened. Next is: ITALY.

BANKING REPORTS

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Smartphone: Sub-Categories in Main Areas

THANK YOU FOR

YOUR ATTENTION!