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March | April 2013 | paymentscardsandmobile.com

Advanced PaymentsThe future of m-payments

in this issueCard Notes Continued growth in ATM withdrawal volumesCash displacement benefits Why the delay?Issuing and Acquiring MPE 2013 highlightsm-payments The Way We Pay

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From the editor

Regular readers of PCM will be familiar with our annual Advanced Payments Report, which tracks the fast-changing payments landscape and provides pointers to stakeholders as to where the future direction of the industry may lie. This year’s report comprehensively gathers together the most recent developments in the mobile banking and payments space, and while it is unsurprising that virtually all in the industry are agreed about the huge potential of m-commerce, there is still much fragmentation and arguments over business models standing in the way of growth and further consumer adoption

As the report makes clear, it is not just technology that drives customer adoption. New or emerging services, such as mobile financial services, have to be provided in a way that they assist people in making their routine tasks easier or more productive, or offer them new ways to do things in a compelling manner. This simple market fact is often forgotten even by long standing industry incumbents who tend to focus and invest in technical innovation only, but fail to grasp that substantial investments in marketing and distribution are equally, if not more, important.

Elsewhere in this issue, Peter Jones, managing director of PSE Consulting, provides a valuable insight into regulators’ mindsets over interchange. The European Commission and other bodies have long cited the “Cost of Cash” study of 2008 as a key driver behind their thinking. A new study is now in the works, but at what risk to

payment stakeholders?

Meanwhile, two major events over the last month – Merchant Payment Ecosystem 2013

and Mobile World Congress 2013 – have demonstrated

how mobile is now at the core of future strategies,

not just for payment players but for merchants. What is undeniable is that, as NFC gains traction, it is not enough just to have a mobile payment process in place. Increasingly,

value-added services and heightened interaction with

consumers will drive growth, more so than ever in our multi-

channel world.

Victoria Conroy, Editor, Payments Cards & Mobile

Average net circulation July 2011-June 2012: Printed 8924 • Digital 708

12. Payments innovation report highlights driving forces The recently-released Payments Innovation Jury Report 2013, from Ixaris and Anthemis Group, has highlighted how the payments industry is undergoing an

intense period of innovation. ■ China

m-banking on the rise – Celent. ■

payments cards and mobile | March | April 2013 paymentscardsandmobile.com4

contents

8. Continued growth in ATM withdrawal volumes The global ATM market is set to continue to grow, largely as a result of huge projected growth in demand for cash withdrawal services in the coming years.

■ Spanish interchange study called into

question. ■

10. UK holiday card spend rise in 2012 FICO has released its quarterly UK cards data showing that average total sales per classic credit card hit a two-year high.

■ iDEAL continues on strong growth

trajectory. ■ Payments M&A activity

heats up. ■

12. African mobile money adoption soars – GSMA More than 30 million people around the world carried out mobile money transactions in June 2012, according

to figures from the GSMA. ■ US EMV

migration called into question. ■ PayPal

co-founder launches m-commerce firm. ■

news in brief

6-7. The payments world in 60 days

card notes

16. Cover story – The future of m-payments

This year’s Advanced Payments Report,

put together by Edgar, Dunn & Company

in conjunction with PCM and First Data,

shows that while the mobile payments

opportunity looms bright, there are still

some hurdles to overcome.. ■

20. Cash displacement benefits – Why the delay?

The economic crisis has highlighted EU

governments need to reduce the unofficial

cash economy and increase tax and VAT

collection. Many believe cash displacement

by payment cards can make a significant

contribution. But due to a four year delay in

the EU approving an incentive programme,

banks are unsure. ■

24. Microcredit – Soft finance getting tougher Microcredit, a booming sector since

the ‘90s, is the latest to feel the pinch

in the wake of the global financial crisis

according to a report by Baird’s CMC

Financial Services. ■

12

20

16

features

Number of registered and active customer accounts by region (June 2012)

Western Africa:7.8 million registered accounts720,000 active accounts

South Asia:13.3 million registered accounts3.8 million active accounts

East Asia and Pacific:4.3 million registered accounts1.8 million active accounts

Eastern Africa:48.5 million registered accounts9.7 million active accounts

0% 20%

40% 60%

80% 100%

Regulations

Access to existing payment infrastructure

Costs

Security

Acceptance network

Partnerships / Ecosystem

Business model

52%

63%

69%

73%

79%

82%

83%

Key concerns of stakeholders around mobile payments


contents


30. Paydiant and Menusoft launch mPOS and wallet service Paydiant, provider of a cloud-based mobile

wallet and offer redemption platform, has

announced that Menusoft has integrated

the Paydiant mobile wallet solution.

■ Banco Santander and iZettle form

partnership. ■ ValidSoft SMART solution

selected by Spindle. ■ Visa introduces Visa

Ready Partner mPOS services. ■ MobiWire

showcases MobiPrint². ■

pos terminals

contactless

mobile payments

38. Mobile World Congress 2013 showcases mobile horizon

conferences

28. Visa and Samsung sign global NFC alliance agreement Visa and mobile handset manufacturer

Samsung have formed a global alliance

to further mobile NFC payment services.

■ China and Canada roll-out SIM based

NFC payment service. ■ NXP highlights

expanding NFC ecosystem. ■ Dutch banks

launch mobile NFC payments trial. ■

29. Payment players partner for MWC contactless payments

This year’s MWC event also brought

together CaixaBank, Gemalto, Telefónica

and Visa Europe who teamed up to

deliver a payments application offered

to the 3,500 delegates who attended the

event. ■ Gemalto, Banco Itaú and TIM

launch Brazilian NFC project. ■ France

gears up for mobile NFC. ■ OpenWay,

Lukoil and LICARD promote contactless

payment. ■ Visa Europe expand UK

contactless payments. ■

35. NFC Forum validates latest Clear2Pay test solution ■ Applus+ obtains EMVCo L1 accreditation.

■ VeriFone and SK C&C team for mobile

wallet acceptance. ■ Oxygen8 Group’s

mobile payment solutions set to go

global. ■ SPS launch enhanced chip

card operating system. ■ Jumio unveils

Netverify Mobile to combat fraud. ■

32. MasterCard launches MasterPass digital payments service The war of the digital wallets is heating

up with the news that MasterCard has

unveiled MasterPass. ■ PayPal and

Lenovo aim to eradicate passwords. ■ UK

e-commerce levels boosts payment card

usage. ■ Servebase launches ANYpay

payment platform. ■ Ingenico to acquire

Ogone. ■ Quarter of Indian consumers

shop online. ■

37. SIX and Diners Club sign merchant acquisition deal ■ Skrill completes acquisition of

paysafecard.com. ■ WorldPay and Vindicia

partner for international payments. ■ TSYS

acquires NetSpend for $1.4 billion. ■

products

e-commerce contracts

24. MPE 2013 highlights changing acquiring landscape The Merchant Payment Ecosystem 2013

event, held in February in Berlin, is proving

to be one of the most important events in

the global payment landscape. ■ Equens

processes billionth SEPA transaction. ■

25. Social media improves engagement with UK credit cardholders According to new research from the

Auriemma Consulting Group, credit card

issuers have been seeking new ways to

drive cardholder loyalty and engagement.

■ PFS forms prepaid partnership with

Deutsche Card Services. ■ WorldPay

acquires YESpay. ■ Barclaycard and Amex

sign new UK card issuing agreement. ■

issuing & acquiring

26. Spire Payments acquires Thyron Spire Payments has announced the

acquisition of Thyron Payments Systems,

which specializes in mobile payments. ■

PayOne files patent infringement lawsuit

against Home Depot. ■ Mobile payments

offer big opportunity for Vending industry.

■ Mobile payments offer big opportunity

for Vending industry. ■ Stripe begins UK

beta trial. ■

27. The Way We Pay – Payments Council According to a new report from the UK

Payments Council, “The Way We Pay”, over

the past decade, UK consumers have

significantly changed their purchasing

behaviours. ■ Banks must drive UK digital

payments innovation. ■ Companies

Struggle to Popularize Mobile Money. ■

Visa launches mobile managed service. ■

Cheque usage may be on the decline elsewhere in Europe but in

Ireland they are still a popular payment instrument, according to the country’s central bank. At the cheque’s peak in 2005, 131.5 million were used, or around 32 per person, during the year. However by 2012 the figure had fallen to 75.1 million or 19 per person. This compares to an EU aver-age of nine per person per year, with 20 out of 27 member states using just two or less cheques per annum. France is the only country with a significant lead on Ireland – a massive 46 cheques for each person each year.

Cyber-criminals managed to steal nearly $11 million from ATMs around

the world using prepaid cards, according to security blogger Brian Krebs. Hackers gained access to issuer authorisation systems and card parameter information. In an alert sent to issuers, processors and ATM acquirers, Visa warned that further attempts are expected, and is urging increased vigilance.

Online retailer Amazon is to launch its own virtual currency for purchas-

ing apps, games and in-app items on its Kindle Fire tablet device. Amazon says it will give customers tens of millions of dol-lars’ worth of free Amazon Coins to spend on developers’ apps on Kindle Fire from the tablet’s Appstore when it launches the new currency in May. Amazon Appstore developers will earn the standard 70% revenue share when customers make purchases using Amazon Coins, whch are pegged to the US dollar, with one Coin equivalent to one US cent.

The rising popularity of hackathons has caught the attention of financial

giants including JP Morgan and Barclays who are all staging their own events in order to attract the cream of the IT crop. Hackathons involve programmers and coders developing APIs and services before demoing them to company executives and entrepreneurs.

An altruistic ATM in Spain is giving out free money to customers – but

only if they promise to share the money. The ATM, known as the “happiness dis-penser”, is part of a publicity initiative with drinks giant Coca-Cola, which has taken the ATM around various parts of the recession-hit country.

After being forced by the Bank of Italy to suspend card payments over

its failure to comply with anti money-laundering regulations, the Vatican City has re-commenced processing card payments. Swiss card payment specialist Aduno has taken over from the previous processor Deutsche Bank Italia – the Bank of Italy does not need to approve the arrangement because Aduno is based outside of the EU.

news in brief


Is an iATM on the way? Tech giant

Apple has reportedly filed a US patent application for an ad-hoc cash-dispensing network which lets people who need cash but cannot locate an ATM send a message through their iPhone to find people nearby who are willing to lend them the money. The patent application involves a system where people who sign up and download an app can connect to an Apple server.

Facebook has launched a prepaid gift card that people can buy on

the social network and send to friends for use at specific retailers and restaurants. Cards can hold multiple gift balances, each one dedicated to the associated retailer. Balances can be checked in account settings on Facebook from users’ phones or desktops, with real-time notifications sent when there are changes.

Bank of Ireland has introduce mobile-to-mobile payments for

customers. The bank’s new ‘Pay to Mobile’ service allows customers to send money to family and friends with a registered Bank

of Ireland account by using their mobile phone number. To date, almost

20,000 of the bank’s 180,000 active mobile customers have pre-registered for the service, which is available for iPhone

users, with an Android version following shortly.

American Express is enabling custom-ers to sync cards with their Twitter

accounts and then make purchases by tweet-ing hashtags. Using its Card Sync technol-ogy, AmEx is offering selected cardholders the option to link their card to their Twitter account to buy the network’s gift cards and products from Amazon, Sony, Urban Zen and Xbox 360.

BlackBerry is piloting a person-to-per-son mobile payments service within its

BBM instant messaging system in Indonesia. The BBM Money commercial pilot will let users access an account from their smartphone and make real-time payments from within the messenger app to their contacts who are also signed up to the service. Customers will also be able to buy mobile airtime credit and transfer money to bank accounts. The service has been developed by BlackBerry with local financial institution PermataBank and AGIT Monitise Indonesia, part of global mobile banking service provider Monitise.

Incoming Bank of England governor Mark Carney has indicated that he may

introduce Canadian-style plastic bank notes to the UK. In Canada, the polymer bank note is widely used. Carney said that the notes are environmentally friendly and represent good value for taxpayers.

The Australian Competition and Consumer Commission (ACCC) is suing

Visa after accusing the network of misusing its market power to distort competing dynamic currency conversion (DCC) services. Such con-version services allow consumers to choose whether they complete a transaction in their home currency or in the local one of the POS terminal or ATM they are using. In 2010 Visa announced rules to stop the expansion of supply of DCC services by rival providers on POS transactions on its network, according to the ACCC.

Banking giant Citi has started roll-ing out functionally advanced

Citibank Express ATMs in Singapore, Malaysia and the Philippines, which are aimed at joining the physical and digital banking worlds. The ATMs incorporate an online banking connection, video-conferencing and biometric capabilities for customer identity authentication. A customer can start a transaction on a computer or mobile device and complete it on Citibank Express, and vice versa.

Bridge Community Bank of the US is introducing a biometrics-based

system for verifying customers inside branches. Current and new account holders can sign up for a digital icon in branches, which incorporate customer fingerprint and facial biometic data to generate a financial security number which is linked to the customer’s account. To identify themselves in a branch and carry out transactions, customers then provide their name and fingerprint.

The US state of Iowa is to enable residents to pay some of

their taxes using Dwolla, a local digital transactions start-up. Dwolla is a cash-based payment network that provides real-time, online and mobile payments, charging a $0.25 fee on any transaction over $10. Businesses that already pay more than $100 million in cigarette stamp taxes now have the option of paying via Dwolla.

US mobile-based financial services provider Moven has launched a

closed beta test of its services. Moven is advertising itself as a cardless and branchless alternative to traditional lenders, and is working with partners that have charters and FDIC insurance. Customers will receive a contactless MasterCard sticker which they can attach to their phone and link to the Moven app for physical payments. Users will also be able to pay friends through Facebook, deposit cheques from their handset, and withdraw cash for free from thousands of ATMs across the US.

news in brief


Visa is working with several Indian banks in order to utilise

the country’s biometrics-based national identity system to bring financial services and electronic payments to millions of people. The ‘Saral Money’ account from Visa, Axis Bank, HDFC Bank, ICICI Bank, Indian Overseas Bank and the State Bank of India is designed to solve the long-standing problem of how to authenticate the many millions of Indians without existing bank accounts or adequate forms of ID. They plan to tap into the government’s Aadhaar national identity system which uses fingerprint and iris biometric information to verify users and authorise payments. There are currently 210 million Aadhaar card holders, with the government planning to expand this to 600 million by 2015.

Just 3% of UK organisations have made preparations for the intro-

duction of SEPA for direct debits, lagging behind rivals in France and Germany as the countdown to the 2014 migration begins. The survey of 300 businesses in France, Germany and the UK conducted by Edgar Dunn & Company on behalf of Steria, finds that almost 70% of European businesses are aware of SEPA in general, and more than 80% of businesses have heard about SEPA Direct Debit in France and Germany. However, only 26% of UK businesses are aware of the mandate.

Sweden’s Swedbank is piloting the use of mobile couponing with

merchants in Uppsala, the country’s fourth-largest city which is attempting to eradicate cash as part of a local crime-fi ghting initiative. Swedbank is trialling the use of MasterCard’s mobile application Koy with high street merchants who can use the app to post deals to subscribers that can be redeemed from the user’s smartphone.

VeriFone has had the wind taken out of Sail, its app and dongle-based

system for turning smartphones into card acceptance devices. Having failed to gain traction with merchants, VeriFone will instead off er the technology to banks. Sail was launched in May 2012, but according to the company, the standalone economics of micro-merchant acquiring ultimately proved to be unprofi table.

Vietnamese payment switch operator Smartlink is working with Singapore

tech vendor Tagit to build a mobile bank-ing service. Tagit’s Mobeix platform will be available to over 40 million cardholders belonging to Smartlink’s more than 50 mem-ber banks. Vietcombank will be the fi rst to roll out the service, enabling customers to download an iOS, Android, BlackBerry or Java app that can be used for account information queries, fund transfers, bill payments and mobile top-ups. Through the Tagit system, Smartlink customers will also be able to con-nect with third parties such as utility compa-nies and government agencies.

Royal Bank of Scotland, Lloyds TSB and NatWest in the UK are in

a generous mood, having set aside £10 million to refund customers who forgot to pick up cash dispensed at the ATM. The banks are set to compensate hundreds of thousands of customers who made a withdrawal at the ATM but walked away without the cash. Unlike other banks which automatically re-credit consumer accounts when the machine retracts the forgotten cash, the banks diverted the funds into their own reserves account and only paid up if the customer asked for a refund.

US start-up Movenbank, which has positioned itself as a mobile-only, card-

less, branchless bank, may be forced to off er companion plastic cards to customers in order to be compliant with MasterCard rules. Movenbank is working with MasterCard on a planned February 2013 launch which will see customers issued with contactless stickers that they can attach to their mobile phones, says founder and CEO Brett King. However, he maintains that the fi rm is still “anti-card”.

news in brief

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card notes


and Nigeria. Cash has been the primary means of

payment for many in these regions until now. This, along with high numbers of new customers entering banking systems and government programmes to encourage usage of cards to access bank accounts, will bring about such an increase in ATM with-drawal volumes in many of these markets that deployers will be forced to ramp up their deployment of ATMs. ■

rate of 8% per year, in compari-son with growth in the number of installations of 7% per year. Despite speculation about the emergence of cashless societ-ies, it seems that worldwide the demand for ATMs and cash with-drawals will remain high.

Vast numbers of people in emerging markets in Asia-Pacific and Middle East and Africa still have no access to ATMs or other banking services, which means that the potential for new ATMs and ATM usage in these regions remains immense. In Asia-Pacific, the annual volume of cash with-drawals is forecast to outpace growth in installations in China, Pakistan and Taiwan, whilst in the Middle East and Africa the same is predicted to be true for Egypt, Iran

Continued growth in ATM withdrawal volumes

The global ATM market is set to con-tinue to grow, largely as a result of huge projected growth in demand

for cash withdrawal services in the com-ing years, particularly from emerging mar-kets, according to a study from strategic research and consulting firm, Retail Banking Research (RBR).

The report predicts that some emerging markets will explode in the next few years, with the number of ATM cash withdrawals projected to rise by around 90% in the Asia-Pacific and Middle East and Africa regions between 2011 and 2017. In Asia Pacific, the Middle East and Africa and central and eastern Europe, growth in ATM usage is expected to outpace the increase in ATM installations. Globally, the total number of cash withdrawals is forecast to rise at a

GLOBAL

at the POS continued its medium-term growth path. In this period, there was no evidence of a negative influence of the interchange or MSC reduction on the sales volume at the POS, in spite of the fact that the mandated interchange reduction was particularly strong in this period. In the period 2001 to 2008, card payment volumes and the volumes of cash withdrawals at the ATM both grew continuously.

little evidence

There is also little evidence to support the claim that the reduction in interchange has led to higher withdrawals of cash and thus higher use of cash as a means of payments, PaySys adds. In the period 2006 to 2010 the interchange rates in Spain were steadily reduced from an average of 1.55% to 0.64%. This led to financial savings for card-accept-

Spanish interchange study called into question

In its battles with regulators over multi-lateral interchange fees (MIFs) in Europe, MasterCard has repeatedly pointed to a study which tracked the after-effects of interchange reductions in Spain. According to MasterCard, the study found that over the five-year period from 2006 to 2010, interchange fees were reduced by more than 57%, and that it was merchants, not consumers, which benefitted from the reduction. The study stated that consumer costs, mainly through annual card fees con-sumers pay to their banks, increased by a staggering 50% over the same period.

However, German payment consultancy PaySys has cast doubt on the findings of the Spanish study, claiming that it has “seri-ous doubts about the interpretation of the statistics and the presented results”.

According to PaySys, in the period 2006 to 2008, Spanish card payment volume

ing merchants and an additional burden of cardholders. In spite of the emergence of the financial crisis, in this period, the number of cardholders increased (+10%), the number of POS terminals increased (+25%), card transactions at the POS increased (+36%), the issuer revenue per card increased (+12%), and the income of the acquirer from the margin MSC/interchange increased by about €1 billion.

Speaking to PCM, Dr. Hugo Godschalk, managing director of PaySys, said: “Our conclusions from the study are that the MIF-regulation did not harm the Spanish card business at all. Issuers, acquirers and card schemes benefitted from the regula-tion and the cardholders accepted the higher annual fees without termination of their cards. It would be better for the card schemes and issuers if the regulators in Brussels would not read this study.” ■

Source: Global ATM Market and Forecaststo 2017 (RBR).

Volume of cash withdrawls (millions), 2009–2017

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0 2009 2010 2011 2012 2013 2014 2015 2016 2017

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UK

card notes


compared to last year, which the govern-ment puts at 1.8%, excluding fuel,” said Nigel Brayne, senior director of global business con-sulting at FICO. “This suggests that many con-sumers shifted their spending to credit cards, perhaps so that they could pay for gifts over a longer period of time. Just as consumers are worried about their finances, card issuers will be monitoring their accounts closely for signs of delinquency.”

For accounts on the books less than 12 months, FICO’s data also showed a drop of 22% in the percentage of payments to bal-

ance, compared with December 2011. For these accounts, average total sales were up 4% over last year and utilisation was up 5%. Payment trends were still positive in the most recent data, with the percentage of balances that were two cycles (60 days) delinquent hitting a two-year low. “It will be interesting to see the impact of the Christmas spend on delinquencies next quarter, to see whether cardholders overreached in their spending,” Brayne said. ■

UK holiday card spend rise in 2012

FICO has released its quarterly UK cards data showing that average total sales per classic credit card hit a two-year high in

December 2012 of £600.25, surpassing the level from December 2011 by 10%. The latest data from the FICO Benchmark Reporting Service showed that average sales per Irish (euro) card also rose, hitting a two-year high of €732.55, while student cards were slightly above 2011 levels. Only premium cards fell in terms of spending compared to December 2011.

“The growth in card spending far out-stripped the growth in December retail sales

Payments M&A activity heats up

Mergers and acquisitions in the pay-ment space during 2012 made a sig-nificant impact on overall M&A trends over the year, according to research from investment bank Berkery Noyes. Overall M&A transaction volume underwent a 7% increase over the past twelve months, from 282 trans-actions in 2011 to 302 transactions in 2012. Moreover, transaction value rose from $19.84 billion to $30.23 billion, an increase of 52%.

M&A activity in the payments seg-ment improved at a robust pace in 2012, rising 47% from 2011. With this growth, payments had a slight edge over capital markets as the most active segment in the report on a year-to-year basis.

In addition, four of the industry’s top ten highest-value deals fell within the payments segment, compared to two in 2011. These four transactions, with a combined value of $5.83 billion, represented 19% of the industry’s 2012 aggregate deal value.

According to John Guzzo, manag-ing director at Berkery Noyes: “There are significant changes occurring in the payments sector, which is draw-ing heightened attention from both strategic and financial acquirers. This includes the creation of enterprise pay-ments hubs that can lower processing costs, as well as the more extensive use of mobile payments systems.”

Guzzo added: “Heightened regula-tory scrutiny and new legislation – particularly the CARD Act and Durbin Amendment – is also starting to have an impact on the sector, as new report-ing and record keeping requirements come into effect. Some payments com-panies, responding in part to these regulations, will look to diversify their revenue streams by launching new products and services.” ■

compared to €6.8 billion in 2011. The growth of e-commerce is also helping

to boost iDEAL volumes. Consumers con-tinued to rate iDEAL positively in 2012: 55% of online shoppers preferred iDEAL to any other means of payment. For 2013, Currence expects iDEAL to continue to grow, partly due to the expected growth in online shop-ping. A major boost for this is the increasing use of smartphones and tablets. As a result, consumers are no longer tied by their own location for their online purchases and are able to purchase online anywhere and any time. The preference for payment via iDEAL is even higher for mobile shopping than for shopping online (69% for mobile versus 55% on average). It is expected that this year more banks will support iDEAL mobile. ■

iDEAL continues on strong growth trajectory

Dutch online payment system iDEAL has long been cited as one of the strongest non-cash competitors to card payments, and recent fig-ures show that over 2012, the number of iDEAL transactions continued to show strong growth, with a 24.9% rise in transaction volumes.

The system, operated by Currence, also broke records in 2012. In October last year, the milestone of 10 million monthly payments was exceeded for the first time since its introduc-tion in 2005 and throughout 2012 more than 117.2 million iDEAL payments were made.

Moreover, the number of iDEAL payments made in December 2012 set a new monthly record. With more than 11.7 million trans-actions, December was the peak month of 2012. The total sales made with iDEAL last year amounted to more than €8.8 billion,

Source:Global ATM Market and Forecaststo 2017 (RBR).

Average UK credit card sales

900

800

700

600

500

400

300

200

100

0

2010-12

2011-05

2012-05

2011-10

2012-10

2011-01

2012-01

2011-06

2012-06

2011-11

2012-11

2011-02

2012-02

2011-07

2012-07

2011-12

2012-12

2011-03

2012-03

2011-08

2012-08

2011-04

2012-04

2011-09

2012-09

Classic – All accounts Premium– All accounts Student – All accounts Euro – All accounts

Number of registered and active customer accounts by region (June 2012)

Western Africa:7.8 million registered accounts720,000 active accounts

South Asia:13.3 million registered accounts3.8 million active accounts

East Asia and Pacific:4.3 million registered accounts1.8 million active accounts

Eastern Africa:48.5 million registered accounts9.7 million active accounts

card notes


live deployments and 37% of the 166 mobile networks operators in the region have already launched mobile money.

The rise of these services means that there are now more mobile money accounts than bank accounts in Kenya, Madagascar, Tanzania and Uganda, and more mobile money agent outlets than bank branches in at least 28 countries. With over 520,000 registered agent outlets, there are now as many mobile money sites as Western Union points of sale.

Furthermore, the total value of mobile money transactions is worth a significant proportion of some countries’ overall wealth – equivalent to 60% of GDP in Kenya in June 2012, 30% in Tanzania and 20% in Uganda. ■

the mobile money industry is growing at an unparalleled rate, driven by the developing world. There are 150 live services for the unbanked, 41 of which were launched in 2012. In addition, the industry is also becoming competitive, with 40 markets now having at least two different services available.

The report identifies six services with more than 1 million active customer accounts, three of which passed the milestone in the last 12 months. There are 56.9 million regis-tered customers in sub-Saharan Africa and in June 2012, there were twice as many mobile money users as Facebook users in the region. In terms of geographical spread, more than half of all countries in sub-Saharan Africa have

African mobile money adoption soars – GSMA

GLOBAL

More than 30 million people around the world carried out mobile money transactions in June 2012, according

to figures from the GSMA, with sub-Sahara Africa leading the way in uptake of the bur-geoning technology. According to evidence from 78 mobile money deployments in 49 countries, compiled by the global mobile industry trade group, 30 million people car-ried out more than 224 million handset-based transactions worth $4.6 billion during the month of June 2012 alone.

This exceeds the 196.3 million transactions performed by customers of online payments giant PayPal on average each month dur-ing the third quarter. The study shows that

on an issuers’ income statement.He gave the example of Discover – which is

five years into its planning for EMV migration – which reported $93 million in fraud losses for 2012, or roughly $8 million more than it spent on postage. By comparison, net charge-offs from credit card debt cost it over $1.2 billion in 2012 and as much as $3.7 billion in 2010.

King added: “It’s no secret by now that while EMV has been excellent at reducing face-to-face fraud, card-not-present (CNP) fraud con-tinues to rise because EMV does not effectively prevent it in today’s online environment.” He points to Canada, where losses from CNP fraud since the roll-out of EMV in 2008 had more than

doubled by 2011, rising from C$128 mil-lion to C$259.5 million.

“Ultimately, EMV as it exists today only solves part of the fraud equation,” says King. “Until a cost-effective and consumer-friendly CNP fraud reduction solution gains traction, I believe a busi-ness case for EMV built around fraud losses will remain difficult to build.” ■

US EMV migration called into question PayPal co-founder launches m-commerce firm

EMV in the US is well underway, much to the relief of global payment stakeholders who have long argued that the US needed to catch up with the rest of the world, particularly in rela-tion to combating fraud with the technology. However, a senior staff member at the Federal Reserve Bank of Atlanta has questioned the business case of the migration.

The first liability shifts for the US are scheduled to take place in April 2015, and issuers and other stakeholders are being urged to set out their migration roadmaps as an urgent business priority. But Atlanta Fed payments risk expert Douglas King claims that fraud is a small, albeit growing, expense

As if payment industry incumbents weren’t worrying enough about competition from non-bank players like PayPal, it appears PayPal has some competition of its own.

PayPal co-founder Max Levchin has launched a mobile money service, Affirm, which aims to make it easier for online shop-pers to complete purchases.

On its website, Affirm claims that the online check-out experience has not improved for shoppers in more than a decade, meaning merchants are left with countless abandoned carts. Affirm is promising to help online mer-chants convert more mobile shoppers into buyers through a quick and simple check-out process, requiring just a couple of taps of the customer’s handset.

Affirm will use Facebook to authenticate customers at the check-out, before guarantee-ing the merchant payment, for which it gets a fee. Acting as a digital charge card, Affirm then gives the customers 30 days to settle the bill, although it does not charge them for this. ■

Source: Aite Group.

Who agree/stongly agree that EMV will migrate to US

■ 2011: Agree to stongly agree (n=58) ■ 2009: Agree to stongly agree (n=29)

19%

34%

50%55%

0%

33%

55%63%

17%

35%

1–2 yrs 3–4 yrs 5–7 yrs 7+ yrs Never

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card notes


maturity of the internet and widespread dissatisfaction in many countries with tra-ditional banking services.

Relating to which type of organisation is best at driving payments innovation, the clear consensus of the jury is that new mar-ket entrants are best at driving payments

innovation, with nearly 70% of respon-dents holding this view. According to the report, new players in the payments space are carrying out activi-ties that traditionally would have been seen as the role of banks. A significant portion of the jury saw technolo-gy vendors as the best at driving innovation. The jury agreed that incumbents such as the established retail banks, payments processors and card schemes are the least effective at driving innovation, despite often investing very heavily, as they are hampered by legacy

Payments innovation report highlights driving forcesGLOBAL

The recently-released Payments Innovation Jury Report 2013, from Ixaris and Anthemis Group, has high-

lighted how the payments industry is undergoing an intense period of innova-tion, driven by a number of factors includ-ing advances in technology, the growing

China and account for 43% of all transac-tions, mobile banking is the fastest growing and accounts for 30% of all transactions. Celent estimates that mobile shopping in China will reach $7.4 billion in 2013 and $40.8 billion in 2015. Moreover, more than 80% of China’s young consumers would like to have their public transport card, bank card, and other payment tools integrated into the mobile phone, and more than 50%

China m-banking on the rise – Celent

According to a new report from payment consultancy Celent, the number of mobile banking users in China reached 150 million in 2012, accounting for more than 40% of mobile banking users worldwide. Major commercial banks saw more than 100% growth in mobile banking users in 2012, and more than 300% growth in mobile banking transaction value, according to the report.

While PCs are the most widely used in

of users hope that mobile banking can offer comprehensive mall shopping services.

“Mobile banking in China is not only growing rapidly, it is enabling new busi-ness models,” says Hua Zhang, analyst with Celent’s Asian financial services group and author of the report. “Mobile banking pro-vides banks with massive amounts of trans-action data, which they can analyse in order to develop new products and strategies.” ■

Card schemes (4%)Retail banks (4%)Technology vendors (12%)New market entrants (72%)Other (8%) Processors (0%)

infrastructures and business models.The report also finds that emerging

economies will be the hotbeds for pay-ments innovation over the next two years with Asia in top place followed closely by Africa, North America and Latin America. A common reason cited by the jury for these findings is that the emerging economies are not lumbered with existing payments infrastructures which are difficult to build on. The developed economies are consid-ered to see comparatively little payments innovation, particularly Europe, due to the stranglehold of regulation, a fragmented payments landscape and the overhang of the banking crisis.

Smartphone and tablet biggest driver

Unsurprisingly, adoption of smartphone and tablet technology is seen to be the biggest driver for innovation in payments, with nearly half of the jury considering this to be the most important technology trend. However, the jury also sees the avail-ability of open APIs to be a major trend driving innovation in payments. APIs are now being extended to a wide range of payments types, opening up possibilities for many companies at a mere fraction of the cost of developing a proprietary sys-tem from scratch. ■

Contactless technology (4%) Cloud Computing (8%)Widespread adoption of smartphones and tablets (52%)Availability of open APIs (36%)Rise of big data and data analytics (0%)Other (0%)

Source: The Payments Innovation Jury Report 2013. Notes: Figures are based on input from 25 payments innovators from around the world.

Which type of organisation is best at driving payments innovation?

What is the biggest technology trend that is driving innovation in payments?

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their PC or from their mobile device. But there have been some significant

shifts between this year’s survey and last year’s relating to the perception of which players are most likely to drive mobile pay-ments. The most notable shift was Google. It fell from a tie last year with PayPal for first, to fourth this year with only 76% of respon-dents believing that Google would drive mobile payments compared with 91% the prior year.

Mobile commerce is a top strategic priority for MNOs globally. They have led initiatives in multiple markets forming joint ventures within their industry and in some markets across both banking and telecommunica-tions industries. MNO joint ventures also saw significant shift in this year’s survey in the perception of their ability to drive growth of mobile, which increased from 59% to 68%.

Speaking to PCM, Samee Zafar, director at Edgar, Dunn & Company, said: “One highlight of the report is that people are realising that there are lots of challenges for new players. People used to think that players like Google and PayPal had a much better shot at this than everybody else but gradually people are realising that even those play-ers, formidable as they may be, are also encountering a lot of challenges in this area.

“Relating to the question on players most likely to drive growth, last year 91% of people who answered this question

2013 advanced payments report


The top mobile payment categories that survey respondents believe will be successful relate to mobile online (or remote) payments. Mobile online or remote payments rank above proximity payments because in the near term, mobile online payments do not require any additional infrastructure. Mobile internet is gradually becoming faster and the quality of connectivity is improving on a continuous basis.

Which players will drive growth?

As in our prior surveys, we asked survey participants which mobile players they feel are most likely to drive growth in mobile pay-ments. PayPal and the card networks again rank at the top. PayPal’s focus on mobile is key to their multi-channel retail approach, providing a consistent online experience for consumers shopping online, either from

With global mobile cellular con-nections expected to exceed 8 billion by 2016 (overtaking the

world’s population in the process), payment industry stakeholders are scrambling to put in place mobile commerce services. But as PCM’s 2013 Advanced Payments Report shows, one thing that is clear is that it is not just the technology that drives customer adoption. New or emerging services, such as mobile financial services, have to be provided in a way that they assist people in making their routine tasks easier or more productive, or offer them new ways to do things in a compelling manner. This simple market fact is often forgotten even by long standing industry incumbents who tend to focus and invest in technical innovation only, but fail to grasp that substantial invest-ments in marketing and distribution are equally, if not more, important.

This year’s Advanced Payments Report, put together by Edgar, Dunn & Company in conjunction with PCM and First Data, shows that while the mobile payments opportunity looms bright, there are still some hurdles to overcome.

by Victoria Conroy and Samee Zafar with insight from FirstData

The future of m-payments

0% 20%

40% 60%

80% 100%

Mobile network operators and initiatives (e.g., MNO, carriers, joint-venture like ISIS)

MNO / bank joint initiatives

Banks and financial institutions

Google

Web-related innovative companies such as Facebook, Apple, Amazon

Card networks / payment schemes

PayPal

59%

68%

70%

91%

81%

82%

91%

68%

68%

72%

76%

78%

82%

87%

2013 2012 Source: EDC APS 2013

Players most likely to drive growth in mobile payments

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device for accessing facilities and digital identification are services that help consum-ers manage their lives better.

Speaking to PCM, Dominic Morea, senior vice-president of mobile commerce solu-tions at First Data, said: “While there are a number of diverse enabling technologies, it’s really not about the technology. It’s about the solutions and the customer experience and the value add. The payment aspect has got to be reliable and frictionless. But the real key is what’s in it for the consumer, the mer-chant and the financial institution. That’s got to be around more advantage for consumers in their shopping journey and experience.

“For merchants, it’s about the ability to sell more and deepen loyalty and the relation-ship with the consumer. Technology enables that but there has to be that ability to like a customer back and connect with them from a loyalty and rewards perspective. For issu-ers and financial institutions, it’s about how they create new dimensions and ways to build upon the basic account relationship. That builds around the element of providing valuable consumer propositions which helps to differentiate them from other competing financial institutions”

Making the business case for mobile payments

In our survey, the most difficult hurdle to cross in mobile payments is the busi-ness case. In other words, stakeholders who

said Google would be one of them and this year it’s gone down to 76%. So it is still high, but there has been a decline in the number of people who think that Google will really be at the centre of it. There is the same thing with PayPal but only very slightly. Previously for mobile operators only 59% of people thought last year that they would be driv-ing mobile payments, but this year it’s 68%. The total this year is still less for MNOs than Google. But the percentage for MNOs has gone up whereas for Google it’s gone down. That basically highlights that it is difficult to see who, even at this stage, whether there is one single category of stakeholder who is driving this space.”

The recipe for success in payments con-tains several ingredients. Customer experi-ence is certainly the most important. A service that is useful, intuitive and easy to use has a far greater chance of success than one which is technically superior but not so easy to use. Many payment innovations are cleverly constructed and marketed but fail to provide an attractive customer proposition.

What is clear from this year’s report is that it is essential for a new payment service to leverage existing infrastructure. Using what is already available, rather than developing something entirely new, helps customers understand and adapt to new products and services quicker. A new payment method, for example, that requires a separate account to be opened, requiring funding and moni-toring, can be a hurdle that many custom-ers do not bother to overcome. Using existing infrastructure also helps the service provider opti-mise operational costs and reduce exception items.

Value added services took third place in our survey but to many industry observers, they are perhaps the most important. Value added services include those linked to loyalty, market-ing, reward schemes or travel and transport. Ability to quickly access travel related services such as using the mobile device as a boarding pass for flights or use the phone as a secure unlocking

responded to our survey are not sure how they will make money from mobile payment services. This is not a new observation and it comes up in most surveys time and time again. One of the reasons why it is at the very top of the table is because stakeholders want to see revenues generated directly from mobile payment services. They don’t want to look at other related but equally valid ben-efits such as customer retention and regen-eration of existing revenue streams. But in the midst of this search for premium profits from mobile payments, many forget that for a financial services institution such as a bank, developing mobile payment services is not solely a question of standalone business viability, it is in fact now a “strategic impera-tive”, and not a matter of choice anymore.

The complex mobile eco-system is yet another major hurdle. A standard credit card transaction is facilitated by banks and card companies but in the mobile proximity eco-system, additional stakeholders play impor-tant roles. The mobile operator, the trusted services manager and the device manufactur-er are new additions to the card eco-system when a payment takes place in the mobile environment. Admittedly though, this relates to mobile proximity payments as other types of mobile payments can be completed with fewer infrastructure elements.

The lack of an acceptance network is also perceived as an obstacle. This refers to POS terminals that are capable of accepting mobile payments, primarily contactless ter-

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Mobile payment solution using a new payment infrastructure

Partner with other stakeholders to

leverage specific expertise

Filling the gaps of the existing

payment methods

Value added services linked to mobile payments

Mobile payment solution relying on

an existing payment

infrastructure

A smooth and practical customer

experience

24% 31% 41%

48%

71%

85%

Source: EDC APS 2013

Key success factors of a mobile payment solution

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gained traction. Competition has intensified as start-ups and payment processors have scrambled to introduce their solutions to market. Consequently, as many as 84% of survey respondents believe that ‘mobile as POS’ solutions will become widespread. Most current offerings require a separate hardware device (such as a dongle) that attaches to the smartphone and reads payment cards; the card credentials captured via the hardware are typically linked to a software application within the smartphone to process payment.

Co-operation is still necessary to produce a consistent interoperable set of standards for mobile payments – for example, a com-mon security protocol to combat fraud that is subscribed to by all network participants. In the quest to align industry interests, it is anticipated that strategic mobile partner-ships will become widespread, and more consolidation will take place between dif-ferent participants in the mobile payments value chain.

The mobile payments landscape remains fragmented, with financial institutions, non-bank participants, payment proces-sor brands, network operators, hardware device manufacturers, security software developers, start-up enterprises and more, jostling to capture a piece of the opportunity. For mobile payments to achieve universal adoption, acceptance needs to reach near-ubiquity on the merchant side, while the value proposition needs to be sufficiently compelling for consumers to adopt mobile payments en masse. Only then will the mobile device fully realise its potential to revolutionise the payments industry.

Zafar of Edgar, Dunn & Company told PCM: “If you under-invest in a new payment ser-vice or a new technology, there is no way you will be able to get it off the ground. There is a level of investment below which you are sure never to get real customer traction. Banks first need to get their mobile payments and banking services efficiently distributed and make sure the customer service is good, and understand that to get new payment services off the ground there is a certain level of cooperation that is required. Beyond that, banks will of course compete with each other but there is a level of cooperation needed.” ■



that alternatives such as QR codes would be successful in the short term. Responses to this question varied between regions with more developed payments markets having more belief in QR codes and other emerging technologies while those with more emerg-ing payments markets were more skeptical of QR technologies.

One new question in this year’s survey asked our respondents if they agreed with the following statement “Social networks will play an important role in the develop-ment of mobile payments”. More than half of them (57%) agreed with the statement. Most industry experts agree that mobile wallets will be used by consumers for more than just payments and utilise users’ data – within limits – to make the consumer experi-ence relevant and rewarding. With these two goals in mind, social networks certainly could prove to be the most interesting addi-tions to the mobile wallet.

In this year’s survey we also asked our respondents if they agreed with the follow-ing statement: “The use of consumer data is key for the development of mobile wallets (i.e. for marketing purposes)” – 78% of the participants agree with the statement. This sentiment is in line with several of the indus-try players pursuing the development of mobile wallets some of whom have actually based their business models on the collec-tion and analysis of consumer data.

2012 can be seen as the year in which the ‘mobile as POS’ movement definitively

minals for NFC payments or some other ele-ments of hardware such as barcode readers. Security is a key concern as well, and other significant hurdles refer to costs of deploy-ment and to mobile payment providers not always having direct access to payments infrastructure in some markets.

Almost all of this year’s participants believe that mobile wallets need to bundle more than just the payment functionality and include services such as couponing, loy-alty and other value added features. These features will be critical to the adoption of mobile wallets.

We also asked our participants about the time, during the purchase process, where they believe a mobile wallet will be used by the consumers. As expected most of the respondents mentioned that the wallet would be used during the payment process. Nevertheless, it is important to note that 3/4 of all the participants also mentioned that the wallet would be used before and after the payment.

Competing technology models

Recognising the emergence of these competing models, this year we asked our survey participants which technology they thought had the best chance of success. Responses were tightly grouped, but the leading opinion was that alternatives to NFC would be successful, with 73% agreeing with this statement. Slightly fewer believed

0% 20%

40% 60%

80% 100%

Regulations

Access to existing payment infrastructure

Costs

Security

Acceptance network

Partnerships / Ecosystem

Business model

52%

63%

69%

73%

79%

82%

83%


Source: EDC APS 2013


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Until 2009 (when the EC was negotiating a new deal with the card schemes) there was almost worldwide recognition of the reward model for banks to displace cash. The traditional 30 year-old Baxter structure requires a proportion of banks’ card pro-cessing charges to merchants to be passed on to the card issuer in the form of an inter-change incentive. For the proceeding ten years EU regulators had become increas-ingly unhappy with this concept, particu-larly with the national market differences in merchant fees. Regulators also faced intense merchant lobbying to implement a common or harmonised interchange across the EU. International and domestic card schemes opposed the regulator’s vision, arguing that interchange was a key enabler to cash dis-placement and that lower payments would reduce incentives to use cards and inhibit contactless and mobile cash substitution. In addition, the cards businesses argued that different country rates reflect the need for greater investment and incentives where cash usage is particularly high.

However in 2008 the EC regulators iden-tified a new solution and model for inter-change. In 2008, two academics (Rochet and Tirole) developed the concept of the “Merchant Indifference Test (MIT)”1. This the-oretical model suggests that merchants will accept cards if they know they are less costly than cash. They proposed the cost benefits from displacing cash with cards should be shared with the merchant as an effi-ciency saving and with the bank to cover incentivisation costs. Very quickly (over 2

cash displacement benefits


However academic analysis shows the effectiveness of migrating cash to cards has a strong correlation with the size of the unofficial economy. The Northern European nations with low grey economies have been most successful in reducing their cash mountains. Over the past five years cash transactions have dropped in the UK, France, Benelux and Scandinavia to almost 60% of total payments. In contrast, in the Southern nations, all with high unofficial economies, cash usage remains stubbornly high at close to 80%. In the Baltics and CEE nations with 85% cash usage, displacement is accelerating but several have unofficial economies exceeding 27% of GDP. For all these countries lower cash usage through the implementation of electronic and card systems, which when combined with foren-sic analysis, have good potential to increase tax collection revenues.

Commission interventions have inadvertently created a blockage

Inevitably maintaining a cash to card momentum needs investment and incen-tives. Unfortunately there is worrying evi-dence that the Commission is not yet fully committed to the concept.

Over the past four years several Commission interventions have inadver-tently created a blockage to raising more tax revenue and improving global EU pay-ment efficiencies.

Key stakeholders responsible for European Union (EU) payments are more or less unified in their views

of the tax collection benefits from displac-ing the unofficial cash economy. Several nations desperate to cut their deficits have passed legislation to reduce high value cash purchases but all are aware that much more is possible if the banks are on side.

Europe’s cash mountain fuels the unof-ficial economy which in the Southern European, Baltics and CEE nations is at an unacceptably high level. VAT and other tax avoidance could be reduced by up to €8bn to €10bn each year if a 7.5% to 10% saving could be achieved.

Many believe that of even greater impor-tance is cash displacement’s impact on EU-wide payments efficiency. It is claimed lower cash usage across the EU could reduce stock holding, cut distribution/transport costs, reduce crime and money laundering, producing additional annual cost efficien-cies of a further €10bn, as well as delivering significant benefits to society.

Displacing cash is not a new phenom-enon; it has been happening since the 1960s from the payment of electronic wages/salaries, through cash dispensers, electronic POS to e-commerce and now “last mile” low value payment concepts such as contactless and mobile Near Field Communication (NFC). For cards a key bank driver for this long term project has been available funds to persuade customers to change behaviour and to develop innova-tive new payment concepts.

The economic crisis has highlighted EU governments’ need to reduce the unofficial cash economy and increase tax and VAT collection. Many believe cash displacement by payment cards can make a significant contribution. But due to a four-year delay in the EU approving an incentive programme, banks are unsure.by Peter Jones, Managing Director, PSE Consulting

Why the delay?

cash displacement benefits


and banks and merchants. A second paper by Rochet and Wright issued in 20095 suggested that credit card interchange should be based on the costs of merchants not providing credit themselves. This model did not fit well with the Commission backed MIT cost of cash framework, undermining confidence in their first paper. Another international card scheme accepted 0.20% for debit condi-tional on empirical cost of cash evidence. The General Court of the European Union backed up some of the Commission’s thinking in Q3 20126 although this may be a temporary adjudication if an appeal, based on the lack of economic studies to support MIT, succeeds.

However, more importantly, is the damage to the Commission’s credibility and its com-mitment to the long term cash displacement project and the revenues and efficiency it can generate. Clearly in this case it lacks the ability to speedily back up new concepts with thorough and detailed research.

Recently the European Parliament voted for the implementation of a common inter-change, a message that may encourage the Markets and Competition Directorates to be bold. The 2012 Green Paper on payments will be followed by a White Paper detailing new payment and possibly interchange regula-tion in Q2 20137. But any new legislation will also have high risks for it could be delivered into an empirical vacuum with insufficient supporting data to back up any common rates set. Inevitably challenges might result. If this proceeds then some may say there is little to prevent the Commission from tak-ing pricing initiatives in other sectors under scrutiny, perhaps water, gas, electricity and even petrol pricing.

Commission’s study appears to exclude efficiency and tax benefits delivered by cash displacement

So where do we go from here with cash displacement? The expensive (€2m) “Cost of Cash and Cards” study is in the pipeline and the expectations are that it will be delivered in Q2/Q3 2013. The study outputs, it is hoped,

to 3 months) the Commission expanded the concept, which was presented in early 2009, to one of the international card schemes as the new basis for intra EU card transaction interchange.

This new MIT structure was also used to support a change in fees. The EC proposed new intra EU cross border rates of 0.2% for debit and 0.3% for credit which it mandated with the proviso that the Rochet/Tirole theoretical model would be backed up by an EU wide “Cost of Cash and Cards” eco-nomic study.

Importance of the cost of cash and cards study cannot be overstated

The importance of the cost of cash study cannot be overstated. The Merchant Indifference Test (MIT) overturned much of the established empirical academic econom-ic studies. Several commentators at the time pointed out the risks the Commission was taking in enforcing a new rate based on an unsubstantiated model without clear verifi-able evidence that the indifference approach was a practical framework.

So in 2009 speed was of the essence if the Commission was to convince card schemes, networks, bankers and academics that MIT was the new cash displacement lodestone and that their mandated interchange rates would be justified by the then just contract-ed study2. However four years later all are still waiting for the evidence.

It is believed the delay has been an embar-rassment for the Commission. To be fair, negotiating and managing payment studies is outside regulators comfort zone. The first 2009 study had a modest budget and it is believed initial, but inconclusive, feedback was produced by mid-2011 although it is believed it was very useful scoping exercise3. By 2012 it became obvious that the initial study had not produced worthwhile results when plans were revealed for a larger more sophisticated and highly funded study4.

Unfortunately this four-year delay has had an unsettling impact on the EU card schemes

will once and for all establish merchant costs of handling cash and cards and enable the mandated 0.2% debit and 0.3% credit intra rates to be substantiated. The highly com-plex study involves collecting detailed costs for 500 merchants and the collection of volu-metric data from a further 2,000. However the study deliverables may not satisfy cost of cash purists and those who believe the analysis should have a wider, more com-prehensive scope. The study brief appears light on the costs of merchant surveillance equipment, cost of theft and robbery and trade losses through business disruption. At this stage the study appears to exclude the convenience and social cost benefits that less cash delivers to citizens and society. More importantly, the EU-wide payments efficiency improvements and tax benefits from cash displacement are not mentioned.

Key risks and important lessons

A key risk is that the study shows that cash costs are lower than cards, up to a higher level of value than previously thought. This would significantly undermine the cash to cards displacement vision and damage the objective of shrinking the unofficial econo-my and improving payments efficiency.

If the study feedback shows card costs are lower than the MIT model it will be validated although an area for debate will be the extent of the saving, the real benefits to society and government and how much is shared with banks.

An important lesson learned for the Commission is that changing long-estab-lished economic models, needs speedy, powerful analysis and reliable empirical all embracing evidence to support a case. Proposing the MIT as an alternative to estab-lished practices and the mandating of new rates which were conditional on a “Cost of Cash” study that fails to materialise was a high risk strategy.

As a result, countries desperate to reduce their unofficial cash mountains and to see SEPA efficiency savings have had to wait several years before they can start to plan much-needed VAT and tax revenue increases and national deficit reductions. ■

References: 1. Must Take Cards Merchant Discounts and Avoided Costs, Jean-Charles Rochet and Jean Tirole, 7th November 2008. 2. European Commission Invitation to Tender, Comp/2008/D/020. 3. Minutes of Meeting of DG Internal Markets, 10th March 2010. 4. European Commission Invitation to Tender, Comp/2012/003 & 004. 5. Credit Card Interchange Fees, Jean-Charles Rochet and Julian Wright, December 2009. 6. General Court of European Union, Press Release No.69/12. 7. Review of Directive 2007/64/EC(PSD) and Regulation (EC) No. 924/2009, Table of the European Commission Proposals.

cial basis, albeit with some key founding principles that underline the commitment to responsible, sustainable lending.

This is reflective of the wider global eco-nomic scenario which has tightened lending belts and where, even in countries such as Brazil or India that have not suffered an eco-nomic recession, it would appear that the les-sons of the Western credit crunch have been listened to and lending criteria adjusted to ensure programme sustainability.

It is therefore apparent that although linked closely with aid budgets, the micro-finance industry is not ring-fenced as might once have been assumed. Indeed early investigation indicates that micro lend-ing initiatives have been more severely impacted in the more credit-impaired mar-kets surveyed in the study, such as in Egypt.

Adapt or perish

The repercussions of this are evident across the countries in the study. A con-sumer credit-fuelled boom in South Africa for instance has provoked a sharp retrench-ment in unsecured lending issuance in order to reduce unsustainably high levels of bad debt. Similarly in Brazil, close, care-ful management of microcredit business lines by commercial institutions such as Santander and Banco do Nordeste, has maintained levels of bad debt at less than 1% of total micro loans outstandings.

Meanwhile growing customer demand for the developed world equivalent of credit for marginal communities, in the form of payday lending, is emboldening regulators in the UK to act to oppose often-

microcredit


mon themes that signal the approaching maturity of the microfinance industry.

Some common themes

Most significant of all perhaps for a form of lending originally born out of an informal community is the relatively urgent need for microcredit programme formalisation.

Whether on the side of the customer – or loan recipient – or from the point of view of the credit issuers, more formal processes for risk evaluation, pricing, regulation, market-ing and credit distribution are in demand by lenders and their customers across the emerging world.

The outcome is that, microcredit, sprung out of a developed world desire to use financial tools to aid development pro-grammes, is no longer quite such a distant relative of the commercial, mainstream unsecured lending industry. As Santander Microcredit in Brazil demonstrates (see box), success in microcredit is best achieved when the programme is run on a commer-

A preparatory study of unsecured and micro lending marketplaces in high growth and developed markets has

underlined the following:

· The financial crisis has caused a sharp drop in emerging world access to basic financial services.

· There is a clear disconnect between the social and commercial objectives of con-sumer and micro-lending schemes.

· There is a clear need for measurable evidence of the impact of micro lending programmes on economic growth.

· There is an acknowledged need for a coherent approach to the regulation, provision and distribution of micro and consumer credit that cuts across govern-ment, the private sector, the financial services community, NGOs and multilat-eral agencies.Although there are distinct peculiarities

in the scale, individual loan size and distri-bution of microcredit in each of the regions and markets included in the study, early investigation also reveals a number of com-

Microcredit, a booming sector since the ‘90s, is the latest to feel the pinch in the wake of the global financial crisis, according to a report by Baird’s CMC Financial Services.

by Simon Hardie and Denise Gee

Soft finance getting tougher

Santander microcredit programmeThe Brazilian subsidiary of Spanish lender Santander’s microcredit programme is a particularly strong example of the benefits of a more formalised, commercial approach to microcredit.

The bank’s business line, named Santander Microcredit since 2010 after the bank acquired Real Microcredit uses a team of credit agents serving more than 600 cities across Brazil to meet loan applicants and assess their eligibility.

According to the bank, it is the traditional, face-to-face approach to lending that has been key to its success. The approach involves a combination of strong customer relationship management with close monitoring and assistance of its consumer base that is traditionally not highly financially literate. ■

microcredit


tution initiative in Kenya is a particu-larly strong example of this. Musoni, a Netherlands-based social enterprise, has partnered with Kenya’s M-Pesa, the service that enables funds to be transferred elec-tronically by SMS message, to assess and approve microloans using tablet comput-ers. Once approved, loans are sent directly by SMS, avoiding the need for riskier, cost-lier cash-based transactions.

The Musoni initiative is one of the best examples worldwide of how technology is broadening the reach of financial services by reducing loan approval time, which allows more customers in remote areas to be served. At the same time savings generated by trans-ferring funds electronically, and lower risk of funds being stolen, is creating a more attrac-tive microfinance business proposition.

In time, this should enable new competitors to enter the marketplace, driving down the cost to consumers and improving financial

pernicious rates of interest. Quite justifiably these legitimately provided products serve customers beyond the reach of regular bor-rowers and potentially reduce the number of lenders who might resort to more unreg-ulated sources of funds in their absence. The increased regulatory scrutiny however neatly highlights the balance that needs to be struck between higher costs of credit, business model sustainability and, the per-ceived or implicit responsibility of lenders to improve the lives of their customers.

In other parts of Africa, as well as elsewhere in the emerging world, the use of technology is also proving to be an essential tool that is helping both to reduce the risk adherent in previously cash-dominated lending markets and enable mainstream lenders to chase ‘the long tail’ by serving formerly unserved customers with products that previously were not commercially viable or sustainable.

The Musoni mobile microfinance insti-

Box headinginclusion for poorer or subprime customers. For more on the impact of technology on the global unsecured lending industry, see our follow-up article “Chasing the long tail” for publication later this year.

The study forms part of a unique global research project conducted by international communications management consultancy Baird’s CMC. ■

Full findings of The Global Consumer Credit Conditions Report will be released

at a global conference in Rio De Janeiro in February 2014. It will use evidence from

prime and sub-prime unsecured and micro-credit lenders in high growth and advanced markets to inform the economic conditions

that support creation of a vibrant lending market; the regulatory policy that can best

ensure sustainable consumer borrowing; and identify the connection between unsecured

credit and economic growth.www.bairdscmc.com

issuing and acquiring


Looking at the explosive growth of e-com-merce, Benjamin Nachman, CEO of Credorax, told delegates that the internet economy is expected to grow almost 10% per annum through to 2016, representing a $4.2 trillion contribution to the G-20’s total GDP in 2016. However, there are a number of challenges to overcome before payment stakeholders can leverage the full opportunity.

Cross-border market complexity is still at the fore, and fraud remains the number one issue. There is also a need to enhance cross-border servicing and support, particularly in light of the many fragmented payment models in existence.

While the European e-commerce market is maturing and the online payments chain is evolving, competition from new and existing players is increasing. Payment service provid-ers are now required to think not just about payment processing but also about payment management.

MPE 2013 highlights changing acquiring landscape

The Merchant Payment Ecosystem 2013 event, held in February in Berlin, is proving to be one of the most impor-

tant events in the global payment landscape. This year’s event brought together over 430 participants, 70 presenters, and 25 sponsors and exhibitors.

Over three days, delegates heard from speaker insights into topics such as rich mer-chant services, covering a new generation of services designed to improve the interaction with consumers and to streamline merchant business operations. The importance of payment convergence in m-commerce and e-commerce was also well briefed. Delegates heard that in order to provide a rich e-com-merce shopping experience for consum-ers, interaction beyond payments with 24/7 connected consumers will bring additional opportunities and threats to the industry.

As with last year, mPOS was one of the most discussed topics. Magnus Nilsson, CEO of mPOS firm iZettle, told delegates that far from being the disruptive force it has been hailed as, iZettle is pursuing partnerships with leading banks in Europe in order to pro-mote card payments in the micro-merchant sector. To this end it has partnered with the likes of Raiffeisen Bank and DZ Bank to pro-vide them with mPOS capabilities. The main advantages of this for banks is that it helps to reposition them as innovators, while also enabling them to attract new customers.

Jeremy King, European director of the PCI Security Standards Council, looked at the state of anti-fraud efforts in the industry, telling del-egates that of the data compromises detected in 2012, around 97% were avoidable through simple or intermediate controls.

Security, he told delegates, was not about having a single process in place, but required the bundling of people, processes and tech-nology. The PCI Security Standards Council is also working to bolster security in the m-payment space and has already identified mobile apps that can be validated to PA-DSS. Additionally, there will be a new PCI 3.0 stan-dards release arriving in November 2013.

Such players need to deliver localised and customised solutions, and provide a seam-less experience in order to support customer long-term stability and growth. They also need to offer robust fraud screening and prevention and assessment tools, along with leveraging vast, pooled and segmented data to improve client business decisions.

Perhaps of most importance in this age of convergence is the need to become what he termed a “channel-less” payments provider, and provide merchants with price trans-parent, omni-channel technology-oriented, innovative solutions. Also of importance is the need to nurture niche payment part-nerships that enhance and complement businesses.

One of the defining elements of the MPE event is its awards gala, which honours the outstanding products, services and companies which are all helping to shape the industry. ■

Equens processed its billionth SEPA trans-action last week. Since the launch of the SEPA Credit Transfer (SCT) scheme in January 2008 and the introduction of SEPA Direct Debit (SDD) in November 2009, transaction volumes have shown progressive growth.

Although Equens’ systems have been prepared for large SEPA payment volumes since day one, it has taken five years to reach the mark of 1 billion SEPA transac-tions, as many market participants have not yet prepared themselves for the SEPA migration. There is therefore still a lot to do between now and the SEPA end date of 1 February 2014.

Michael Steinbach, CEO and Chairman of the Board of Directors of Equens: “Our billionth SEPA transaction is the result of our early and intense preparation for the introduction of SEPA Credit Transfer and Direct Debit. Our timely investments in our high-performance payment system are now starting to pay off. Although the SEPA format brings about much higher data volumes, our system currently processes up to 10 million SEPA payments per day without problems. Despite the milestone of 1 billion processed SEPA transactions, we see that the European payments market still has a long way to go before the final SEPA migration next year.” ■

Equens processes billionth SEPA transaction

issuing and acquiring


WorldPay has announced the acquisi-tion of the payment service provider YESpay. Leveraging YESpay’s technol-ogy, WorldPay will offer its UK clients a complete payment service, including merchant acquiring, card processing and payment terminals integrated with POS systems. The combined service will allow WorldPay and YESpay cus-tomers to fully exploit the evolving needs of omni-channel shoppers with a single payment service operating in-store, online and on mobile.

According to WorldPay, the acquisi-tion, made for an undisclosed amount, is in response to growing demand from WorldPay’s clients for integrated pay-ment services - allowing the integration of their payment service with all of their sales channels - to support the evolving needs of the omni-channel shopper. It also enables YESpay to significantly increase the deployment of its solutions to WorldPay’s customer base. ■

Barclaycard and American Express have agreed to expand the scope of their current global relationships, with Barclaycard becoming an American Express card issuing partner in the UK. This builds upon their existing relation-ships and will enable Barclaycard to issue cards accepted on the American Express global network in the UK.

Barclaycard and American Express currently have a number of business relationships around the world. This new agreement will increase the choice available to Barclaycard customers and will lead to a wider range of products being offered to UK consumers. The companies will commence product development during 2013. ■

WorldPay acquires YESpay

Barclaycard and Amex sign new UK card issuing agreement

to subscribe and engage with credit card social media pages. Consumers were most interested in the ability to contact cus-tomer service through social media (34.1% incidence rate), redeem exclusive rewards/special offers (32.5% incidence rate) and sign up for cardholder subscriber events (30.1% incidence rate).

“Social media is a huge opportunity for issuers, given its strong cardholder penetration”, said Matt Simester, manag-ing director at Auriemma. “Social media provides a way to drive increased engage-ment and usage amongst cardholders, and is best suited as either a mass servicing or marketing channel, as one-on-one inter-action remains difficult to accomplish. To drive stronger interest and engagement with social media, exclusive and frequent offers are key, which will also serve to dif-ferentiate issuers from the competition in an increasingly competitive marketplace. Issuers need to start spending as much time on engagement through this channel as phone and branch based services.” ■

Social media improves engagement with UK credit cardholders

According to new research from the Auriemma Consulting Group, cred-it card issuers have been seeking

new ways to drive cardholder loyalty and engagement, as their market share has been under threat from both debit cards and emerging payment types (e.g. mobile apps, mobile wallets).

Social media represents a significant new channel to improve cardholder engagement, as 71.7% of credit cardholders already use social media, and usage is increasing amongst younger and higher-income cardholders.

Despite strong cardholder penetration of social media, only 13.8% of consumers are subscribed to their credit cards issu-ers’ Facebook page. Further, some 68% of the cardholders subscribed had not yet interacted through the channel (e.g., responded, replied or shared a message). Issuers therefore have yet to solve how to best use social media to drive increased engagement and loyalty.

The research showed that consumers must see clear and tangible value in order

Prepaid Financial Services (PFS), a global provider of prepaid solutions, and Deutsche Card Services have announced the sign-ing of a strategic partnership to develop and deliver prepaid card solutions across Europe. The strategic agreement is an out-come of the prepaid card providers’ con-tinuous expansion in new territories and the full-service acquirer and payment ser-vice provider’s aim to deliver solutions in response to client demands.

Within the agreement, PFS will work with Deutsche Card Services to develop prepaid card solutions for corporate cli-ents. According to PFS, some markets, e.g. Germany, where prepaid cards do not yet play as important a role, as they do in other

PFS forms prepaid partnership with Deutsche Card Services

regions such as UK, Italy and US, are espe-cially interesting. Prepaid solutions can be beneficial for travel and other corporate expenses, payment of disbursements, ben-efit payments, compensation payments e.g. for airlines and insurance companies and payroll administration, especially where banking facilities are underdeveloped.

PFS will provide the technology and support to enable Deutsche Card Services to offer new payment solutions across different regions and territories whilst Deutsche Card Services will provide PFS with strategic access to clientele in new operating regions. The cooperation also includes plans to jointly develop new ser-vices in the future. ■

mobile payments


strategy on mobile payment technology and products.

Kazem Aminaee, CEO and President of Spire Payments, says of the move: “This is further proof of our commitment to deliv-er Spire’s product roadmap and business strategy. At our industry launch event last September, I promised our customers that Spire Payments would bring a new range of terminals to market in 2013, including a product that would address the evolv-ing mPOS market. We are now following through on this commitment.” ■

eBay points to a mobile future

eBay has revised its global m-com-merce forecast, predicting that it will generate in excess of $20 billion in mobile sales volume in 2013.

The forecast comes as eBay reveals that more than four million new customers joined eBay via mobile devices last year, boosting the three million plus listings being added via mobile around the world every week. According to the company, nearly one in three transactions made on eBay today are now influenced by mobile at some point during the shopping journey.

eBay’s suite of mobile apps have been downloaded more than 120 mil-lion times globally, a 20% increase since reaching the 100 million download milestone in September 2012.

Olivier Ropars, senior director of mobile at eBay, said: “Our forecast for global transactions taking place in 2013 is ambitious, but I believe we are yet to see the full potential that mobile can offer the UK retail economy. We predict that the value of global transactions will reach $119 billion by 2015, and I’m excited to see what this means for eBay and its consumers alike.” ■

Spire Payments has announced the acquisition of Thyron Payments Systems, which specialises in mobile

payments. The acquisition cements Spire Payments as the third-largest POS player in Europe by providing a chip and PIN/PCI SRED-certified mPOS solution alongside the new range of Spire Payments terminals, due to be rolled out in early 2013.

Under the terms of the agreement, Thyron will become a wholly owned sub-sidiary of Spire Payments UK Limited, and will become the focal point for Spire’s

Spire Payments acquires Thyron

PayOne has filed a patent infringement lawsuit against retailer Home Depot in the Northern District of California, alleging that the Home Depot retail store deploy-ment and use of PayPal’s in-store check-out infringes on multiple PayOne patents including the use of a mobile phone num-ber and a PIN to complete the check-out process and payment at point of sale.

The convergence of the payments and technology industries creates a business opportunity and a significant transition for the vending sector afforded by the spread of payments-enabled mobile devices, writes Electronic Transactions Association CEO Jason Oxman.

He notes the vending industry is adapt-ing to this trend through collaboration with the mobile payments industry to devise mobile payment options that include smart-er vending machines. “The mobile phone has evolved from a two-way communica-tion tool to a complete socially interactive, machine interactive device, and it’s going to play an important role in the continued resurgence of vending,” predicts Apriva’s Rinaldo Spinella.

Embedding interactive smartphone capa-

PayOne files patent infringement lawsuit against Home Depot

Mobile payments offer big opportunity for vending industry

The complaint seeks unspecified dam-ages and a court-ordered injunction against future infringement by Home Depot. According to PayOne, its platform and proprietary technologies enable, among other solutions, the use of a mobile phone number and PIN to instant-ly transact with a merchant at the POS or in a virtual environment. ■

bilities broadens access to a new consumer market that does not carry cash but always has a mobile payment device on hand. Smarter vending machines also widen value beyond the items they stock, including expanded functions such as ATM services or the generation and accessibility of product data and consumer behavior.

“Mobile payment technology has the potential to extend the reach of vending as a tool for collecting market intelligence by increasing the attraction exerted by vend-ing machines on the younger, more mobile consumers who are most favourably disposed to automated convenience,” Oxman writes. However, he says the payments and vending industries must work together to address security and other challenges that come with mobile payment technology’s proliferation. ■

Stripe begins UK beta trialStripe has launched a closed beta trial of its payments solution in Britain ahead of a broader European deploy-ment. Stripe gives merchants an application programming interface that they can incorporate into their websites to enable easy credit card acceptance, without needing mer-chant accounts.

They also can establish their own payment forms without concerning themselves about PCI compliance requirements. ■

mobile payments


According to a new report from the UK Payments Council, “The Way We Pay”, over the past decade, UK

consumers have significantly changed their purchasing behaviours over the last decade, with the share of cash payments being eroded by rising usage of debits cards with every passing year. One of the more con-troversial conclusions of the report is that the end of plastic cards could be in sight as mobile phones are increasingly adopted as payment devices.

Cheque usage continues to fall, halving every five years. In 2001, 40% of home rental payments were made in cash and 43% of retail spending by value used cash too. By 2011, landlords collected only just over a quarter of rents in cash, while only 30% of shopping was paid for in this way (with the majority of payments being under £5). The rise of the debit card has been responsible for the decline of cash on the high street – debit card spending has risen almost fourfold since 2001 – while direct debits have changed the way UK consumers make regular payments.

The Way We Pay – Payments CouncilAdrian Kamellard, CEO of the Payments

Council, said: “We scarcely notice the steady changes in the way we pay, yet someone in their thirties today will see more change in their lifetime than in the entire history of money. Even recent innovations such as pay-ment via a mobile phone, which ten years ago some felt to be science fiction, will soon be commonplace. The 2000s were the decade of the debit card. The 2010s are likely to be the decade of the mobile phone. Just as we can’t imagine how we ever did without the internet, many people will soon wonder how we used to be so dependent on cash and cheque. Twenty years from now even cards may seem archaic.” ■

New research from VocaLink into UK con-sumer appetite for alternative ways to pay on mobile devices reveals that 81% of those interested in new digital payment methods say they are more likely to adopt such ser-vices if they are provided by their bank.

The independent research undertaken by Accord on behalf of VocaLink, includes both qualitative and quantitative analysis across 5,000 UK consumers, merchants and businesses. The research shines a light on UK consumers’ current payment habits.

· 33% of smartphone owners in the UK have used them to shop online.

· 42% of smartphone owners have used them for online banking.

· 43% of tablet owners in the UK have used them to shop online.

Banks must drive UK digital payments innovation

· 33% of tablet owners have used them for online banking.Convenience and ease of use are important

factors in encouraging consumers to adopt these new ways to pay. However security remains as important for new digital methods as well as existing payments methods.

For those interested in new payment ser-vices, 81% indicated they would be more like-ly to use them if they were provided by their bank – and of those, around half indicated they would be encouraged to transact more using their mobile device. This indicates that banks are trusted to provide safe and secure transactions, regardless of channel and the delivery of alternative payments is a clear opportunity for banks to maintain and build greater customer engagement. ■

Companies struggle to popularise Mobile Money

Visa launches mobile managed service

Various companies are grappling with the challenge to develop compelling reasons for consumers to use mobile payment technology.

The GSM Association’s Reed Peterson says in-store smartphone payments require “a lot of things to align,” includ-ing equipping the phone with NFC hard-ware and software, deploying the right equipment and training in the store, the phone company supporting the trans-action, and payment processors and banks having a stake in it. Peterson says although some of these components have been established, the network of commercial pacts that supports these payments requires expansion, while con-sumer demand remains lukewarm.

The popularity of iPhones among consumers is an impediment to NFC adoption because Apple has not yet embedded NFC into any of its smart-phones. Another flashpoint for NFC revolves around who controls the secure element in phones, with the GSMA sup-porting the element’s installation in the subscriber identity module rather than in the phone itself.

Visa, Google, and phone companies are debating over who controls the secure element, while PayPal advocates avoiding NFC altogether. ■

Visa has announced the launch of a new plug-and-play mobile money platform that will make it simpler and cost-efficient for financial institutions and mobile operators to offer mobile financial services. The global platform is the world’s first bank-grade managed service for mobile money – meaning it allows Visa to host and fully manage all aspects on behalf of the provider. ■

Source: Payments Council – The Way We Pay 2013.

Payments volumes from 2001 to 2021800

700

600

500

400

300

200

100

02001

20062018

20112002

20142007

20192012

20032015

20082020

20132004

20162009

20212005

20172010

Debit Card

Inde

x 200

0 = 10

0

Automated creditsDirect debit

Credit card

Cash

Cheque

contactless


China Unicom has announced that it will use Gemalto’s UpTeq NFC SIM card to secure its mobile wallet programme. China Unicom is the nation’s second-largest wireless opera-tor, with more than 220 million subscribers in which over 60 million are on 3G. The Unicom Merchants’ Bank mobile wallet is the first NFC payment service being launched in China, in a joint collaboration between China Unicom and China Merchants Bank for the mobile wallet itself.

China Unicom’s mobile wallet enables consumers to make purchases at food and beverage outlets, including retailers and merchants who accept China UnionPay QuickPass contactless cards. There are cur-rently over 162,000 QuickPass POS terminals in Shanghai that are compatible with the mobile wallet. The mobile wallet enables China Unicom subscribers with a CMB credit card to securely store their card details in the SIM card of their NFC enabled mobile phone.

Similarly, Canadian telecommunications carrier TELUS will use the same NFC SIM card to enable consumers to securely store a variety of credentials on their mobile phones.

China and Canada roll-out SIM based NFC payment serviceThis fully compliant Europay MasterCard

Visa (EMV) technology will enable custom-ers to make secure payments, participate in loyalty programmes, validate their tran-sit pass, and redeem coupons using the secure credentials stored on their SIM cards accessed with TELUS smartphones equipped with tap-and-go NFC and LTE capabilities.

“Having migrated to EMV chip years ago, the Canadian market is naturally well positioned to offer NFC-enabled credential solutions within its well-developed con-tactless ecosystem which boasts one of the greatest contractless-ready retail point of sale penetration rates globally,” comments Sébastien Cano, SVP of Telecommunications at Gemalto North America.

“TELUS will be bringing mobile payment technology to customers very soon and we have teamed up with Gemalto to offer a secure and seamless experience to enable the storage of payment and non-payment credentials on TELUS SIM cards,” continues Drazen Lalovic, Vpof Market Planning at TELUS. ■

NXP highlights expanding NFC ecosystem

Dutch banks launch mobile NFC payments trial

programmes. Samsung will offer banks the ability to load payment account information over-the-air to a secure chip embedded in Samsung devices, using Visa’s Mobile Provisioning Service which is linked to Samsung KMS (key management system), a service that creates secure data storage domains for issuers.

The Visa payWave mobile applet will be preloaded onto selected next-gener-ation Samsung mobile devices featuring NFC technology and an embedded secure element. Off the shelf, these devices are ready to be personalised with Visa payment account information, with consumers using a mobile payment application provided by their financial institution. ■

Visa and Samsung sign global NFC alliance agreement

Visa and mobile handset manufac-turer Samsung have formed a global alliance to further mobile NFC pay-

ment services. Financial institutions that are planning to launch mobile payment programmes will be able to use the Visa Mobile Provisioning Service to securely download payment account information to NFC-enabled Samsung devices. In addi-tion, Samsung has agreed to load the Visa payWave applet onto its mobile devices featuring NFC technology.

According to both companies, the alli-ance is the first of its kind between an NFC handset manufacturer and payment net-work that is paving the way for the imple-mentation of large scale mobile payment

NXP Semiconductors has showcased a range of mobile technology solutions at this year’s Mobile World Congress 2013 in Barcelona, demonstrating enabled devices running applications for the connected city, home, office and retail environments.

According to NXP, 2013 will see the mobile ecosystem expand even further, with new innovations and applications being launched that will enhance all aspects of the mobile lifestyle. NXP’s PN65 NFC solution is used in 65% of NFC-enabled phones worldwide.

Some of the innovations showcased at MWC include MIFARE4MOBILE, an advanced mobile ticketing solution that allows NFC-enabled smartphones to be used for ticketing applications on more than 650 contactless transport systems around the world that are based on NXP’s MIFARE technology.

A similar solution was successfully test-ed in late 2012 in Dubai, representing the world’s first NFC based ticketing system. Meanwhile, Think&Go NFC utilises NXP’s NTAG NFC tag ICs integrated in super-market shelves to change the shopping experience by bringing individualised information and promotions to the con-sumer at the place of purchase. ■

Dutch banks ABN Amro, ING and Rabobank are teaming up with MasterCard and telco KPN on a con-tactless mobiles payments pilot in the Dutch city of Leiden. The pilot will involve 1,000 KPN customers who also have accounts with one of the three banks and will run until the end of 2013. Participants will be able to make low-value purchases at MasterCard ter-minals in shops and restaurants. ■

contactless


With more than 2.5 million Cityzi NFC-enabled handsets now in circulation, France is ready for wide-scale mobile contactless services in 2013, claims the Association Française pour le Sans Contact Mobile (AFSCM) industry association.

In 2008 three French telcos joined forces to develop NFC standards and promote the technology. In 2010 the partners’ Cityzi initia-tive saw the city of Nice declared a mobile contactless city, enabling residents to use their NFC-enabled phones to pay at restau-rants, supermarkets and local stores, as well

Gemalto says its UpTeq NFC SIM and Allynis Trusted Services Management (TSM) platform are at the core of Brazil’s first mobile NFC project.

TIM Brasil, a mobile operator with 70 mil-lion subscribers, and Banco Itaú are using the technology to transform smartphones into contactless mobile payment devices.

“The pilot in Brazil is an extension of more

France gears up for mobile NFC

Gemalto, Banco Itaú and TIM launch Brazilian NFC project

as in the city’s transport networks. In France, around 55,000 retailers have

POS terminals that accept mobile phone payments. Handset manufacturers such as Samsung, LG, Sony, HTC, Blackberry, Motorola and Nokia are all automatically integrating NFC into their new products, says the AFSCM. More than 26 mobile phone handsets are compatible with Cityzi NFC, compared with 14 in 2012. ■

than 50 successful global deployments of Gemalto’s NFC technology and this is only the beginning in Latin America,” said Eric Megret-Dorne, SVP of secure transactions at Gemalto Latin America. “The collaboration with strong market leaders such as TIM Brasil and Banco Itaú is a major step forward in rolling out NFC services to the masses in Brazil.” ■ Visa Europe expand UK

contactless payments

OpenWay, Lukoil and LICARD promote contactless payment

ing delegates to make payments at contact-less payment terminals across the Fira Gran Via. In addition, the app allowed payments at any of the 16,000 Visa contactless pay-ment terminals in stores, commercial cen-tres and city markets, as well as 700 taxis installed by CaixaBank around Barcelona.

According to the companies, the market potential for NFC is significant - nearly 1.5 billion SIM-based handsets will have been sold worldwide between 2010 and 2016, supporting transactions of more than $50 billion globally over the same period, and momentum is growing. Further, the deploy-ment of NFC-ready POS terminals is set to expand dramatically, growing from 3.9 million in 2011 to 43.4 million in 2017, with 53% of all POS terminals worldwide being NFC-ready. ■

Payment players partner for MWC contactless payments

This year’s Mobile World Congress event brought together CaixaBank, Gemalto, Telefónica and Visa Europe

who teamed up to deliver a payments appli-cation offered to the 3,500 delegates who attended the event. The app, developed by Telefónica Digital, enabled delegates to make mobile contactless payments using a prepaid card especially developed for mobile payments, which has been enabled to work with Visa’s contactless payment technology. The card is issued by MoneyToPay, the new subsidiary for the prepaid business created by CaixaBank.

Delegates experienced the service on an Xperia smartphone provided by Sony Mobile Communications, and using wallet technology developed by Telefónica Digital.

The app was pre-loaded with €15, allow-

Visa Europe is working with UK banks RBS and NatWest to roll out contactless cards to over 2 million eligible custom-ers of the banks over the next year.

There are 26 million Visa contact-less cards in circulation in the UK and around 50 million in Europe. Contactless payments are accepted at more than 150,000 terminals in the UK and a total of 590,000 across Europe. By the end of 2013, there will be more than 70 million Visa contactless cards in use across Europe. ■

LICARD, a key player in the Russian and CIS fuel card market and OpenWay, a global developer of IT solutions for payment card issuing and acquiring, have implemented a project under which all types of bank, fuel and loyalty cards are united on the WAY4 process-ing platform from OpenWay.

LICARD’s new system processes bank, fuel and loyalty card payments, both online and offline, keeps detailed accounting records for all card transac-tions, and provides flexible settlement to clients with individual requirements. WAY4 also supports international clear-ing and fuel card acquiring abroad.

An additional advantage of the system is the capability of acquiring MasterCard PayPass contactless cards. At the moment, this function is avail-able at most of Lukoil filling stations in 65 regions of Russia. Also, imple-mentation of the new WAY4-based accounting system has substantially shortened the clearing and settlement cycle between fuel suppliers and cli-ents, which promoted more effective management of filling stations. ■

pos terminals

Visa introduces Visa Ready Partner mPOS services

Paydiant and Menusoft launch mPOS and wallet service

Visa has launched a new partner pro-gramme, Visa Ready Partner, designed to accelerate the introduction of innovative payment solutions globally. As part of the Visa Ready Partner programme, Visa is paving the way for mPOS providers to accelerate the deployment of mPOS acceptance solutions by defining mPOS requirements and best practices to sup-port the open development of commer-cially-viable solutions and services, while upholding Visa’s principles of security, brand integrity and interoperability.

It will also provide applications, tools and services to enable the develop-ment of mobile acceptance solutions compatible with magnetic stripe, EMV chip, and contactless card payments. Additionally, it will make available open API and software development kits to allow mPOS solutions providers in select markets to connect to Visa via a number of payment gateways, includ-ing CyberSource and Authorize.Net, acquired by Visa in 2010. ■

MobiWire showcases MobiPrint²

Spain’s Banco Santander and mPOS special-ist iZettle have formed a partnership agree-ment, making Banco Santander the first bank in Spain to enable self-employed profession-als and micro-merchants to accept card pay-ments with smartphones and tablets.

“In Spain alone there are more than 1 mil-lion self-employed, professionals, and micro-companies that, due to the mobile nature of their business, need an option that is more

Global anti-fraud specialist ValidSoft has announced that its secure mobile architec-ture for real-time transactions (SMART) has been selected to be an integral element in the recently announced payment acceptance service solution to be provided by Spindle, a US provider of mobile payments solutions.

With fraud costs estimated to be over $100 billion annually in the US, fraud pre-vention is quickly becoming a matter of

survivability for many merchants, according to ValidSoft. However, with the emergence of the micro-merchant, where a smart-phone and card reader dongle are all that’s required to set up shop and process card

Paydiant, provider of a cloud-based mobile wallet and offer redemp-tion platform, has announced that

Menusoft has integrated the Paydiant mobile wallet solution into its Digital Dining restau-rant management and POS software system.

Menusoft’s 50,000 Digital Dining custom-ers can now enable pay-at-the-counter, pay-at-the-tablet/handheld and pay-at-the-table mobile wallet capabilities, along with tar-geted mobile offers and offer redemption,

Banco Santander and iZettle form partnership

ValidSoft SMART solution selected by Spindle

flexible than conventional card terminals,” said Francisco Fernández Cué, head of pay-ments at Banco Santander.

iZettle has also launched a chip and PIN reader which connects wirelessly, via Bluetooth, to a smartphone or tablet. Like the iZettle chip and signature reader, the new device works with iZettle’s free app that lets enables a smartphone or tablet to accept card payments. ■

payments, protection from merchant fraud, driven by the relative ease of being able to process cards, is becoming an imperative in the protection of acquirers.

According to Pat Carroll, CEO at ValidSoft: “The frequency and magnitude of fraud and security breaches in the payments space is rapidly rising. Security is only as strong as its weakest link and the recent high profile case of one of the largest UK banks announcing the suspension of its mobile app due to a security flaw in its enrollment process is a stark reminder of this. It is imperative that institutions employ a layered approach of strong authentication and verification com-bining visible and invisible security checks, to ensure merchants are not at risk, whilst also protecting against rogue merchants in the growing area of micro-merchants.” ■

branded and configured to meet the needs of each restaurant customer.

Once end-customers use their smartphones to download a restaurant’s branded mobile wallet app and their payment cards are linked to the wallet, restaurant customers will scan a QR code presented to them on a payment ter-minal or on a receipt at the table. From there, customers use their mobile device to choose which offers to redeem and which card type to use to complete the transaction. ■

French mobile commerce specialist MobiWire has unveiled MobiPrint², the latest version of its transaction processing terminal. The white-label company, a specialist in cash and electronic transaction technology and a manufacturer of mobile phones, has provided customers across Latin America and South Africa with more than 50,000 of its POS terminals.

MobiPrint² is now used in various parts of the Middle East, Western Africa and Latin America, expanding the company’s footprint to countries where banking ser-vices tend to be rare and cash payments are the principal means of transaction. ■

payments cards and mobile | March | April 2013 paymentscardsandmobile.com

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Ingenico to acquire Ogone

Quarter of Indian consumers shop online

MasterCard launches MasterPass digital payments service

Ingenico has reached an agreement in principle with Summit Partners to acquire Ogone, a pan-European online payment services provider, for an enterprise value of €360 million.

According to Ingenico, the acquisi-tion represents a key milestone in the execution of Ingenico’s strategy of becoming a “one-stop-shop” provider covering multi-channel payment solu-tions such as POS, online and mobile. The combination of Ingenico’s custom-er base and infrastructure with Ogone’s platform offers an opportunity to lever-age synergies in terms of new upselling areas and offer optimisation expected to generate additional EBITDA in excess of €20 million by 2015.

Ogone has a global client base of over 42,000 merchants, and in 2012 it gener-ated €42 million of revenue. The secured financing of the acquisition will consist of existing cash for €120 million and in committed bank lines of €240 million. ■

Around 24% of Indian consumers shop online at least once a month, according to the e-Retail Report 2013. The survey shows that the country has 40 million unique online shopping website visitors per month, with this number increasing at the rate of 45% annually.

Among categories, apparel has been the fastest growing category accounting for 15% of online users in India. Vertical e-commerce categories, including baby products, shoes and other lifestyle cat-egories, have also shown growth.

The report points out that direct debit is the most common payment type, amounting to over 50% of overall pay-ments of online shopping in India. Cash on delivery (COD), which is a popular mode of payment, represents 20% of total e-retail transactions. ■

PayPal and PC manufacturer Lenovo have joined with other internet and security com-panies to form the Fido Alliance (Fast Identity Online) with the aim of replacing password-based log-ins with an industry-supported open protocol tied to the actual device used to access online services.

Fido’s standards-based approach auto-matically detects when a Fido-enabled device is present, and offers users the option to replace passwords with authentication methods embedded in the hardware. The

According to a survey released by the UK Payments Council, over the last decade, the number of UK consumers making pay-ments using debit cards has risen by 400%, which is a direct result of an increase in online shopping.

Adrian Kamellard, CEO of the Payments Council, says that there has been a subtle

The war of the digital wallets is heat-ing up with the news that MasterCard has unveiled MasterPass, a digital

service that lets customers use any card or enabled handset to shop online and in the real world. Based on PayPass Wallet Services, MasterPass will support the use of NFC, QR codes, tags and mobile device for in-store purchases, while for online pur-chases, shoppers get a simplified check-out process, without having to share ship-ping and card information.

Banks and merchants can utilise MasterCard’s technology to offer their own wallets, with consumers storing card information, address books and more in a secure cloud. The wallet is open, which means that in addition to MasterCard, people can use other branded credit,

PayPal and Lenovo aim to eradicate passwords

UK e-commerce levels boosts payment card usage

standard will support a full range of technol-ogies, including biometrics such as finger-print scanners, voice and facial recognition, as well as existing authentication techniques, such as trusted platform modules, NFC, one-time passwords and security tokens.

Vendors signing up to Fido must install the necessary protocols on their servers and convince users to install new authentica-tion software on their Internet-connected phones and computers where it is not already available. ■

but significant shift in the payment habits of people in the UK, with behaviours chang-ing to the point that the cost of making payment card transactions has been signifi-cantly reduced. Kamellard also predicts that over the next decade, making payments via mobile devices will become the most popular avenue for transactions. ■

debit and prepaid cards. Ed McLaughlin, chief emerging pay-

ments officer at MasterCard, said: “MasterPass brings together all of the ways we pay for things, from traditional plastic cards to digital wallets, and gives consumers the ability to make a payment from wherever they are and with one simple experience.” ■

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Swiss Post Solutions (SPS) has intro-duced a new version 2.0 of JACOS, its chip card operating system. JACO 2.0 features flash technology from Infineon and the new dual-interface version also enables contactless payment. The operating system, developed accord-ing to the latest EMVCo, Visa and MasterCard standards, is available as of now from SPS.

According to the company, flexibility and longer life are the main features of the JACOS chip’s flash technology. Dual-interface technology means that the chip cards with the new operating system can be used as both debit and credit cards. The new version meets the highest security standards and supports dynamic data authentication (DDA) as well as SDA and CDA. ■

Jumio has announced the release of Netverify Mobile, which allows busi-nesses to authenticate their customers’ identities – via passport, driver licence or ID card – using iOS and Android smart-phone cameras.

According to the company, smart-phone users are one-third more likely to experience fraud than the general public, and Netverify’s real-time ID verification reduces the risk of fraudulent activity, while significantly speeding the confir-mation process and reducing associated costs for vendors and online communities.

Financial institutions, online retail-ers and consumer marketplaces and other communities can now integrate Jumio’s ID verification technology into their iPhone and Android applications to confirm a customer’s identity based on government issued IDs from more than 60 countries. ■

SPS launch enhanced chip card operating system

Jumio unveils Netverify Mobile to combat fraud

testing of NFC products worldwide. The tool will also be available for the device vendor community’s debugging and pre-certification needs.

The mobile and payments industry antic-ipates widespread integration of NFC tech-nology in mobile devices: analysts expect close to 300 million NFC-enabled devices to be shipped in 2013, reaching 1.95 billion by 2017. Clear2Pay’s automated Test Solution includes all the latest test cases as defined by the NFC Forum. ■

NFC Forum validates latest Clear2Pay test solution

Clear2Pay, a global payment solution technology provider, has announced that the NFC Forum, the non-profit

industry association that advances NFC technology, has validated the latest release of its NFC Forum conformance test suite.

The test solution enables chip and device manufacturers to verify the digi-tal conformance of NFC devices to the latest NFC Forum device requirements. The solution will be used in authorised test laboratories for official certification

and a merchant’s acceptance device. The OpenAPI standards ensure that value-added wallet data such as offers, coupons and loy-alty, are universally accepted and flow seam-lessly through merchant systems without disruption of traditional transactions.

The current deployment projects involve a peer-mode interface to enable an active dialogue between a mobile wallet and the merchant’s payment acceptance device. ■

number of European and non-EU countries, connecting more mobile network operators and remittance organisations to mobile wallet markets around the world. ■

With the new accreditation, Applus+ can offer a complete programme to certify the security and functionality of contactless smart cards.

The EMV level 1 contactless certification is applicable to smart cards and mobile devices and evaluates the digital and analogue requirements. ■

VeriFone and SK C&C are partnering on the deployment of open interface standards and technology platforms for management of digital wallet services, acceptance solutions and mobile commerce. The two companies are currently in deployment activity with sev-eral large mobile network operators (MNOs).

SKC&C has adopted VeriFone’s OpenAPI common interface standards that govern communication between a mobile wallet

Oxygen8 Group has announced the con-tinued global roll-out of its mobile money transfer hub, Bridge. The company will be adding new money transfer destinations to a

Applus+, a global inspection, testing, cer-tification and quality control company, has achieved a new accreditation for its IT labora-tory, dedicated to security and functionality testing for payment systems such as cards, terminals, and mobile devices. The new EMVCo accreditation allows Applus+ to per-form EMV Level 1 contactless certification.

VeriFone and SK C&C team for mobile wallet acceptance

Oxygen8 Group’s mobile payment solutions set to go global

Applus+ obtains EMVCo L1 accreditation

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TSYS has agreed to buy NetSpend, a provider of prepaid cards to US underbanked consumers, for around $1.4 billion in cash. NetSpend serves more than 2.4 million accounts – 46% of which are direct deposit accounts – with more than 500 retail distributors and 130,000 reload locations across the US.

Philip Tomlinson, CEO of TSYS, said: “The NetSpend acquisition is truly a transformational event for TSYS and consumers alike. It enables us to meet our strategic goals of diversifying our business, being a more innova-tive payment solutions provider and expanding our role within an area of payments that is expected to grow at a 20% annual rate over the next four years.” ■

TSYS acquires NetSpend for $1.4 billion

countries. By doing so, it is adding an addi-tional major card brand to its product range in Italy, which currently consists of the Visa, MasterCard, UnionPay and JCB credit cards, along with V PAY and Maestro debit cards.

Diners Club is used by more than eight million cardholders worldwide, and is accepted by over 14 million merchants in 185 countries. Merchants who decide to activate Diners Club automatically will also accept Discover cards under the same terms and conditions. ■

SIX and Diners Club sign merchant acquisition deal

SIX Payment Services and Diners Club Italy, part of the Discover Network and Diners Club International, have

signed a long-term merchant acquisition agreement for Italy. The purpose of the agreement is to promote the acceptance of Diners Club and Discover cards in Italy.

The agreement closes a gap that SIX Payment Services has had in its card accep-tance range in Italy. SIX Payment Services will support the acceptance of the Diners Club Card and Discover Card in 16 European

cifically designed for the digital industry.

CashBox customers will be able to benefit from expanded international reach, support for major merchant cards, and pre-ferred regional networks and payment methods. Vindicia customers will gain access to numerous global payment methods and 115 currencies provid-ed by WorldPay’s world-wide network. ■

ing will deliver an end-to-end stored value payment solution, combining a secure prepaid product that complements Skrill’s existing payments service. paysafecard’s offline dis-tribution network adds to Skrill’s online network that includes more than 100 payment options in 200 countries worldwide. ■

Subscription billing specialist Vindicia and global payment processor WorldPay have formed a partnership to deliver enhanced payment acceptance capability to Vindicia’s digital e-commerce merchants.

The alliance integrates WorldPay’s pay-ment processing capabilities into Vindicia’s billing platform, CashBox, which is spe-

Digital wallet provider Skrill has complet-ed the acquisition of paysafecard.com, the Austrian prepaid payments business. pay-safecard’s products allow payments without a credit card or bank account at more than 4,000 online stores and more than 450,000 sales outlets in 33 countries across Europe, North America and South America. In 2012, it processed more than 55 million transactions.

Skrill and paysafecard’s combined offer-

WorldPay and Vindicia partner for international payments

Skrill completes acquisition of paysafecard.com


conferences

ers around the venue provided access to information and services. Using just their handset, attendees could pay for their lunch, download exhibitor information, and take advantage of coupons and discounts throughout Barcelona. Several thousand attendees even received complimentary Sony Xperia handsets to fully appreciate the NFC experience.

Mobile World Congress 2013 also hosted the 18th annual Global Mobile Awards, which recognised 37 outstanding offerings in a number of categories, covering topics from apps and entertainment to devices and innovation. ■

Mobile World Congress 2013 showcases mobile horizon

RBTE Wendy short piece

This year’s Mobile World Congress, which took place at the Fira Gran Via between 25-28 February, welcomed

more than 72,000 attendees from 200 coun-tries. Organised by global mobile industry body the GSMA, the event included a semi-nar programme, and an exhibition featur-ing over 1,700 companies from around the world.

New for the 2013 event was the NFC Experience, a collection of SIM-based NFC services for attendees. Participants were able to create a virtual NFC badge on their handsets to speed their access into Congress. NFC-enabled smart post-

ll be is still undecided. It appears that most are spreading their research, interest and investment across several options so that they are prepared when the eventual victors emerge. ■

Advanced Payments Survey P25 www.

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Nordic Card Markets 18-19 January, Copenhagen www.nordiccardevent.co.uk

Conference diary

FIS™ is the global leader in payments technology. With an unmatched breadth of products and depth of knowledge, FIS is uniquely positioned to help you build and maintain a competitive advantage in your market.

FIS offers a powerful combination of payments software and services that will lift your business. We are the trusted partner that offers you the greatest choice of technologies, services and deployment options. Our range of solutions includes:

• Card management for debit, • Mobile payments credit and prepaid • Secure eCommerce solutions• Switching • Merchant and ATM acquiring • Risk and fraud management • Statementing and communications

More than 13,000 customers worldwide trust FIS to keep them at the forefront of the payments revolution. Isn’t it time you joined them? Find out more at www.fisglobal.com.

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