Digital Payment Trends
Jean Sideris
Principal, Dubai Office
Nicosia, 18 February 2020
© Edgar, Dunn & Company, 2020
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Edgar, Dunn & Company is an independent global financial services and payments strategy consultancy
Financial services and payments focus
Six office locations worldwide
Independent - owned and controlled by EDC Directors
+1,000 projects completed
+250 clients in 40 countries & 6 continents
EDC Key Metrics
EDC: Independent, Global, Financial Services
Founded in 1978, the firm is widely regarded as a trusted advisor to its clients, providing a full range of strategy consulting services, expertise and market insight, and M&A support
EDC has been providing thought leadership to its client base working with:
More than 40 European banks & card issuers/acquirers
Most of the top 25 US banks and credit card issuers
Many of the world's most influential mobile payments providers
All major international card associations / schemes & many domestic card schemes (including playing a key role in the establishment of such schemes)
Many of the world's leading merchants, including major airlines
Many Central Banks and Government Bodies across the world
EDC Locations
London
Sydney
FrankfurtParis
San Francisco
EDC Office
Dubai
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Consumers digital payment trends
Today we will discuss key trends in payments from 2 separate perspectives
B2B & B2B2C digital payment trends
1 2
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There has been an explosive development in payment options and it appears that alternative payments will continue to grow
Cards are not the only way to pay online
Customer preferences vary by demographic, country and product / service consumers buy - understanding local
preferences is key to increasing conversion
Alternative Payment Methods(>300 different types worldwide)
202019901980197019601950
Physical Digital
Cloud computing
2000 2010
Explosion of digital customerpayment instruments
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The payment ecosystem is becoming crowded as new players exploit opportunities unserved by incumbents
Traditional Banking New Challengers
Financial Services LandscapeAlternative Players
Traditional Challengers
Large Banks
Retailers Savings
Building Societies
Wallets
Prepaid CardsCrowd Funding
Full Service
Digital Front End
(US)
(GER)
Loans / Invoicing
(US)
MarketplaceLending
(US)
Money Transfer/ FX
(US)
(US)
(US)
(GER)
High Net Worth / Direct
Digital Only Banks
(US)
6
Consumers digital payment trends B2B & B2B2C digital payment trends
1 2
7
68% Want Instant P2P Payments
Source: Accenture US Data
8
Consumers Prefer Natural Language Interface
Voice
or Text
Source: PPRO
9Source: Telstra
Source: PPRO Online Only
About 50% of Consumers Will End a Transaction if
Their Preferred Payment Option is Not
Available
10
Source: GlobalData (2016), National Associations (2016), Postnord (2016)
Europeans Vary In Their Use Of Payment Methods
12%
28%
12%
45% 45%
27%
42% 44%37%
31%
20%
54%
5%
4%
6%
7% 5%
14%
11% 8%
4%
2%
4%
10%
10%
62%
16%14%
12%
9%
22%
21%
53%
60%
5%
23%
20%
6%
9%22%
23%
25%
12%
19%
12% 16%
25%
21%
30%
18%
20%
6%
5%
9%2%
9%5%
13%
25%
13% 14%20%
4% 2%
12%
Germany Austria Netherlands Sweden France Italy Spain Denmark Norway Finland Switzerland UK
Card Cash Bank Transfer E-Wallet Open Invoice Direct Debit Other
Payment Types By Country
11
The Mobile Device Has Become A Key Force In Commerce
41%
45%
48%
52%
55%
59%
0%
10%
20%
30%
40%
50%
60%
70%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2018 2019 2020 2021 2022 2023
M-C
om
me
rce
as
a %
of
tota
l e-c
om
me
rce
(%
)
M-C
om
me
rce
(U
SD
$bn)
M-Commerce Value (USD$bn) 2018-2023
M-commerce ($USDbn) M-commerce as a % of total e-commerce
26%
38%
28%
46%
55%
41%38%
66%
48%
77%
70%
59%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
NorthAmerica
Latin America Europe MEA APAC Global
M-Commerce as a Proportion of Total E-Commerce (%) 2018 - 2023
2018 2023
The prevalence of the card online is expected to reduce looking forward
12
36,6%
33,7%
13,0%
7,8%
8,9%
Payment Card
E-Wallet
Bank Transfer (includes DD)
Cash
Other (prepaid, postpay, invoice, carrier billing, etc)
18,5%
46,7%
19,5%
6,6%
8,6%
Payment Card
E-Wallet
Bank Transfer (includes DD)
Cash
Other (prepaid, postpay, invoice, carrier billing, etc)
2018 2023
Confidential 13
Airplus – 2018 International Travel Management Study
95%
84%
59%
39%
28% 27%
5%
16%
41%
61%
72% 73%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
China India USA Germany Austria UK
Use mobile payments Do not use mobile payments
China is Leading Mobile Payment Usage Globally
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Mobile devices offer great tools to engage with customers on a regular basis
Apps
▪ In-app ordering/purchase
▪ Purchase/shipping status
▪ Receipts/purchase history
▪ Refunds/exchanges
▪ Reviews/feedback
▪ Customer service
▪ Account information
▪ Other types e.g. gamification
Operations
Mobile Could Make A Significant Impact To Customer Loyalty
Confidential 15
Ecommerce Entertainment
Car Sharing
Food Delivery
HotelMovie/Concert Tickets
Train/Bus/Flight Tickets
Car & Bike Sharing
Financial ServicesPayments
TravelTravel
Market Places & Food Delivery
Housekeeping
Alipay and WeChat Pay have created their own digital ecosystem covering consumers’ daily needs, surrounding payments
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Activities & tasks earn energy
Alipay Uses Gamification And Social Influence to Drive ConsumerBehaviors And Loyalty
Clear goals to achieve
“Energy is too low! I will die!”
Plant a virtual tree
450 million “carbon accounts”
20% of Chinese participating
13.3 million trees planted
Confidential
Alipay collects and uses data from the Alibaba environment (plane tickets, ecommpurchases, smartphone location etc.) to push relevant notifications based on location.
Coupons
17
Confidential 18
19
Source: Statista 2019
The Number of IOT Connected Devices Is Growing At An Unprecedented Speed
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The IoT Sector Is Currently Experiencing Significant Growth And6 Key Trends Shape The Future Of Connected Objects
1. Multiplication of devices 2. Data will drive value
6. Solving concrete pain points4. Fragmented ecosystem
3. Significance of payments
5. Consumers interest
Biometric authentication to access banking apps including
Touch ID and Face ID
Banks Everywhere Are Introducing Biometric
Authentication For Banking Apps
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Bank of China Hong Kong, China’s fourth largest bank, is rolling out finger-vein authentication at ATMs
China Merchants Bank and the Construction Bank of China, Agricultural Bank of China's (ABC) all
introducing facial recognition technology at its ATMs
Chinese Banks Are Rolling Out Biometric ATMs
22
Confidential 23
Consumers digital payment trends B2B & B2B2C digital payment trends
1 2
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New players have entered processing by providing direct issuing solutions to industry verticals, either in association with issuing banks or bypassing them completely
Processing 2.0
Processing 1.0
Payment
Processor
Issuing Processing /
Card Management
Acquiring Processing
Interbank Switching
ATM Management
Fraud Risk Management
Merchant Services
Loyalty Solutions
Mobile Banking
Data Analytics
Online Payments / Gateways
Digital Platforms
Merchant Wallets
Open API Services
Tokenisation & IoT
Targeted Instant / Virtual
Prepaid Card Issuance
Industry Verticals
Open Banking
Real Time Payments
In-Store Experience
Omni-Channel Solutions
Processing 3.0
Evolving in line with digital
payments innovation, new
verticals are addressed through
tailored / packaged issuing
processing solutions:
Market places (e-commerce)
On-demand delivery
Disbursements
Alternative lending
Expenses management
Digital banking
Pay-outs
▪ Support companies in paying contract workers
Provide digital-first banks, non-banks, and financial service providers solutions for delivering convenience of day-to-day spending features to their customers through modern card programs
Configure purchase cards and control expenses made by companies’ employees
SMEs financing
▪ Open API enables lenders to provide flexibility to offer multiple card form factors to meet SMEs needs
POS financing
▪ Support lenders with virtual cards than can offer borrowers choice of merchant, easy onboarding of merchants without merchant integration pain, and approving and funding transactions in real-time without the need for lenders to integrate with each individual merchant
Insurance claims
▪ Support insurance companies to be more efficient in settling & paying claims
Support online retailers who use drop shipment by providing a virtual card that allows multiple supplier payments from a single transaction ensuring faster order fulfilment
Seamless payment operations for delivery companies (food & non-food) that typically operate with a fleet of couriers
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Examples of use cases within industry verticals
Disbursements
On-demand Delivery
Market Places
Alternative Lending
Expenses Management
Digital Banking
Processing
3.0
Incentives
▪ Improving rewards with flexible, on-demand funding
Consumer Payments - Traditional Banks
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Card-based transactions forecast
Consumer Payments - Digital Banks B2B Payments- Fintechs
20%
10%
70%
12%2%
86%
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B2B card-based payments are growing fast
Source: Global Data & EDC Analysis
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Direct Carrier Billing
(DCB) solutions allow
end users to access
online content & pay
for services & products
using their mobile
phone account (either
pre- or post-pay)
In emerging
economies, DCB has
greater consumer
reach than traditional
& mobile wallet
payment solutions and
is growing fast
Direct Carrier Billing
Global carrier billing revenue
Source: Ovum
MerchantConsumer Telco DCB Provider
Merchant Commission
Purchase amount
Purchase amount –Telco Commission
Purchase amount – Merchant Commission
Telco Commission
Net: DCB Commission
DCB Business Model
Probably The Wrong Way
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Ευχαριστώ πολύ
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DMCC Business CentreJewellery & Gemplex 2DubaiUnited Arab Emirateswww.edgardunn.com
Mob +971 56 413 56 [email protected]
Jean SiderisPrincipal
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