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PSD - experiences and outlook
Swiss Finte.ch Meetup Event
Christian Bucheli
F10 Incubator, Zurich, 4th February 2016
Classification: public
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Page F10 Incubator, Zurich, 26 January 2016, public
Content
2
• SIX - Payments in a nutshell
• PSD 1 – experience
• PSD 2 –outlook
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SIX - Payments in a nutshell
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F10 Incubator, Zurich, 26 January 2016, public
A day with us…
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F10 Incubator, Zurich, 26 January 2016, public
SIX Payment Services - overview
Merchants Financial Institutions
Card Issuance - Cobranded international
payment cards
- Closed loop private label
payment cards
- Closed loop private label loyalty
cards
- Issuing partner models
- Issuing processing and
management
- Issuing services (fraud, auth.
Cardholder support, etc.
Enabling - Stand alone POS solutions
- Integrated POS solutions
- E-commerce PSP solutions
- Stand alone POS solutions
- Integrated POS solutions
- E-commerce PSP solutions
Card Acceptance - Multibrand, multicurrency
acquiring
- Merchant processing
- Acquiring reseller models
- DCC solution
- Value added services
- POS Acquiring partner models
- Merchant management
- POS Acquiring processing
- ATM Acquiring processing
- ATM Management
- Transaction switching
- DCC solution
- Value added services
Non card payments - Mobile peer 2 peer payments - Mobile peer 2 peer payments
SIX Payment Services covers the entire electronic payments value chain and
possesses all necessary banking and PSD licenses to provide financial services
across Europe with almost 50 years of business experience.
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F10 Incubator, Zurich, 26 January 2016, public
An international footprint to be close to our customers
Luxembourg Processing Centre Issuing, Market Leader Issuing and Acquiring.
Switzerland Processing Centre for Acquiring and Issuing, Market leader POS- and ATM business
Hungary Leading Acquirer for Retail- and Hospitality Solutions
Other office locations Germany, Italy, Poland, United Kingdom, USA, Sweden
Austria Market Leader Issuing and Acquiring Processing, POS & ATM business
t t t
t t t
t
t
t
t
London
Stockholm
Vienna
Budapest
t
Luxembourg
Hamburg
Frankfurt
t
Warsaw
Milan Geneva Biel Zurich
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PSD 1 - experience
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F10 Incubator, Zurich, 26 January 2016, public
Going international – initial legal concerns
In 2007 SIX, at the time still Telekurs, decided to expand its acquiring business
internationally to follow international merchants, penetrate new markets and protect
the home market.
A strategy to achieve this was written and as a first step an international sales team
put together. Still it was very unclear under what type of legal framework SIX would
be allowed to operate in Europe because legislation was very heterogeneous.
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PSD I – a silver lining on the horizon
In 2008 the EU started publishing the first version of the PSD with the aim to
standardize the local legislations for financial service providers across all member
states by November 2009.
Impact:
In order to offer card acquiring and /or issuing service a PSD license is required.
The PSD is not included in the bilateral agreements with the European Union.
Therefore a Swiss Company’s legal entity cannot obtain a PSD license.
Solution:
SIX founded after careful evaluation a legal entity in Luxembourg in December
2008. This newco obtained a PSD license in 2009 which was then passported
successfully in all major European Market. This allows SIX to offer Payment
Services in all these countries.
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Assessment
In hindsight the solution SIX went for clearly was a success characterized by the
following most important pros and cons.
10
Cons
- National PSD implementations not
identical
- National PSD certifiation
procedures strongly vary
- Additional laws like AML, KYC,
VAT still not harmonized
- Local business rules for settlement
- Specific local tax directives
- Different IT system setups
between CH and EU
- Redundant structures between CH
and EU
Pros
- Legal security to set up business
upon
- One legal framework to apply
across all EU countries
- Standardized passporting to enlist
in EU member states
- One authority to deal with (CSSF)
- Certain plain level in the market
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PSD 2 - outlook
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PSD II – the disruptive elements
Aside of a number of incremental changes, extensions into further domains and
even stronger harmonization the following items have the potential to strongly alter
the financial services market by offering third party providers the following services:
One-time access to a consumer’s online banking presence to
collect transaction history information
One-time access to a consumer’s online banking account to
enable the authorization of a transaction (using a credit
transfer) but not to hold funds at any time
Trusted party providers (TPP) must be licensed and hold appropriate insurance. If
so, they may not be discriminated by banks. A shared liability for defective
transactions between the parties is the working hypothesis. No contract between
Bank and TPP is required but they need to authenticate themselves every time and
are obliged to keep the customers security details secure.
AIS
PIS
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F10 Incubator, Zurich, 26 January 2016, public
Standard APIs – app store innovation dynamics
If the industry in collaboration with the legislators manage to come up with a
standardized open API to trigger Account Information and Payment Initiation
Services a veritable innovation Tsunami could be triggered.
Thanks to this TPPs would be able to build a myriad of services based on this
foundation always relying on identical specifications and rules. Such services could
comprise:
• Direct to ACH payments
• P2P payments
• IOT payments
• Instant installment purchases
• Credit scoring services
• Address verification services
• Simple check-in / check-out
• Identity management services
• Finance management platforms
• Finance services comparison services
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F10 Incubator, Zurich, 26 January 2016, public Page
Opportunities and threats
As with many innovation cycles these changes can be an opportunity or a threat for
incumbent players depending on their ability to update their business models.
14
Threats
- Potential disintermediation due to
TPPs.
- Bank’s services can become
commoditized and exchangeable
- Increased difficult to master
security challenges due to multiple
parties involved
- Large players like Apple or Google
could start bypassing Card
Industry
- Unreliable or inconsistent TPPs
can backlash on banks customer
relationship
Opportunities
- Growing number of ACH
transactions should reduce card
based fees and increase control
over general cost structure
- Banks information and services
become even more central to
consumers
- Diversification into information
services allows banks to diversify
business models
- New revenue models for Banks
and Processors
- Federated ID management
systems like in Nordics become
possible
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Thank you for your attention.
Christian Bucheli
Executive Director
Head of strategic ventures
SIX Payment Services