hackers’ delight · 2019. 12. 16. · • paypal closes $2.2bn izettle acquisition • wirecard...

COUNTRY SURVEYS INSIGHT ANALYSISAnalysis and key data for payments in Luxembourg, Slovenia and Saudi Arabia

Could biometrics be the key to making payments

personal again?

New research reveals where digital technology is

helping economies

HACKERS’ DELIGHT

WHERE ARE CRYPTOCURRENCY EXCHANGES GOING WRONG?

Issue 375 / SEPTEMBER 2018w w w. e l e c t r o n i c p ay m e n t s i n t e r n at i o n a l . c o m

EPI September 2018 375.indd 1 03/10/2018 10:56:54

2 | September 2018 | Electronic Payments International

contents

NEWS

05 / EDITOR’S LETTER06 / DIGEST• Tencent expands WeChat Pay HK

service to China• UK banks lose £503.4m to scammers

in H1 2018• Paytm trials facial-recognition tool• Monzo awaits unicorn confirmation

after reaching milestone• Cedar upgrades healthcare payment

platform• BBVA opens up app to more

products• Japan’s Origami partners with

UnionPay for expansion• PayPal closes $2.2bn iZettle

acquisition• Wirecard makes Google Pay Italy

available to Android users• Zaif crypto hack: continuing security

problems spark concern• Klarna to acquire UK’s Close

Brothers Retail Finance

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CRYPTOCURRENCY EXCHANGES

COVER STORY

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contents

SEPTEMBER 2018

1810 / CHINA CITIC BANKVirtual technology has helped facilitate the lifestyle of modern society. Briony Richter speaks to Helen Kan, executive director at China Citic Bank, about inMotion, Hong Kong’s first virtual banking app

12 / CRYPTOCURRENCY EXCHANGESRegulatory lapses and inadequate security have led to a number of cryptocurrency exchanges falling victim to hackers. Hosho’s Michael Julian explains where they are going wrong. Briony Richter reports

14 / CRYPTOCURRENCYMining validates cryptocurrency transactions, and successful miners earn well for their efforts. But it uses large amounts of energy, so what do miners do? Get other devices to do it for them. Patrick Brusnahan reports

15 / CASHLESS IN EUROPECashless transactions have changed the financial ecosystem. With card payments pushing out cash, new research reveals the countries where digital technology is helping economies thrive. Briony Richter reports

18 / LUXEMBOURGLuxembourg’s payment card market is mature, with a high penetration of 4.0 cards per inhabitant. Cards are also the preferred payment instrument, accounting for 52% of the total transaction volume in 2017

20 / SLOVENIACash remains the dominant payment instrument in Slovenia. However, following concentrated efforts by banks, and the central bank’s financial inclusion programmes, the payment card market is gradually growing

21 / SAUDI ARABIAWhile high-value transactions are shifting to electronic platforms, low-value transactions are mostly made with cash. Use of debit cards, is gradually rising, although they are mostly used for cash withdrawals at ATMs

22 / IDEX BIOMETRICSOur relationship with money is less personal; gone are the days when people would queue at their local bank to withdraw cash via the bank clerk. David Orme, senior vice-president at Idex Biometrics, writes

INDUSTRY INSIGHT

COUNTRY SNAPSHOTS

FEATURES

ANALYSIS

PRODUCTS16 / PAYSENDPaysend is the latest digital money-transfer provider to launch a global account in a crowded market dominated by Revolut and TransferWise. Robin Arnfield talks to its London-based CEO, Ronnie Millar

17 / ORANGE MONEYOrange Money, Orange’s mobile money solution, is celebrating its 10th anniversary. Launched in 2008, the service currently has 40 million customers and is available in 17 countries. Douglas Blakey reports

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editor’s letter

Exactuals payments acquisition one to watch

Get in touch with the editor at: [email protected]

Douglas Blakey, Editor

Any RBC acquisition causes the writer to sit up straight and pay close attention.

The 2015 RBC acquisition of City National, for example – its biggest to date – was by normal M&A metrics expensive, but is already shaping to look like a shrewd piece of business. And now City National has acquired Exactuals, a Los Angeles-based provider of innovative SaaS solutions for complex payments in the entertainment industry.

Exactuals is a unique payments provider, leveraging artificial intelligence tools to provide innovative payment solutions to clients of all sizes. Exactuals’ innovative payment system, PaymentHub, allows studios, unions, guilds, payroll companies, music publishers, record labels, distributors and marketplaces to provide direct deposit payments. It also covers tax document management and online reporting to rights holders, performers, managers, service providers and independent contractors across the globe.

In many cases, this automated system has replaced an outdated payment process, reducing or eliminating the need for costly paper checks and reporting. Exactuals’ system provides payments and reporting functions with greater security, accuracy, transparency and speed. Firms can process global payments through operating accounts at City National.

In addition to PaymentHub, Exactuals recently launched RAI, a sophisticated artificial intelligence tool used by record labels and publishers to optimise ownership metadata for the calculation and payment of royalties.

At the time of the City National deal, RBC retained City National’s leadership team. That is also the position at Exactuals, with the business’s senior management staying on and being rewarded with multi-year deals.

Exactuals will now modernise the residuals and royalty payment process for the entertainment industry and, interestingly, will expand to serve other businesses as a wholly owned subsidiary of City National Bank.

The acquisition builds on City National’s history of serving the entertainment industry. It also enables RBC to continue to build out its payments franchise, defend and grow value for its entertainment clients, and create a source of lower-cost, lower-beta deposits in the future.

Exactuals was founded at the Stanford Graduate School of Business in 2011 with the goal of modernising the entertainment payments space. It is by no means the biggest bank fintech acquisition of the year, but is potentially one of the most interesting.

Switch launched 30 years agoIt is 30 years since the first Switch transaction, following the launch of Switch debit cards by Midland, RBS and NatWest.

By 1994, one-half of all UK adults held a debit card. In 2001, debit expenditure exceeded credit card spending for the first time. Switch was to run for 14 years until merging with Mastercard’s Maestro brand. Switch’s 30th anniversary is much more agreeable to celebrate than the plethora of 10-year gloom-and-doom pieces marking the Lehman collapse.

Another anniversary is on the horizon, with the prepaid card in the UK set to become a teenager. Prepaid cards in the UK rolled out 13 years ago next month in October 2005.

Open Banking deadline fast approachingThe EBA is taking a firm line on PSD2 Open Banking regulations, stating that “ignorance of them can, of course, not be used to justify non-compliance,” and that “non-compliance amounts to a breach of law, with the resultant consequences for the legal entity”.

With less than six months now until the deadline, there are seven key elements that a financial institution needs to deliver to meet the PSD2 Open Banking regulations: 1. API Interface – live for six months prior to going live

externally;2. Exemption certificate from NCA or fallback option;3. SCA solution;4. TPP regulatory checking;5. eIDAS Seal certificate checking if operating in Europe;6. Access token issuance, and7. Management of consents by PSU

One wonders just how many prepaid and debit programme managers at smaller institutions, e-money issuers and credit institutions are going to be fully compliant and on target to meet the 14 March 2019 deadline. <


News | Digest

news digestTencent expands WeChat Pay HK service to China

Users in Hong Kong can now use the WeChat payment app to make purchases at Chinese merchants.

The latest development is the result of a partnership between Tencent, China UnionPay, and its subsidiary UnionPay International.

The service will be available from October 2018, and will enable Hong Kong users to make purchases at Chinese vendors including ride-hailing service Didi Chuxing, group buying business Meituan-Dianping, and train-booking website 12306.

The app will automatically convert yuan to Hong Kong dollars, using exchange rate quotes and automatic exchange services. The

app will also connect to UnionPay to facilitate money transfers.

Tencent vice president and Tencent Financial Technology head Jim Lai said: “The cross-border mobile payment will greatly increase the collaboration opportunities for both Hong Kong and Mainland Chinese businesses. This exchange of culture, talent and the stimulation of economic activity across a wide variety of sectors will serve to strengthen the mutual relationships between Hong Kong and Mainland China.”

Tencent launched its wallet services in Hong Kong in 2016. Previously, the payment app service could only be used by Hong Kong users to settle local payments. <


UK banks lose £503.4m to scammers in H1 2018The banking sector in the UK lost £503.4m ($662m) through ‘authorised’ and ‘unauthorised’ fraudulent activity in the first half of 2018.

According to UK Finance, a total of £145.4m was lost due to authorised push payment (APP) scams that trick account holders into sending payments to other accounts. The remaining £358m was lost through unauthorised fraud, mainly where transactions are executed by a third party without the account holder’s authorisation.

The total number of APP scams in the first six months of 2018 was 34,128. Of the total lost through this type of scamming, £30.9m was returned to affected customers.

Purchase scams were the most common type of APP fraud, with 21,483 cases reported in the first half of 2018, resulting in a loss of £19.4m.

The total number of reported unauthorised fraud cases was 1,036,376 in the first half of 2018, an increase of 10% from last year. However, combined total losses through unauthorised fraud dipped 2% from the previous year.

Compared to a year ago, losses due to unauthorised transactions on payment cards dropped 2% to £281.2m. The industry helped prevent £493.5m in attempted unauthorised card fraud.

Losses due to unauthorised remote banking fraud remained almost stable at

£73.6m, with banks preventing £137.8m of attempted remote banking fraud.

Losses due to cheque fraud slumped 41% year on year to £3.2m, with £74.3m of attempted fraud in this area being prevented.

UK Finance’s MD of economic crime, Katy Worobec, said: “Fraud and scams pose a major threat to our country. The criminals behind it target their victims indiscriminately and the proceeds go on to fund terrorism, people smuggling and drug trafficking, whether or not the individual is refunded. Every part of society must help to stamp out this menace, especially by stopping the data breaches which increasingly are fuelling fraud.” <

Paytm trials facial-recognition toolIndian e-commerce payment system Paytm is testing a facial-recognition tool to enable digital payments through customers’ smartphones.

The technology will enable customers to authenticate payments on the mobile devices to carry out purchases at merchant outlets.

Sources quoted a senior Paytm executive as saying: “We have already started testing the face-recognition tool among our

employees. Once live, Paytm users will be able to log into the app by simply looking at the phone.”

The sources also told Economic Times that testing is being carried out on Google’s Android platform. Once testing is completed, the feature will be launched through an app update.

The Paytm facial-recognition tool aims to increase payment security and prevent phishing attacks. Offline payments through

facial recognition will be introduced at a later date. Company executives added that Paytm will introduce additional security features with the facial-recognition tool, to bolster prevention of fraud.

In April this year, Paytm introduced the Paytm Tap Card for customers without internet access. The cards use NFC technology to carry out digital offline transactions at merchant POS terminals issued by Paytm. <


News | digest

Cedar upgrades healthcare payment platformNew York-based patient payment and engagement platform Cedar has launched an upgraded version of its flagship product, Cedar Pay.

Featuring multiple updates, the product aims to facilitate and simplify the patient billing experience. The platform uses advanced data science, machine learning and smart segmentation to provide comprehensive information on patient communication and payment preferences.

The enhancements in Cedar Pay include Truly Unified Billing and Dynamic Personalized Segmentation. The Truly Unified Billing service enables patients to view all transactions in one place, as well as the bills of other family members linked with their account. The Dynamic Personalized

Segmentation feature offers users additional opportunities to “personalise the patient journey”, and simplifies payments by enabling access to the online dashboard by entering an email address or telephone number.

Cedar co-founder and CEO Florian Otto said: “As the consumer influence on healthcare continues to rise, it’s more critical than ever to deliver a payment and engaging experience that turns patients into advocates, and makes it as easy as possible for them to interact

with providers. We are excited to share the next evolution of our platform, which further brings the modern, digital consumer experience to the forefront of patient billing.”

Cedar advisor and former executive-vice president and Montefiore System CFO Joel Perlman added: “Providers are constantly challenged with establishing a streamlined approach to engaging patients when it comes to the billing process. This is a critical pain point in healthcare as organisations look to optimise time with patients and drive satisfaction.

“Cedar’s new capabilities now allow providers to easily deliver consumer-friendly billing communications that drive patient engagement and increase collections on the back end.” <


Monzo awaits unicorn confirmation after reaching milestone

Challenger bank Monzo’s unicorn valuation is awaiting confirmation after it reached the million-customer milestone, just weeks after it was revealed that the bank is set to join the league of UK unicorns.

On its blog, Monzo boasted that 20,000 new customers are signing up every week, with the digital-only bank now sending out over 3,000 of its coral cards each day.

Monzo faces competition from rivals including Revolut, but that has not stopped from moving ahead with its goals. Monzo now claims that it accounts for 15% of new current account openings in the UK.

Since the bank ended its beta prepaid programme in April, its customer base has surged by 75%. Monzo has also discontinued its waiting list, so anyone wanting to join can now do so immediately.

The bank is now processing £1bn ($1.3bn) in payments every month, with customers spending more than £4bn with Monzo cards to date.

Monzo CEO Tom Blomfield said: “Our community of customers now extends across the UK, and I’m so grateful that more than a million people are helping us build a better bank. But our mission is to make money work for everyone, so this is only just the start!

“We’re working hard to earn our customers’ trust by building a product that solves people’s problems, giving them brilliant customer service, and being totally transparent every step of the way. This milestone shows that there’s real, mainstream appetite for a bank that’s doing things differently.”

Monzo noted that, on average, each customer has around 16 contacts within the app to send and receive money transfers, adding that the app is designed to make everyday payments simple, secure and fun. Friends and family can split bills when going out for dinner or directly pay contacts they have within the app. According to the blog, customers send over £800,000 to Monzo contacts each day.

The challenger has also gained a strong reputation for customer service, with the blog claiming that it now has a Net Promoter Score of +80.

Monzo’s unicorn valuation sits at more than $1bn, and is expected to be confirmed after it completes its latest round of fundraising.

On 25 September, Monzo announced the release of its Share with Us tool, which encourages customers to ask for help about their financial welfare.

The blog stated: “If there’s anything that affects the way you deal with your money or the relationship you have with your bank, it might be worth telling us.

“We can use that knowledge to support you in a way that suits your needs – whether that’s letting you opt out of lending if you’ve struggled to manage debt in the past, or giving you a different way to verify your identity if you find it tricky to take selfie videos.”

A specialist team will be available for extra support to help customers through the app until issues are resolved. <


News | Digest

BBVA opens up app to more productsBBVA now allows products used by customers of other banking institutions to be added to its app.

The BBVA app tool, Bconomy, opened up to accounts and cards from other financial service providers in February 2018. However, customers can now add investment funds, pension plans, deposits, securities, as well as mortgage and consumer finance products, through the ‘your other banks’ option. Once verified, the products download automatically and are added to the app.

Bconomy was launched to measure customers’ incomes and spending patterns, as well as savings and debt levels. It now includes all customer positions, and provides a wider overview of their financial

health. It also helps customers to make better decisions on their spending and investing.

While Bconomy currently allows balance checks to be grouped together in the app, BBVA is looking to extend the app’s reach further. In 2019, new regulation will add the possibility of operating between different products within the BBVA app itself. According to the regulation, banks must give access to payment account information if authorised by customers.

BBVA customers will also be able to choose only the products they wish to see, and access comparisons within the Bconomy tool, giving them a monthly forecast of fixed expenses and comparisons with people with similar profiles. <


Japan’s Origami partners with UnionPay for expansionJapanese e-payment startup Origami Pay has entered into a new partnership with UnionPay to expand its services worldwide.

Under the capital and business alliance with UnionPay International, Origami Pay will be accepted at nearly 7.5 million UnionPay QR code-enabled outlets by the first quarter of next year. The service will be available in 24 countries in North America, Central Asia, and the Middle East and Africa.

All Origami partner shops in Japan will accept UnionPay’s QR payments. Origami will also partner with Taiwan-based payment service JKOPay to allow users to carry out transactions at Origami partner shops in Japan. The service will enable all Taiwanese visitors to pay directly for purchases from the JKOPay app.

In future, Origami is expected to enter into new international partnerships to expand its global footprint. It recently

raised $66m in a series C investment round to support its expansion and expand its workforce. The latest round, which increased investment in the company to $88m, was joined by SBI Investment, Toyota Finance, Shinkin Central Bank, Union Pay International and Mitsui Sumitomo Card Company, among others.

Founded in 2012, Origami operates the Origami Pay service, which is accepted at around 20,000 locations in Japan. <

PayPal closes $2.2bn iZettle acquisitionUS digital payments giant PayPal has completed the acquisition of Swedish payments business iZettle in a deal worth around $2.2bn.

The iZettle acquisition, first announced in May this year, forms part of PayPal’s growth strategy, and is expected to bolster its commerce services for merchants.

PayPal COO Bill Ready said: “We’re thrilled to welcome the iZettle team to the PayPal family, and are excited to expand the ways we serve our small business customers.

“iZettle brings a suite of products and services that allows merchants to meet their customers where they are – online, in-store or via mobile. This is another step in our journey towards democratising commerce tools to help businesses of all sizes thrive.”

iZettle will continue to operate separately under the PayPal brand. Jacob de Geer, co-

founder and CEO of iZettle, will continue to lead the company. Co-founder and executive chair Magnus Nilsson has also joined PayPal as part of the deal.

De Geer said: “We share PayPal’s strong belief in the power of small businesses.

Together, we will be stronger and move even faster to help small businesses succeed in a world of giants.”

The UK’s Competition and Markets Authority launched a review of the iZettle acquisition prior to its completion. <



News | Digest

Zaif crypto hack: continuing security problems spark concernA second Japan-based cryptocurrency exchange has fallen victim to hackers, with $60m lost in the Zaif crypto hack.

It is the second major cryptocurrency hack in Japan after Coincheck reported $520m in NEM tokens stolen by hackers in January 2018.

Tech Bureau operates Zaif, a licenced crytocurrency exchange. The business discovered the theft of Bitcoin, Monacoin and Bitcoin Cash on 17 September, and reported it to the authorities the following day. An investigation is underway.

The loss includes 5,966 Bitcoins. However, the amount of Bitcoin Cash and

Monacoin is still unknown. The business is working to reimburse affected customers.

Of the $60m stolen, around $19.6m belonged to the exchange and the rest was client money. Users are unable to make withdrawals or deposits as Zaif rebuilds its system; the exchange is unable to say when they will resume.

In a statement, Zaif said: “Unauthorised access from the outside was conducted from around 17:00 on 14 July on the server managing the hot wallet for the deposit and withdrawal, and the virtual wallet managed by the hot wallet currency was illegally remitted. Regarding specific concrete

methods of unauthorised access, etc., this case is a criminal case.”

After filing it as a criminal case, local authorities started an investigation.

As a result of the company’s loss from the hack, Zaif also stated that it had reached an agreement with Japan-listed business Fisco to receive investment in exchange for a share of ownership.

Cryptocurrency exchanges have suffered at least five large attacks in 2018, with regulators around the world increasingly concerned about security in the crypto-exchange market. <See feature on page 12

Wirecard makes Google Pay Italy available to Android usersGerman payments technology business Wirecard has made Google Pay Italy available to Android users through its mobile payment app, boon.

The boon app is available from the Google Play store by Android users in Italy. Users can now utilise a fully digitised prepaid card, regardless of their bank.

Wirecard’s executive vice-president of consumer solutions, Georg von Waldenfels, said: “With boon, we are delighted to now offer Google Pay to every user of an Android device in Italy, from Android version 5 on.”

Customers can top up their boon account with any Visa or Mastercard, or by bank transfer, eliminating the requirement to hold a credit card issued by a bank supported

by Google Pay. boon also enables real-time person-to-person fund transfers between users.

The boon app operates on both the Android and iOS operating systems. The iOS version is available in the UK, France, Italy, Ireland, Switzerland and Spain, and the app is also accessible for Android users in Germany, Belgium, Ireland, the Netherlands, Austria and Spain.

Google’s head of Europe, Middle East and Africa commerce partnerships, Florence Diss, commented: “Starting today, boon users can link their card to Google Pay once, and then use Google Pay to make safe, fast and delightful purchases in millions of places in Italy and around the world – including on their favourite apps and sites.” <

Klarna to acquire UK’s Close Brothers Retail Finance

Klarna Bank has announced that it will acquire Close Brothers Retail Finance (CBRF) to strengthen its retail financing business in the UK.

Established in 2014, CBRF offers omni-channel retail financing services, providing POS financing to shoppers and enabling merchants to expand their customer base and increase sales. Shoppers repay the loaned amounts in fixed monthly instalments. CBRF currently claims to have around 600 active merchants in the UK.

CBRF MD Alex Marsh said: “We at CBRF have transformed retail finance in the UK over the past four years, and are extremely proud of what we have accomplished.

“Together with Klarna, we have the exciting opportunity to further develop our capabilities and deliver even more services and value to merchants to help them succeed.

“We are now focusing on a smooth integration and seamless continuity of our

offering to merchants and customers.”As well as bolstering its presence in the

UK retail financing market, the acquisition is expected to enable Klarna to grow its consumer offerings.

Klarna chief commercial officer Michael Rouse said: “We are delighted to welcome CBRF to Klarna. The complementary talents and propositions will help accelerate Klarna’s leadership in the payments market.

“What CBRF has achieved to date in the UK is impressive, but together we can invest in realising the full potential of the business.”

Completion of the acquisition is subject to approval by the Swedish financial supervisory authority, Finansinspektionen. The financial terms of the transaction were not disclosed. <



Convenience is touted as the major advantage of virtual banking, but it is not the only one. There are many

reasons to bank online, from 24/7 service to a speedy process.

In March 2018, China Citic Bank launched inMotion, opening up a completely new channel for its customers.

Speaking to EPI about the breakthrough, Helen Kan states: “In March 2018 we became the first bank in Hong Kong to offer a completely new way of opening a bank account without having to visit a branch. Opening the account is completely virtual, and we were the first and the only bank up until now in Hong Kong to do so.

“Anyone can download through the Apple App Store or Google Play store. It is available 24/7 for anyone who holds a Hong Kong identity card.”

She continues: “We want to position this app to be our virtual banking app, because as a commercial bank we want to offer our customers a service that is completely digital.”

As long as the person has a valid Hong Kong ID, they can enjoy all the functionalities of the app. The onboarding process is one of ease and speed. Once a customer has launched the app, it will ask for a mobile number. inMotion uses a one-time password. Once that is completed, the app will ask the customer to scan their Hong Kong ID card.

The app has expanded its functionality beyond day-to-day banking to cover investment account opening. It also allows customers to make fixed deposits, and

handles foreign exchange, mutual funds and stock trading, revealing the extent to which inMotion is making headway in the virtual banking space.

On its site, it boasts some of its latest offers, which include cash prizes up to HK$100 ($12) and 0.125% brokerage commission on trading securities.

REGULATION AND SECURITYBecoming the first bank in the region to achieve the launch was a milestone. The bank worked hard with the regulator to ensure security and open the door to enable a new way of banking.

The app harnesses OCR and facial-recognition technology and e-KYC processes, and can complete the account-opening process in just 15 minutes.

Facial recognition is carried out via a ‘selfie’, from which the app can confidently ensure that the user is the same person as pictured on their Hong Kong ID card.

Speaking about the onboarding process, Kan states: “We promise account opening in 15 minutes, and after putting in key information we achieve that. We use OCR technology to scan the Hong Kong ID card and conduct numerous tests to look for fraudulent or invalid ID cards.

“The other technology is the selfie. These are the two fintech technologies that enable us to securely authenticate, but we also had a breakthrough in terms of the regulatory requirements.”

Opening a bank account in Hong Kong used to be a much more rigorous process. Kan explains: “In the past, when opening a brand new bank account in Hong Kong, the customer needed to submit proof of address. So the way that traditional banks do it is to ask the customer to show a utility bill or another bank’s statement.

“In a virtual world, this is not feasible; the bank cannot guarantee the nature of a photo copy. We went through long discussions with the Hong Kong Monetary Authority (HKMA) to discuss and lobby its support. In turn, it had to go to the legislative council to relax the CML ordinance to allow banks to open a brand new banking account without needing proof of address.

“What we are really proud of is our ability to work with the regulator, with its support to have this breakthrough in terms of the

feature | china citic bank

inmotion: making a break

into the virtual banking world

Virtual technology has facilitated modern society; almost everything can be done through a mobile. Briony Richter speaks to Helen Kan, Executive Director &

Alternate Chief Executive Officer Group Head, Personal & Business Banking Group of China CITIC Bank, about Hong Kong’s first virtual banking app

What we are really proud of is our

ability to work with the regulator



constraint of opening a bank account,” she notes.

China Citic Bank was the first to propose the solution and gain approval, and Kan adds that she expects other banks to join the revolution. The regulation is now more relaxed, enabling other banks to adopt the same approach and expand their services. This is why the inMotion app added the capability to open an investment account, to enhance its competitive advantage.

The competition did not take long to attempt the new approval process. In August this year, HKMA announced that it had received 29 applications for the first batch of virtual bank licences. The applicants ranged from telecommunications operators and financial technology companies to global banks.

inMotion successfully met the criteria to open a virtual banking app; the other applicants will need to pay close attention to how it handles operational risk. Successful applicants will need to effectively demonstrate to HKMA an understanding of the risk exposure in the running of a virtual bank, and more importantly, how they plan to manage those risks.

COMBINING CHANNELSEven in an increasingly digital arena, having a branch network can play a critical role in building a strong connection with customers.

Physical branches also provide comfort for those customers who are not willing to go fully digital, as they inspire trust in banks’

ability to safeguard both their money and data.

Speaking about balancing the digital and physical channels, Kan highlights: “In Hong Kong we have 32 retail branches. I think it’s a journey, and customer behaviour should drive the pace of the mix between virtual and branch channels. The customer experience on the inMotion app is critically important.

“On the other hand, there are still customers that come into our branches

because we are very convenient and everything is nearby. Competition is high, but consumers are very used to visiting branches. I think it’s a generation trend. The age profile of inMotion customers is much younger than the customers we acquire through our branches.”

Kan adds that around 15-20% of all new customers have been acquired though the inMotion app, and that 100 accounts are opened every month. Even in the short time that inMotion has been live, it is clear there is scope for virtual banking on a daily basis.

HKMA has introduced a number of initiatives in a move to modernise Hong Kong’s banking and payments system. The country’s instant payment system, the Faster Payment System, is now live. It is open to all

banks and payment service providers in the country; around 20 banks and eight payment service providers are already on board with the system.

The breakthrough with inMotion marks the start of a long journey towards more digitally accepted payment methods in Hong Kong. According to GlobalData, debit cards account for only 32.9% of the total card payment value in 2018, largely as a result of consumer preference for pay-later cards.

However, debit card use is gradually rising – frequency of debit card payments rose at a marginal CAGR of 2.9%, from 20.6 per year in 2014 to 23.1 in 2018. Debit cards are mostly used for payments rather than cash withdrawals, highlighting a gradual shift from cash to card-based payments. Overall, debit card payments account for 68.6% of the total debit card transaction value in 2018.

Looking to the future, Kan concludes: “Our strategy going forward is to expand our local market share through fintech investments. We want to be able to increase our customer base and tap into the cross-border Chinese customer because we have the advantage and the collaboration with our mother bank, China Citic Bank.” <

feature | china citic bank

The age profile of inMotion customers is much younger than the customers we acquire through our branches

20142015̀2016

20172018e

2019f2020f

2021f2022f

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Credit cardCharge card

Debit card

hong kong: key data

Source: GlobalData

Cards per person, by card type

Reasons for using prepaid cards

Contactless card usage

Travel purchases

Online purchases

Control spending

Public transport

All regular spending

Receive salary

Received as a gift 5%

6%

6%

10%28%

29%

6%

20142015

20162017

20180

20

40

60

80

100

Don’t have one, would like oneHave one, use it for contactless paymentsHave one, don’t use it for contactless paymentsHad not previously heard of them

22.1

31.7

12.9

13.9

19.4 17.7 13.5

9.47.324.0

32.3

15.1

10.9

23.0

35.3

20.7

7.5

7.3

67.5

13.5

4.5

11.5

60.5

13.5

5.2

Don’t have one, don’t want one



Cryptocurrency has become a societal obsession, attracting both supporters and strong critics.

Although volatile, digital currencies continue to send shockwaves across the world. However, maintaining the security of cryptocurrency is irrelevant if the exchange in which it is stored is not secure.

In September 2018, Japan-based cryptocurrency exchange Zaif admitted that it had been hacked. Tech Bureau, the parent company behind the Zaif exchange, announced that close to 6,000 Bitcoins, worth around $29m, had been stolen by hackers. Of the $60m stolen, around $19.6m belonged to the exchange; the rest was client money.

The latest attack on cryptocurrency exchanges once again brings to light the vulnerabilities of the infrastructure, and the risk investors take when placing trust in them.

Hosho’s Michael Julian offers a clear assessment of where exchanges are going wrong: “Lack of company focus on cybersecurity – specifically, in this case, improper storage of cryptocurrency funds – is making cyberattacks frequent in the industry. The lack of resources devoted to cybersecurity causes exchanges to have weak network security that, once breached, leads to a loss of funds caused by poor cryptocurrency storage practices that are susceptible to attacks.”

The hacks reveal how the platforms within these cryptocurrency exchanges can be ill-equipped to cope with the volatility of, and unpredictable surges in demand

for, cryptocurrency. Hacking can create an immense level of stress on the systems, and their ability to handle extreme volume is yet to be properly tested.

The hack into the Zaif exchange follows a long line of other successful breaches of security. At least five major hacks have occurred so far in 2018 and, to make matters worse, a whole weekend passed before Tech Bureau detected the Zaif hack.

It is believed that the hackers had gained access to Zaif ’s hot wallets, a type of cryptocurrency wallet that is stored online.

“While the method of entry into Zaif ’s network is unclear at this time, it’s likely that Zaif was not following a sound hot/cold wallet policy,” Julian states.

“Given the $59m stored in hot wallets, which is not recommended, either the

attacker had already breached the system then waited patiently for the perfect opportunity to withdraw funds – such as a period of extremely high withdrawal requests – or, more likely, there was an internal failure to implement or follow an effective hot/cold wallet-storage strategy.

“To succinctly answer the question, it is likely that this attack was moderately difficult, particularly to infiltrate the network. However, with paydays in double-digit millions, it’s understandable that hackers are extremely motivated to engage at higher levels of expertise,” he adds.

In January 2018, Coincheck, another Japan-based currency exchange, lost a record-breaking $526m to hackers. The exchange had been storing its assets in a hot wallet that Coincheck admitted it had not secured with multi-signature private keys. Multi-signature security requires multiple sign-offs before funds can be transferred; had the platform been in use, the funds would not have been accessible to a single breach.

Although the relevant security protocols are available, the infrastructure in these exchanges often struggles to keep up with the pace.

HOSHO CAPABILITIESHosho aims to drive the potential of blockchain security. With Hosho audits in place, clients can feel at ease that audited smart contracts have been written securely. Speaking about what Hosho can do to

feature | cryptocurrency exchanges

cryptocurrency exchanges plagued by hacks:

where are they going so wrong?

Regulatory lapses and inadequate levels of security have led to a number of cryptocurrency exchanges falling victim to hackers. Michael Julian, information security officer at Hosho, explains

where they are going wrong. Briony Richter reports

it’s likely that Zaif was not following a sound hot/cold

wallet policy



support exchanges, Julian says: “Hosho offers penetration-testing services which, in conjunction with an effective infosec team, will ensure that exchanges have strong perimeter network security.

“Because no system is completely unhackable, it is also important to have an effective cryptocurrency-handling policy. Hosho assists in this domain by auditing existing policies and creating custom policies from scratch in the case of a new exchange entering the market.”

He continues: “Centralised exchanges can be secured through the proper application of sound cryptocurrency-handling policies, effective use of information security teams, and use of third-party auditing firms to perform policy reviews along with frequent penetration testing.

“As witnessed with Bancor, even decentralised exchanges are not immune to poor security implementation. No system, whether centralised or decentralised, is inherently secure. Systems must be designed in a secure manner, eliminating single points of failure. Once implemented, they must be kept up to date, tested and audited to ensure that they remain secure.”

As no security regulations or standards have been determined, Hosho conducts ‘penetration tests’, involving a series of signature tools and techniques to attempt a breach into a client’s system. By doing this, Hosho can discover potential vulnerabilities that could expose a system to damaging hacks. Each issue discovered is reported by Hosho with a Risk Score based on the likelihood of the issue being exploited.

THE FUTURE IS BLOCKCHAINThe jury is still out on cryptocurrency. In September, the New York attorney general’s office released a report stating that the exchange sector was full of conflicts of interest. It went further, saying the industry did not do enough to protect investors and prevent damaging breaches.

In the UK, similar concerns have been raised by the government. MPs on the UK Government’s Treasury Select Committee have called for cryptocurrencies to be regulated, to protect consumers.

On the future of the cryptocurrency market, Julian highlights: “While no one can see into the future, we believe that blockchain has the potential to be a globally transformative technology. The ability to rapidly exchange currency worldwide is important to the continued growth from globalisation, and with it the expansion of international trade, ideas and culture.

“It would appear that the exchange of information has advanced at a pace much faster than the international exchange of currency. Cryptocurrency could be the catalyst that can fuel this continued growth, free from the red-tape interference of diplomacy.”

The government has continued to have concerns over the volatile nature of cryptocurrencies. It has the potential for scams and has been used in illegal activities, such as money laundering or funding terrorism.

However, Julian notes that blockchain has the real potential to transform various sectors of society. He says: “Blockchain technology has the potential to be just as transformative

as the automobile, telephone, computer or internet.

“Hosho’s main goal is to work with business leaders, investors and regulators to improve blockchain security, leading the market with innovative tools, products and ideas. Through improvements in security, blockchain will become more trusted in the eyes of the population, allowing more investment, innovation and utilisation, eventually reaching its true potential to change the world as we know it.”

It will take time to become fully accepted across society, however. Julian adds: “Just like the infancy of the internet, the adoption of online payments did not become mainstream until it was deemed to be a secure method. Blockchain technology needs time to mature and become understood by the masses.

“As more resources are thrown into the development of innovative smart contracts and apps, we will see more companies rolling out products using blockchain technology. As long as security is taken seriously, and trust is developed with users and CEOs alike, soon we will see many mainstream technologies adopting blockchain technology.”

The reality is that the world of cryptocurrency and blockchain technology is growing at an exponential rate. To avoid further breaches, exchanges need to focus on securing their infrastructure. Using Hosho’s security checks enables businesses and exchanges to learn early on where vulnerabilities lie, and how best to fix them.

Without a robust platform in place, hacks will continue to plague the cryptocurrency exchange industry. <

feature | cryptocurrency exchanges

Michael Julian, Hosho

No system is completely unhackable: it is important

to have an effective cryptocurrency-handling policy



analysis | cryptocurrency

Mining cryptocurrency is not the most popular task. In July 2018, US congressman Brad Sherman

actually called for a blanket ban on buying and mining cryptocurrency.

Both Apple and Google have banned cryptocurrency mining apps from their app stores, in an attempt to stop users having their phones used for that purpose without their knowledge. Even charities are getting into the game: Unicef recently asked gamers to use their GPUs to help mine cryptocurrency for Syrian refugees.

There is also the environmental impact of mining cryptocurrencies such as Bitcoin. According to the Bitcoin Energy Consumption Index, Bitcoin uses around 32TW of energy every year, enough to power around three million US households. In comparison, all Visa transactions in a year only use the energy of 50,000 homes.

While most mining efforts are intentional, others are using more illicit forms.

ILLICIT MININGAs cryptocurrency values rise, cybercriminals are using devices such as computers, mobiles, and even smart fridges to illicitly mine cryptocurrency. According to the Cyber Threat Alliance (CTA), illicit cryptocurrency mining grew by 459% between 2017 and 2018, and is showing no signs of slowing.

Mining malware affected 13% of all Fortinet customer companies in the fourth quarter of 2017, rising to 28% by the first quarter of 2018. In May 2018, Check Point’s Global Threat Index identified that the CoinHive browser-based miner was having

an impact on 22% of its corporate customers. Furthermore, the Palo Alto Networks found approximately 470,000 unique binary-based samples that have the goal of cryptocurrency mining. Security firm McAfee did not have anything better to add, stating that there was a 629% increase in coin-mining malware in the first quarter of 2018.

In its The Illicit Cryptocurrency Mining Threat report, the CTA says: “While the theft of computing cycles to make money may sound relatively benign in the face of other kinds of cyberincident that can encrypt your data for ransom, steal your intellectual property, or disrupt important functions of critical infrastructure, it is a threat that cybersecurity providers and network defenders must address together to improve our overall cybersecurity.”

A multitude of problems can come from this. On a basic level, it drains resources, causes higher electricity bills, and decreases the productivity of devices and workforces.

Cyberattackers are now targeting less-obvious devices to mine: smart TVs, cable

boxes, internet set-top boxes and all IoT devices are under threat. On a more serious note, it proves that a device or system has serious cybersecurity flaws. It is also a sign that there may be far larger security problems ahead.

The report continues: “Illicit mining shows no signs of being just a phase for threat actors, but will likely be a continuous and nearly effortless approach to revenue generation. As enterprises experiment with the use of blockchain technologies to conduct business operations, illicit mining outside of cryptocurrencies may itself become a disruptive risk that enterprises must mitigate.”

The CTA has specified five reasons for the increase in the activity:• The increasing value of cryptocurrencies

are making the act more profitable;• Introducing cryptocurrencies that can

be mined via standard devices, such as Monero and Ethereum, provide higher levels of anonymity and a wider attack surface;

• Ease of use;• Increasing availability of pool mining,

where groups of computers band together to mine and increase scale, and

• Enterprises and individuals with lacking security practices and cyberhygiene are bigger targets and often unaware that their operations are being utilised.

The report concludes: “Network defenders have a real opportunity to disrupt threat actors that rely on illicit mining operations to generate revenue. Revenue generation on a per-infection basis is currently low.

“Thus, proper improvements in security may actually drive malicious actors to abandon mining altogether. Even better, making these basic improvements will also increase your defences against other malicious actors that seek to steal or manipulate data or disrupt business processes.” <

cryptocurrency: are you mining it without knowing?In the cryptocurrency world, mining is crucial. It validates transactions, and successful miners gain new cryptocurrency for their efforts. However, it uses an enormous amount of energy, so what do miners do? Get other devices to do it for them. Patrick Brusnahan reports

CRYPTOCURRENCY MINING AT A GLANCE

currency anonymity coin price july 2018 features

Bitcoin Low $8,166.08 $140bn market cap. First blockchain coin.

Litecoin Low $83.27 $4bn market cap. More frequent block generation and faster confirmation times than Bitcoin.

Ethereum Low $465.03 $46bn market cap. Is mined due to its popularity as well as ease of mining.

Monero Medium $140.04

$2bn market cap. Focused on privacy. Mining algorithm is considered ‘ASIC resistant’, meaning no specialist hardware is required, making traditional CPU/GPU mining more profitable.

Zcash Medium $219.19 $976m market cap. Privacy feature conceals sender, recipient and amount transacted.

Source: CTA



analysis | cashless in europe

Market Research has analysed cashless transactions in 28 European countries, and found

a number of factors that are driving the rise in digital payments.

Across all market segments, cashless transactions are on the up. In the UK, the surge of digital-only banks is driving the cashless revolution and transforming how consumers interact with money.

The report considers the number of cashless transactions and total revenue from digital payments to determine the countries with the most digitally ready businesses. It found that, of the European countries studied, the UK has become the biggest supporter of cashless.

The UK generated a staggering £81.3trn ($106trn) in cashless payments in the year ending 2016, and the highest total number of cashless transactions, at 25.2 billion.

As digital technology in the payments space continues to evolve, card payments in the UK have now surpassed cash for the first time. The frictionless process and convenience of use are clearly driving the relentless rise in popularity of cashless spending.

In September 2018, Mastercard released new data revealing a 95% rise in contactless transactions across the UK for the year to date. Contactless now represents almost one in two in-store card transactions carried out by UK consumers.

Speaking to EPI, a spokesperson for Mastercard comments: “Cash will have a role to play for years to come, but what is clear is that cash transactions are declining in favour of card payments. This is partly driven by the rise of online shopping, but it is also true of the high street.

“Research shows that consumers are carrying less cash with them because of the ease of contactless. Whether cash will ever completely disappear remains to be seen, but ultimately people need choice in the way they make payments. One size doesn’t fit all.”

GERMANY SECONDThe report placed Germany second in terms of readiness to adopt cashless payment methods. Although 80% of transactions were conducted with cash in 2014, the nation has moved forward quickly, with measures such as bringing in card payments in all taxis in Berlin in 2015. That move triggered a shift to contactless, and Germany’s annual cashless spend is now £48.7trn.

Expert Market lead researcher Jared Keleher comments: “Over the past few years, we’ve seen that even the most traditionally cash-loyal countries like Germany are slowly coming around to the idea that digital payments are a central part of business in the 21st century,

with contactless card payments hitting the 1% mark for the first time this year.

“In the UK, where card and contactless payments have been widely adopted, card payments actually surpassed cash for the first time this year. The availability of simple card payment systems has certainly helped small businesses that previously relied upon cash payments – even beach-front chippies and small markets now offer quick and easy contactless payment. With more and more people choosing to pay via phones and smartwatches, it is not a stretch to say that cash and even cards might become obsolete here in the coming decade.”

Dragging its feet is Malta, where cashless payments only accounted for 89 billion transactions. The report highlighted that, in comparison, the UK scooped 535 times more cashless transactions.

Whether countries go completely cashless is yet to be seen; however, digital payment methods are certainly causing a shift in how countries and governments look at money.

The Mastercard spokesperson highlights: “Clearly there will be always be local nuances when it comes to payments. In Germany, for instance, online payments are far less popular, and many shoppers pay on delivery for goods ordered through e-commerce sites.

“However, the commonalities tell a stronger story. For instance, in the physical store environment, contactless continues to witness strong growth, consistently, across every country.

“We are not expecting huge differences in the adoption of biometric payments from one market to the next. The technologies are already in place with fingerprint and facial recognition on smartphones. And with strong customer authentication becoming law in September next year, banks will need to offer their customers biometric authentication as well as one-time passwords. So, from this point on, while we expect a spike in biometrics payments, this should be consistent across the entire region.”

Of course, with an increase in cashless transactions, the question of data security must be addressed. Although certain types of financial crime would stop, cashless opens the door to an increased amount of cybercrime, and that concerns a lot of consumers over the privacy of their financial data.

As many countries free-fall into an increasingly digital world, it will be imperative for them to ensure banks and other financial organisations have a sufficiently robust infrastructure to cope. <

the cashless economy: countries join the revolutionCashless transactions have caused dramatic changes to the financial ecosystem. With card payments pushing out cash, new research reveals the countries where digital technology is helping economies thrive. Briony Richter reports

Top 10 European countries for cashless transactions1. The UK2. Germany3. France 4. The Netherlands5. Spain6. Poland7. Italy8. The Czech Republic9. Belgium 10. FinlandSource: Expert Market



products | paysend

Paysend’s Global Account allows customers to hold, move and spend multiple fiat currencies globally

using their Paysend card, and also supports several cryptocurrencies.

Customers can switch funds between currencies using the Paysend app in real time, as they travel to different countries, and there are no charges other than FX rates.

“If you’re in Canada, and run out of Canadian dollars, you can instantly transfer some of your sterling funds to Canadian dollars, and our app handles the FX conversion,” Millar says.

Paysend will roll out the Global Account, currently available in beta form, over the next few months. Its first product, the card-to-card-based Paysend Global Transfers remittance service, is aimed at migrants and expatriate workers who typically send small amounts back home. It charges a fixed fee – £1, $2 or €1.50 – plus an FX rate per transfer.

“The Global Account is essentially an e-wallet,” says Millar. “It enables people to do three things: hold money the way they want to hold money, move money the way they want, and spend money how they want.”

Initially, the Global Account can hold US dollars, sterling, euros, rubles and Kazakhstani tenge, plus three cryptocurrencies: Bitcoin, Ethereum and Litecoin.

“The difference between the Global Account and our Global Transfers service is that, with the Global Account, you transfer money within your own e-wallet from currency to currency, rather than to someone else,” explains Millar.

Paysend currently has a Payments Institution license from the UK’s Financial Conduct Authority. “If we lose our European passporting rights due to Brexit, we’ll apply for a European Payments Institution licence as

well, so we can carry on trading in continental Europe,” says Millar.

Several members of Paysend’s product design team originally worked for Revolut, whose app allows users to hold up to 25 currencies on a Revolut card and offers fee-free transfers in 130 currencies at real-time exchange rates. TransferWise offers a borderless account that lets customers hold over 40 currencies and send and spend money abroad using the TransferWise debit Mastercard.

Whereas Revolut has 2.8 million users, and TransferWise over four million with over two million TransferWise debit card transactions to date, Paysend so far has signed up 200,000 users to its Global Transfers platform, having seen a threefold increase in Global Transfers users in the last six months.

In July 2018, Paysend raised $20m from investment firm MARCorp Financial and its existing investors to fund development of the Global Account. “Money-transfer companies were a key focus of fintech investment in 2017, so clearly people are using these firms’ services extensively,” says Talie Baker, senior analyst at Aite Group.

VISA AND MASTERCARD“We’re direct Visa and Mastercard members, and also support China UnionPay (CUP) cards for our remittance service,” says Millar. “Because of our membership of Mastercard and Visa, we do our own acquiring and processing on our PCI-compliant platform, and don’t use a third-party processor.”

Paysend uses the Visa and Mastercard P2P transfer rails, Visa Direct and Mastercard Send, for its remittance service. “We opted for card-based transfers for our Global Transfer service rather than bank account transfers,

because cards are now so prevalent compared to cash,” explains Millar.

“The reason people send funds to their relatives is so the recipients can spend this money, and they typically withdraw the funds using a card. So it makes sense to enable our customers to transfer funds direct to the recipient’s Visa, Mastercard or CUP card. We didn’t just want to offer a cheaper bank-to-bank transfer service, but wanted to provide something transformative.”

As a direct Visa and Mastercard member, Paysend can act as issuer for Paysend prepaid cards linked to customers’ Global Accounts.

Millar says the company’s development plan calls for it to develop B2B services such inbound and outbound business payments for smaller international online businesses. He says Paysend will likely also eventually offer bank-account-to-bank-account transfers. In some destination countries, Paysend already supports card-to-bank-account transfers.

“We will be launching our business services in Europe later this year,” says Millar. “This will leverage our payment-processing platform to enable businesses that sell abroad to receive payments in multiple currencies, for example via an e-marketplace.

“We plan to link our consumer-facing and business payment-processing platforms. This will mean that, if a consumer makes a purchase from one of our merchant clients, we can instantly offer the consumer a Paysend digital account and perform the KYC on them to let them make the purchase.”

“Paysend’s platform is very different from other remittance companies in that its primary product offering is card-to-card transfers,” says Baker. “Card-to-card transfers can work in developing nations if the recipient has a prepaid card, since this is a safer way to receive money than picking up cash.

“The downside of card-to-card transfers is disclosing your card number to people, due to the fraud that may happen when someone gets your card account number. However, in Russia, for example, it’s common practice to give your card number to another person for P2P transfers, so maybe it’s not a big deal in other parts of the world.”

Baker suggests that Paysend should set up a directory for its remittance service that allows people to send money to an email address or mobile number tied to a card. This would be a safer way to make transfers, she notes, while praising the app’s digital wallet function.

“The ability to hold money in different currencies is a plus for people who do a lot of international travel,” she says. <

money transfer provider paysend launches A global accountPaysend is the latest digital money-transfer provider to launch a global account, in a market dominated by Revolut and TransferWise. Robin Arnfield talks to CEO Ronnie Millar



products | orange money

Orange Money was initially launched in Côte d’Ivoire in 2008.

The success of this money transfer and mobile payment solution for unbanked or relatively unbanked populations is based on the accessible, universal nature of the service, which makes it possible for millions of people to perform instant, secure and reliable financial transactions using a mobile phone.

The service is available in 17 African countries and has 40 million customers, 13 million of whom use it every month.

Orange Money’s accelerating growth and sales, which rose 60% from 2016 to 2017, have made it one of the group’s top growth drivers in Africa, particularly in Côte d’Ivoire, Mali, Burkina Faso, Senegal and Cameroon. In some countries, the service gives close to 50% of users access to banking services in areas with low levels of bank usage.

Orange Money is now much more than just a cash transfer service. Over the past decade,

the number of Orange Money services has quadrupled, leading to the financial inclusion of populations and helping drive national economic development. The offer has been significantly expanded to include international transfers, bill payment, and wage payment services. The Bank to Wallet service, launched in 2015, is a major innovation that goes even further by enabling transfers between bank accounts and Orange Money accounts.

ELECTRONIC MONEYElectronic money has also made it possible to facilitate exchanges and secure transactions, and is now a major advantage not only for individuals but also for major companies and SMEs. To meet the compliance regulations that govern mobile money activities, Orange has created financial establishments with central bank approval in seven African countries, as well as a shared supervision

and compliance control structure, Cecom, based in Abidjan. These structures guarantee transactions and facilitate dialogue directly with authorities, thereby simplifying new service launches. The goal is to make Orange Money accessible for as many people as possible, in strict compliance with regulations set out by the central banks in the countries and currency zones where Orange operates.

Alioune Ndiaye, CEO of Orange Middle East and Africa (OMEA) says: “Orange Money makes real contributions to economic and social development in Africa, and is a part of our strategy as a multi-service operator and digital transformation partner in Africa and the Middle East. Orange Money’s success is first and foremost a joint achievement; I would like to thank all the teams who work hard every day to ensure its success, which now represents a major share of OMEA turnover.”

Paul de Leusse, Orange group deputy CEO for mobile financial services, says: “Orange Money’s success is based on its usefulness, its ease of use, and its full integration with Orange’s services. Orange Money represents the future of Orange’s mobile financial services in all our countries, especially in Europe.”

After its transfer and payment services, Orange is going further with lending and savings services available directly by mobile phone. Available through partners, the services have already been offered to customers in Mali and Madagascar since early 2018.

International transfers, another strong area of development for Orange Money, aim to strengthen ties between people living outside their home countries and their loved ones. Finally, as smartphones become increasingly widespread and uses change rapidly, the Orange Money services are evolving with the development of an application for easier interactions and transactions. <

orange money: a decade of financial innovation in africaOrange Money, Orange’s mobile money solution, is celebrating its 10th anniversary. Launched in 2008, the service currently has 40 million customers and is available in 17 countries, reaching €26bn ($30bn) in transactions in 2017. Douglas Blakey reports

Orange Money: how does it work?Orange Money is an electronic wallet linked to an Orange mobile number. It simply converts cash into electronic money, and vice versa.

Orange Money service is available to all Orange customers provided they have a SIM card, a mobile phone and an identity card. Registration is free at all Orange Money points of sale. To load their account, the customer goes to a point of sale with the desired amount in cash. Following the transaction, the seller and the customer receive an SMS confirmation of the transaction’s success. The account is instantly credited.

Transfers and paymentsThree types of transaction are offered by Orange Money:

• Money transfer: Orange Money makes it possible to send money via mobile phone to any Orange Money customer within the same country, and internationally for certain countries.

• Payment: Users can make payments to merchants, pay some bills remotely, make purchases on the web, or top up airtime whenever they want.

• Financial services: In Madagascar, customers can now access m-kaji, PAMF’s instant credit and savings service, from their Orange Money mobile account. Orange will gradually extend this type of solution to other countries.



country snapshot | luxembourg

LUXEMBOURG

country snapshot: luxembourg

Payment cards are the preferred payment instrument in Luxembourg, accounting for 52% of the total

payment transaction volume in 2017.

Banking penetration in Luxembourg is one of the highest in the world, and consumers are keen users of bank products and services. The percentage of

Luxembourg’s population aged 15 or above with a bank account was 97.3% in 2017.

Luxembourg is also host to a number of wealthy individuals and large corporations,

0

500

1,000

1,500

2,000

20132016

2021f2017e

$bn

value of credit tRanSfers

Source: Central Bank of Luxembourg, GlobalData

0.0

0.5

1.0

1.5

2.0$bn

20132016

2021f2017e

value of cheque payments

A mature market with high card penetration

0

3

6

9

12

15$bn

20132016

2021f2017e

value of payment cards

Source: Central Bank of Luxembourg, GlobalData Source: Central Bank of Luxembourg, GlobalData



country snapshot | luxembourg

and the majority of banks offer private banking, wealth management and asset management services. Payment cards are often cross-sold to customers as part of bundled offerings.

A favourable tax regime and bank-privacy legislation have enabled financial services to become a growth leader. The rising adoption of contactless technology contributed to the growth of payment card transaction volumes and values between 2013 and 2017.

With a growing number of retailers accepting contactless payments, the increased use of contactless technology is anticipated to further drive payment card transaction values and volumes over the next five years.

DEBIT CARDS PREFERREDDebit cards accounted for 55.2% and 54.2% of the payment card transaction value and volume respectively in 2017. Growth has been supported by a gradual shift from low-value cash transactions to debit cards, and the availability of contactless cards.

Some non-banks also offer debit cards, and the entries of digital-only banks such as N26 and FerratumBank have also supported the debit card market.

Germany-based mobile-only bank N26 launched operations in Luxembourg in November 2017. Account holders are offered a Mastercard-branded debit card to make payments in stores and online.

Similarly, Finland-based mobile-only bank FerratumBank offers services in several European countries, including Luxembourg. The bank offers a current account, an overdraft facility and a Mastercard contactless debit card.

PAY-LATER GROWTHPay-later card penetration in Luxembourg is among the highest in the world, with every citizen currently holding around three pay-later cards.

Rising disposable incomes and real household consumption are the primary reasons for the strong uptake of pay-later cards among individuals.

With Luxembourg’s largely wealthy population, banks are offering premium credit cards and a range of value-added services to these customers as part of bundled packages.

E-COMMERCE GROWTHE-commerce in Luxembourg recorded strong growth, increasing in value from €466.1m ($559.3m) in 2013 to $899.2m in 2017, at a CAGR of 12.6%.

Increasing consumer confidence in online transactions and a well-developed logistics infrastructure have supported e-commerce’s growth. The availability of virtual payment cards and a number of alternative payment solutions for online purchases has also been a key factor.

In November 2017 the Luxembourg government announced the launch of national e-commerce platform LetzShop. The platform provides an opportunity primarily for small and medium-sized merchants to display and sell products online. Products can be picked up from physical stores or delivered to the customer’s address.

To make it cost-effective, transaction fees on purchases are waived for

merchants, although an annual fee of around $600 is charged. This initiative is anticipated to boost e-commerce in the country, which will drive electronic payments.

PAYMENT INFRASTRUCTURE The number of POS terminals grew from 11,608 in 2013 to 13,232 in 2017, mainly supported by an increase in the number of POS installations at smaller retail outlets.

To serve SMEs, payment service providers are offering mPOS solutions. In 2017, SumUp, a Germany-based POS provider, launched its mPOS solution in Luxembourg, allowing merchants to accept payments by mobile phone.

As preference for contactless payments grows, retailers are also installing POS terminals with contactless functionality. According to Visa Europe, there were 7,000 contactless POS terminals in Luxembourg as of February 2018. <

BanqueInternationaleà Luxembourg

14.9%

Others32.6%

BNP Paribas22.0%

Banque etCaisse d’Epargne

de l’Etat30.5%

Debit card shares by issuer

Source: GlobalData

Mastercard52.0%

Visa48.0% Visa 100%

Debit card shares by scheme

Source: GlobalData

Others40.8%

BNP Paribas59.2%

pay later shares by issuer

Source: GlobalData

Visa67.3%

Others6.8%

Mastercard25.9%

pay later shares by scheme

Source: GlobalData



country snapshot | slovenia

country snapshot: sloveniaBank and government initiatives challenge cash’s dominance

SLOVENIA

Cash remains the dominant payment instrument in Slovenia, accounting for 54% of the overall transaction

volume in 2017. However, following efforts by Slovenian

banks and the central bank’s financial inclusion programmes, the payment card market is gradually growing. Payment cards accounted for 21% of the overall payment transaction volume in 2017, up from 16.7% in 2013.

Growths in the payment card transaction value and volume in the last five years were also supported by the rising popularity of contactless cards. Most banks in Slovenia offer contactless cards that can be used to make payments of less than €15 ($18).

Debit cards are the preferred card type in Slovenia, accounting for 79.9% of the overall payment card transaction value in 2017. High banking penetration coupled with consumer preference for debt-free payments and prudent consumer spending have led to the dominance of debit cards.

Financial inclusion remains a priority for the Slovenian government, which plays a key role in promoting financial literacy.

The central bank holds an education day to improve financial awareness and education, while the Bank Association of Slovenia aims to create financial awareness by organising workshops and seminars. Banks have also taken steps to educate consumers. Nova KBM promotes awareness among children about banking products and services through its interactive mascot, Dindin.

In terms of transaction value, charge cards accounted for a larger share than credit cards in 2017. Charge cards are mainly preferred by corporate users for high-value transactions, as they have a fixed payment timeline.

Banks in Slovenia have taken steps to boost credit card use, and most offer instalment facilities on credit cards. Abanka

offers a Visa Electron card that allows holders to split payments into between two and 12 instalments.

E-commerce grew in value from $222.3m in 2013 to $402.8m in 2017, at a strong CAGR of 16%. The young and working population is expected to drive the e-commerce market’s growth.

According to the Statistical Office of the Republic of Slovenia, 46% of the country’s population aged between 16 and 74 purchased online between April 2016 and March 2017. E-commerce growth is also supported by the availability of alternative payment solutions including PayPal, Skrill and paysafecard.

Banks and payment service providers are launching new solutions to boost electronic payments. NLB launched its NLB Pay mobile wallet in March 2018, allowing users to save Mastercard details to the wallet and make in-store contactless payments in Slovenia and abroad.

In March 2017, Fortumo collaborated with Telekom Slovenije to launch its carrier billing service, allowing users to pay for digital content on Google Play. <

CARD TRANSACTION VALUES BY CHANNEL ($ BILLION)

ATM POS

2013 6.7 5.7

2014 6.8 5.8

2015 6.9 5.8

2016 7.0 6.2

2017e 7.1 6.6

2018f 7.2 7.1

2019f 7.4 7.5

2020f 7.5 7.8

2021f 7.6 8.2Source: Central Bank of Slovenia, ECB, GlobalData

CARD TRANSACTION VOLUMES BY CHANNEL (MILLION)

ATM POS

2013 57.4 131.9

2014 57.0 139.9

2015 56.4 148.4

2016 55.8 162.1

2017e 55.2 175.3

2018f 54.6 188.7

2019f 54.1 201.9

2020f 53.6 214.1


NUMBER OF ATMS AND POS TERMINALS (THOUSAND)

ATM POS2013 1.8 35.6

2014 1.7 32.8

2015 1.7 38.0

2016 1.7 37.0

2017e 1.6 35.8

2018f 1.6 35.3

2019f 1.6 35.7

2020f 1.6 36.3


PAYMENT CARDS BY TYPE (MILLION)

Debit Pay later

2013 2.5 2.5

2016 2.6 2.6

2017e 2.6 2.6

2021f 2.8 2.8Source: GlobalData



country snapshot | saudi arabia

country snapshot: saudi arabiaHigh-value transactions gradually shift to electronic platforms

SAUDI ARABIA

In Saudi Arabia, cash is the preferred method of consumer payment, accounting for over 90% of the total

transaction volume.While high-value transactions are

shifting to electronic platforms, most low-value transactions are in cash.

Although use of payment cards – primarily debit cards – is gradually rising, they are mostly used to withdraw cash rather than make payments. However, the government has taken initiatives to promote electronic payments, including the introduction of the Wage Protection System regulation in September 2013.

While debit cards remain the dominant payment card type, credit card use remains low in Saudi Arabia for religious reasons. However, almost all leading credit card issuers in the country now offer Sharia-compliant credit cards.

The gradual adoption of contactless technology and the emergence of e-commerce – supported by the availability of several alternative payment methods – are likely to drive the payment card market throughout the next five years.

Debit cards are the dominant card type in Saudi Arabia. The Saudi Arabian Monetary Authority (SAMA) has taken a number of initiatives to encourage electronic payments, including establishing the Mada electronic payment system and introducing mandatory wage payments into bank accounts. In September 2015, SAMA launched a modified payments network, linking all ATMs and POS terminals to a central payment switch.

Pay-later cards accounted for only 6.1% of the overall transaction value in 2017. Key factors inhibiting the growth of credit cards include the debt-averse nature of Saudi consumers, and merchant reluctance.

The central bank has also set a minimum income requirement for credit cards at

SAR24,000 ($6,400) per annum for banked consumers and $8,000 for non-banked consumers, making credit cards available only to certain parts of the population.

The gradual adoption of contactless payments is fostering the use of payment cards at the POS. Riyad Bank launched the country’s first contactless card in September 2015, converting its entire card portfolio to contactless technology. In April 2016 National Commercial Bank also transferred its entire credit card portfolio to contactless technology.

In November 2016, SAMA launched the Mada Atheer contactless payment service, allowing cardholders to make low-value contactless payments at POS terminals.

In February 2018, SAMA announced plans to extend contactless functionality to smart devices, and in March 2018 Riyad Bank partnered with payment technology provider Gemalto to launch Saudi Arabia’s first contactless payment wristband.

Saudi Arabia’s e-commerce market registered a strong CAGR of 25.2%, supported by rises in the young population and smartphone penetration. <

CARD TRANSACTION VALUES BY CHANNEL ($ BILLION)

ATM POS

2013 179.9 42.8

2014 196.9 51.2

2015 209.2 56.7

2016 203.0 61.1

2017e 197.7 65.7

2018f 193.3 70.6

2019f 189.5 75.8

2020f 186.4 81.3

2021f 184.1 87.2Source: Central Bank of Saudi Arabia, GlobalData

CARD TRANSACTION VOLUMES BY CHANNEL (MILLION)

ATM POS

2013 1,343.9 324.3

2014 1,537.3 400.9

2015 1,804.1 484.4

2016 1,931.4 629.3

2017e 2,054.7 770.8

2018f 2,161.3 911.3

2019f 2,264.7 1,057.5

2020f 2,363.7 1,203.4

2021f 2,458.2 1,344.2Source: Central Bank of Saudi Arabia, GlobalData

NUMBER OF ATMS AND POS TERMINALS (THOUSAND)

ATM POS2013 13.9 107.8

2014 15.5 138.8

2015 17.2 225.4

2016 17.9 276.2

2017e 18.6 305.0

2018f 19.4 335.6

2019f 20.1 366.3

2020f 20.8 395.7

2021f 21.4 423.7Source: Central Bank of Saudi Arabia, GlobalData

PAYMENT CARDS BY TYPE (MILLION)

Debit Pay later

2013 17.8 2.7

2016 26.5 4.0

2017e 29.1 4.4

2021f 37.3 5.9Source: BIS, GlobalData



industry insight | idex biometrics

Modern technology has positively shaped personal finance in many ways, by providing convenience

and security through areas such as online banking and payment cards. As a result however, our personal relationships with our money are quickly deteriorating.

After all, we live in a world of personalised experiences. Amazon offers us individual recommendations, Spotify suggests great new songs based on our listening, and Netflix knows what we will love to watch. We now expect everything to be unique and tailored to us and our personal preferences. It puts us in control and validates that we are each individuals with our own specific likes and needs – that in a world of 7.6 billion people, we have a voice.

This taps into an innate love of the personal – something that reflects who we are, from a monogrammed shirt, a personalised number plate, a tailored itinerary for your holiday to simply how you like your coffee.

Yet there are some things in life that have resisted being personalised: credit and debit cards are one such example. They are all the same. All dull and functional. Generally, the only way to personalise cards currently is to use a PIN with significance such as a birthday, as insecure as that may be.

But, as the protagonist from the 1960s TV show The Prisoner famously shouted: “I am not a number!” None of us are numbers. We are all unique. And what is more unique than our fingerprints?

BIOMETRIC INTERVENTIONOur society has become increasingly security-conscious, in a landscape characterised by

the rising skill levels of cybercriminals. With biometric technology already implemented as a security measure in airports, and even on the latest smartphone devices, the idea of fingerprint recognition should not be a foreign concept. Instead, due to it already being a consumer habit, biometric payment cards will be easily adoptable, paving the way for a smooth transition.

DEATH OF THE PINTraditional methods of authentication such as the PIN are becoming more and more outdated. Failing to combat fraud, the PIN has seen millions lost to scams ranging from shoulder-surfing to lost and stolen, even to opportunist criminals discovering PIN codes written down.

By introducing a biometric payment card, consumers will be far more protected from fraud, which will eventually bring an end to the PIN. By storing a fingerprint sensor directly onto the payment card, as opposed to a central database, there is nobody else in the world that will be able to connect with the card to issue a transaction other than the owners themselves. Thus, it creates a far more accurate method of authentication and the ultimate personal relationship between consumers and their cards.

With everything else now seemingly moving towards a digital platform, this is the last piece of physical interaction in payments, and therefore a much-needed opportunity to build a personal connection and better security to combat fraud head-on.

Specifically, the reference fingerprint can easily be uploaded to the card by the user, at home, and once that is done they can

use the card via existing secure payment infrastructures – including both chip and ID and contactless card readers – in the usual way.

Once it is registered and in use, the resolution of the sensor and the quality of image handling is so great that it can recognise prints from wet or dry fingers, and knows the difference between the fingerprint and image ‘noise’ – such as smears or smudging – that is often found alongside fingerprints. The result is a very flexible, durable sensor that provides fast and accurate authentication.

Fingerprint recognition will provide a clearer means to distinguish an individual from everyone else on the planet. This technology will not only assist the financial sector; instead, its benefits will transcend into a range of areas, from bolstering national identification which will help address healthcare and social fraud, assisting financial inclusion and maintaining access to controlled spaces such as government buildings.

HOW SOON IS NOW?Fortunately, the long-held ambition to add biometrics to cashless transactions has now been achieved. Production and trials of an extremely thin, flexible and durable fingerprint sensor, suitable for use with payment cards, are underway in countries such as Bulgaria, the US, Mexico, Cyprus, Japan, the Middle East and South Africa.

However, we anticipate that each banking customer may deploy as many as 100,000 biometric cards to their account holders by the end of 2018, and that biometric bank card adoption will go into many millions from 2019. It is paving the way for payments to become personal once again.

Personal relationships are a key part of life; they offer us a sense of importance and happiness. The time is now for this to extend to our payment cards. Biometric payment cards will create a unique connection, with transactions exclusive to the owner, shunning anyone else on the planet trying to access the sensor. Not only is this integral to creating a personal relationship between card user and bank, but the security benefits are, therefore, more profound as the challenge of forging fingerprints is far more complex for criminals

Though biometric technology is already in place across our society, its potential within payments has yet to be truly discovered. Before this can be achieved, banks need to gain consumer trust and promote the value of biometric technology before its benefits can be realised by us all. <

biometrics: how to reconnect with our paymentsOur relationship with money is less personal than it was. Gone are the days when people would visit their local bank, queue up and request to withdraw cash via the bank clerk. David Orme, senior vice-president at Idex Biometrics, writes


Event highlights:

∤ Re-defining asset ownership for a digital generation

· The Baltic Approach: Regulatory arbitrage in the digital era

· GDPR and its implications for reporting, asset management and marketing

· Funding strategies for a lean world

· Re-defining sales and distribution channels for the digital era

· Harnessing the power of agile: Assessing the transformative potential of digital

· Embracing the circular value chain approach to lease delivery & design

· Taking the right risks for the rewards: Strategic implications of the era of asset ownership

· Using data and analytics to drive performance, deliver value


Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580

LEASING LIFE CONFERENCE& AWARDS 2018

15th November 2018 ∤ Tallinn, Estonia

For its 14th edition Leasing Life Conference and Awards 2018 moves to the Baltic Region to bring together asset finance professionals and industry disruptors in an active discussion of the key issues facing the leasing industry.

This year’s Leasing Life conference explores how Europe’s leasing industry is responding to the value chain opportunity - the operational, and strategic, implications of the paradigm shift, and the role that technology

must play in transforming the industry so that it thrives in the digital age..


Headline Partner: Gold Partner: Silver Partners:

Table Hosts:Drinks ReceptionPartner:

Badge and LanyardPartner:

Exhibitors: DocumentationPartner:

Lunch Partner:

RegionalPartner:

In Association with:Panel Hosts:

Key Issues :

∤ Economic trends to 2020. Wealth management industry performance

∤ With technology playing an increasingly significant role in service delivery what benefit does institutional size confer?

∤ What are the implications for service, delivery and product distribution in the age of the digital wealth manager?

∤ How is technology enabling faster, more cost effective on-boarding, KYC and compliance reporting among wealth management organisations?

∤ How should Switzerland’s private banking industry define itself in the age of digital technology and intensifying competition?

∤ What channels are working for attracting, retaining and managing an increasingly diverse customer universe?

∤ What’s the connection between distribution and profitability? How are Swiss private banks adapting to the challenge of tight margins and higher costs?

∤ What does the country need to do to stay ahead?

SHAPE THE FUTUREOF PRIVATE BANKING


Private Banking & Wealth Management: Switzerland 201812th December 2018 ∤ Marriott, Zurich

Private Banking & Wealth Management: Switzerland 2018 Conference and Awards leverages the expertise across the Verdict research and publishing portfolio, including Private Banker International, Wealth Insight

and Wealth Intelligence Centre. The event is an opportunity to share ideas, discover trends and network with peers across the wealth industry.


Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580

Supported byGold Partner: Silver Partner: Bronze Partners: Exhibitor:

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