ing banks on staff wellbeing€¦ · intelligent environments is an international provider of...

•HPS PowerCARD Users Meeting, Marrakech

•AI and machine learning

•DBC debate: biometric security

•Country Surveys: Thailand, the UK, Italy

May 2017 Issue 359 www.electronicpaymentsinternational.com

The Dutch bank’s Wellness Quotient programme wins Retail Banker International 2017 Employee

Investment award

ING banks on staff wellbeing

EPI 359 May.indd 1 07/06/2017 13:18:35

Intelligent Environments is an international provider of innovative mobile and online solutions for fi nancial services providers. Our mission is to enable our clients to deliver a simple, secure and effortless digital experience to their own customers.

We do this through Interact®, our single software platform, which enables secure customer acquisition, engagement, transactions and servicing across any mobile and online channel and device. Today these are predominantly focused on smartphones, PCs and tablets. However Interact® will support other devices, if and when they become mainstream.

We provide a more viable option to internally developed technology, enabling our clients with a fast route to market whilst providing the expertise to manage the complexity of multiple channels, devices and operating systems. Interact® is a continuously evolving technology that ensures our clients keep pace with the fast moving digital landscape.

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To fi nd out more please visit:

www.intelligentenvironments.com

Simple, secure and effortless digital solutions for fi nancial services organisations

@IntelEnviro

IE Adverts - 2017.indd 1IE Adverts - 2017.indd 1 21/12/2016 11:53:1221/12/2016 11:53:12

www.electronicpaymentsinternational.com May 2017 y 1

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EDITOR’S LETTER

Cross border banking steps up

Financial News Publishing, 2012Registered in the UK No 6931627

ISSN 0956-5558Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers

Editor: Anna MilneTel: +44 (0)20 7406 6701Email: [email protected]

Group Editor: Douglas BlakeyTel: +44 (0)20 7406 6523Email: [email protected]

Senior Reporter: Patrick BrusnahanTel: +44 (0)20 7406 6526Email: [email protected]

Group Publisher: Ameet PhadnisTel: +44 (0)20 7406 6561Email: [email protected]

Sub-editor: Nick Midgley

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As a subscriber you are automatically entitled to online access to Electronic Payments International. For more information, please telephone +44 (0)20 7406 6536 or email [email protected].

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Could TransferWise and ipagoo be the first of a new wave of bank accounts serving customers and SMEs that conduct their financial

affairs across countries?Ipagoo is back on the scene. The pan-

European bank first surfaced in 2015, with news of launching in four key European markets – the UK, France, Spain and Italy – with the fifth, Germany, hotly following on their heels.

It is a mobile app and debit card, allowing users to bank in multiple European coun-tries without the costs and charges that are normally applied to sending money between European banks.

It does away with what is often the main barrier to opening an account in a different country – that of providing proof of address. Upon sign-up, the user uploads a geoloca-tion-tagged selfie with ID document while present at the registered address.

Use of a the account, replete with debit card, allowance of three faster payments per month, and unlimited free transfers between ipagoo accounts will cost the use £5 per month. I can already count a few people who

would go for this, if only as a subsidiary to their usual accounts.

Meanwhile, UK P2P money-transfer operator Transferwise has launched a simi-lar account, having announced profitability at the start of 2017. Currently it processes transfers in 750 currency combinations to the value of $1bn per month.

The account is called Borderless and has launched in the UK and Europe, ahead of the US in June. So far it is for SMEs, but Transferwise aims to extend the service to consumers later in the year.

“With the unique platform we’ve built, we’re looking forward to creating a new kind of financial services for the future,” Taavet Hinrikus said.

The account will allow SMEs to hold, get paid in and transfer money between more than 15 different currencies.

At a time when the powers that be in Brit-ain want to shrink European ties, any prolif-eration of these kinds of services shines light on what is, for many, a baffling nonsense. <

ANNA MILNE, [email protected]

CONTENTSNEWS

2: GLOBAL RETAIL BANKING AWARDS

3: NEWS DIGEST

FEATURE

6: HPS CONFERENCE With the advent of PSD2, data management and anti-fraud measures very much to the fore, HPS’s clients congregated in Marrakech, Morocco to compare notes on their respective developments, research and predictions in these fields. EPI reports back

8: WELLBEING QUOTIENT The younger workforce has different habits and expectations, driving digital transformation and levelling the corporate hierarchy. Now, one institution is making changes of its own, writes Anna Milne

9: DBC DEBATE: BIOMETRIC SECURITY As banking and payments become increasingly advanced, the security protecting them needs to be more advanced as well. Can biometric security ever truly replace the tried-and-tested password? Patrick Brusnahan reports from the Digital Banking Club’s latest debate in London

13: THAILAND

14: THE UK

15: ITALY

COMMENT

12: AI AND MACHINE LEARNING, FICO

16: THE POWER OF ANALYTICS, SIX PAYMENT SERVICES

EPI 359 May.indd 1 07/06/2017 13:18:38

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Celebrating the best of the best in retail banking globally, the awards showcase the pioneering initiatives that have gained ground in the last

year, and reflect shifting trends in the industry.

In total, 25 awards were handed out, rec-ognising the best achievements and innova-tions in the retail banking industry.

An extra award was added to this year’s proceedings, one we hope we will be a per-manent fixture – that of Employee Invest-ment. This went to ING Bank for its WQ initiative, an employee wellbeing programme.

The Royal Bank of Canada (RBC) scooped Global Retail Bank of the Year and the award for Best Branch Strategy.

As for regional awards, Standard Bank, CIBC, Caixabank, Emirates NBD,

Scotiabank and DBS were all duly decorated. Ecobank also collected two awards – Launch of the Year and Product Innovation. Metro Bank’s CEO Craig Donaldson was awarded Retail Banker of the Year.

Commenting on the awards, Douglas Blakey, group editor of consumer finance titles at Verdict, said: “The annual RBI Global Awards were established more than 30 years ago, and continue to set a bench-mark for recognising world-class consumer finance institutions that have set new stand-ards in terms of innovation and outstanding performance.“We received a record number of entries

and I want to thank all entrant banks for participating; the quality and quantity of the entries did the RBI Global Awards proud. I want to congratulate all the winners, and

thank the awards sponsors Fiserv for their continued support,” Blakey continued.“The awards evening concluded a thor-

oughly enjoyable and informative Retail Banking Forum which, with Retail Banker International, is celebrating its 36th year.

“Taking Financial Innovation in Retail Banking: Winning Strategies as its theme, the conference took a retrospective and pro-spective look at the retail banking industry globally, and explored how the forces that have shaped the last 36 years are likely to influence the future.”

Payment strategies are increasingly to the fore in retail banking. It is great to see such change and ground-breaking initiatives industry-wide. You never know, next year we might even have a blockchain category! Con-gratulations to all the winners. <

GLOBAL RETAIL BANKING AWARDS Electronic Payments International

Winners of the 2017 Global Retail Banking Awards

Electronic Payments International is delighted to announce the recipients of the 2017 Global Retail Banker International Awards, sponsored by Fiserv. The winners were honoured at a gala dinner after the annual Retail Banking Conference in London’s Waldorf Hilton Hotel on 11 May.

The 2017 Global Retail Banking Awards winners are:

African Retail Bank of the YearStandard Bank

North American Retail Bank of the YearCIBC

European Retail Bank of the YearCaixabank

Middle East Retail Bank of the YearEmirates NBD

Latin American Retail Bank of the YearScotiabank

Asia-Pacific Retail Bank of the YearDBS

IT Innovation of the YearNordea

Product Innovation of the YearEcobank

Disruptive Innovation of the YearBarclays

Security Innovation of the YearGesa Credit Union

Best Payment InnovationTEB

Best Service InnovationAlior

Best Use of Digital Marketing and Social MediaNationwide

Best Use of Data AnalyticsZiraat

Best Customer-Facing TechnologyBank of Ireland

Excellence in Customer CentricityToronto Dominion

Best Non-bank CompetitorCircle

Retail Banking Launch of the YearEcobank

Best Branch StrategyRBC

Best Mobile Banking StrategyBangkok Bank

Best Digital StrategyICICI

Employment InvestmentING

Best Business Model InnovationBTPN

Retail Banker of the YearCraig Donaldson, Metro Bank

Global Retail Bank of the YearRBC

TEB Bank collecting Best Payments Innovation award with John Smith, Fiserv, and EPI editor, Anna Milne

EPI 359 May.indd 2 07/06/2017 13:18:39


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STRATEGY

Citi, Nasdaq partner for blockchain payment platformUS banking major Citi and stock exchange Nasdaq have unveiled a new integrated blockchain payment platform, which facili-tates straight-through payment processing and automates reconciliation.

The partnership makes use of technology company Chain’s blockchain infrastructure platform, Chain Core.

According to the companies, a number of transactions have already been completed between Citi’s CitiConnect and Nasdaq’s Linq Platform.

Nasdaq CEO Adena Friedman said: “This new payment capability marks a milestone in the global financial sector, and represents an important moment in the commercial appli-cation of blockchain technology.

“Through this effective integration of blockchain technology and global financial systems, we can realise greater operational transparency and ease of reconciliation, which can have profound implications for outdated administrative functions in the capital markets.”

The integration will enable end-to-end transactional processes for private company securities. It will also enhance operational efficiency and ease of reconciliation with real-time visibility of payment transactional activity on the blockchain ledger, the com-panies said.

Citi’s global head of treasury and trade solutions, Naveed Sultan, said: “CitiCon-nect for Blockchain provides a crucial bridge

between blockchain platforms and Citi’s global financial network.“Our partnership with Nasdaq showcases

Citi’s client-centric approach to innovation, and is an example of how we actively engage with our clients to co-create innovative, leading and differentiated solutions for the global market.” <

PRODUCTS

Android Pay launched in RussiaSearch engine giant Google has launched the Android Pay mobile payment service in Rus-sia, supported by 15 financial institutions.

Russia is now the 11th country where Google has launched the contactless mobile payment solution.

Android Pay in Russia is supported by MasterCard credit or debit cards issued by institutions including AK Bars, Alfa-Bank, B&N Bank, MTS Bank, Otkritie, Promsvy-azbank, Raiffeisen Bank, Rocketbank, Rus-sian Standard Bank, Russian Agricultural Bank, Sberbank, Tinkoff Bank, Tochka, VTB24 or Yandex.Money.

Raiffeisen Bank, Sberbank and Tinkoff Bank customers can also enable Android Pay from the banks’ mobile apps, without having to download Android Pay. Users need to choose the ‘Add to Android Pay’ option to

enable a card in Android Pay, without having to enter the card’s information.

Android Pay users can make payments at Magnit, Perekrestok, Starbucks, KFC and Rosneft. The app can also be used to shop online with supporting applications includ-ing Lamoda, OneTwoTrip or Rambler-Kassa.

Google first launched Android Pay in the US in September 2015, followed by the UK, Singapore, Australia, Hong Kong, Poland, New Zealand, Ireland and Japan in 2016.

In a blog post, Google said: “We’re thrilled to name Russia as our 11th country to adopt Android Pay, and we hope it’ll make your everyday purchases faster, easier, and a little more fun.“Get the app now to enjoy the benefits of

effortless checkout in apps, online, and at all your favourite places.” <

STRATEGY

Android Pay, PayPal partner to allow online paymentsAndroid Pay has expanded its partnership with payment giant PayPal to offer users a “seamless” payment experience online at merchants that accept PayPal.

With the extended partnership, Android Pay users on Chrome mobile web will be able to pay at online merchants using a PayPal account and fingerprint. Users do not need to enter a username or password when shopping using an Android phone running OS version 4.4 and higher, including KitKat, Lollipop, Marshmallow and Nougat.

In a blog post, PayPal explained that mer-chants using the latest versions of PayPal Checkout do not need to carry out any inte-gration processes to use the new features.

Google’s vice-president of payment prod-ucts, Pali Bhat, said: “Mobile checkout remains one of the biggest sources of fric-tion in the commerce experience, and we’re excited to collaborate with PayPal on ena-bling streamlined checkout experiences for all Android Pay and PayPal users.”

PayPal COO Bill Ready said: “This new seamless way to make a purchase with PayPal on Chrome mobile web with an Android device is just one way we’re work-ing to simplify the checkout experience. Pay-Pal’s One Touch is another way, and enables consumers to securely check out across plat-forms and devices without having to type in any payment information once logged in.”

In April 2017, PayPal collaborated with Google to allow PayPal as a payment meth-od on Android Pay in the US. <

PRODUCTS

Samsung Pay arrives in UKSouth Korean electronics giant Samsung, has launched its Samsung Pay mobile payment solution in the UK, in collaboration with MasterCard.

MasterCard is working with Spanish banking group Santander and credit card company MBNA to enable cardholders use MasterCard with Samsung Pay. The solution will allow users to make payments at almost any location where contactless payments are accepted.

Card details will not be stored on devices, but a digital token, powered by Master-Card’s Digital Enablement Service, allows

devices to make payments using industry-standard tokenisation.

MasterCard said it will generate a unique card number that will be specific to the card-holder’s device and cannot be used in con-junction with any other device.

MasterCard president of UK and Ireland Mark Barnett said: “Every Samsung Pay transaction made with MasterCard is highly secure – a critical part of this is our ability to tokenise cardholder details.”

Samsung Pay will initially be available on Samsung’s Galaxy S8, S8+, S7, S7 Edge, S6 and S6 Edge devices. <

EPI 359 May.indd 3 07/06/2017 13:18:41

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Visa to enable financial institutions to improve digital card experiences

Visa is set to introduce new capabilities to help financial institutions provide enhanced digital card management to customers.

The capabilities can be shared by issuing partners with cardholders through online and mobile banking channels.

On completion of deployment, the new capabilities will allow issuers to give Visa cardholders greater control and insight over how and where they pay, and who can pay using a digital version of the Visa card.

The new tools will be based on the Visa Token Service, which substitutes the 16-digit

account number, expiry date and security code with a unique identifier that allows shoppers to make purchases without reveal-ing account details.

The new feature enables Visa cardholders to add their card to digital wallets, card-on-file merchants, e-commerce enablers and Internet of Things (IoT) providers without having to sign up for each participating ser-vice individually. Users can also log into their bank’s mobile app and link a new card to a digital wallet before they even receive their physical card in the mail.

Issuers may pair the Visa Network Hub Push Provisioning with Consumer Transac-tion Controls to create new experiences for cardholders. For instance, issuers can enable holders to give restricted card access to other users via a digital wallet, card-on-file mer-chant, e-commerce enabler or IoT provider.

Visa added that the new capabilities will be made available to issuers in the US and Australia in 2018. <

DIGEST Electronic Payments International

STRATEGY

Mastercard wraps up Vocalink acquisitionMasterCard has completed up the takeover of VocaLink, which will help the acquirer to expand beyond card-based pay-ments to drive the major types of electronic payment transactions.

Mastercard agreed to acquire VocaLink for £700m ($920m) in July last year.

The deal was subject to regula-tory scrutiny from the UK’s Compe-tition and Markets Authority (CMA), amid concerns that the acquisition will weaken competition in the supply of ATM network services in the country.

When Mastercard made a commitment to address the CMA’s concerns, it received

final approval to proceed with the acquisition in the UK.

VocaLink powers real-time bank account-based payments in the UK, Singapore and Thailand, with the US scheduled to go live

later this year.Its technology is also the basis of

the UK’s ATM and traditional ACH sys-tems, as well as a new mobile offering that enables consumers to pay for retail purchas-es directly from their bank accounts.

Mastercard chief product officer Michael Miebach said. “This is a transformational deal. It brings Vocalink’s world-class technol-ogy and world-class people to Mastercard at a time of continued change in payments.“I am eager for what the future will bring:

more innovation, inclusion and choice that lets people, businesses and governments pay the way they want.”

Mastercard said VocaLink technology will allow it to innovate further in retail transac-tions, and expand in areas such as person-to-person and business-to-business payments, and government disbursements. <

STRATEGY

JPMorgan Chase exits R3 blockchain consortiumJPMorgan Chase has formally parted ways with distributed ledger technology firm R3, as the blockchain company proceeds with fundraising plans.

The consortium is looking to raise funds to nearly $150m from members and strategic investors in return for a 60% stake. Initially, the bank planned to raise $200m and offer a 90% share in the new company.

JPMorgan follows other larger banks, including Goldman Sachs Group, Banco Santander, Morgan Stanley and National Australian Bank, which left the consortium in late 2016.

JPMorgan joined the blockchain syndicate with eight other banks, including Goldman Sachs and Barclays, to develop common standards for blockchain technology.

The R3 blockchain consortium currently has in the region of 80 financial institutions as members.

JPMorgan Chase is a founding member of newly formed blockchain syndicate Enter-prise Ethereum Alliance, and is an investor in blockchain startups Axoni and Digital Asset Holdings. It is also an active participant in the Hyperledger project. <

LAUNCH

Starling Bank launches payment services unitStarling Bank, a mobile-only challenger bank in the UK, has launched a payment ser-vices unit to give businesses instant access to the country’s payment systems.

The new unit, Starling Payment Services, will allow other banks, payment service pro-viders and fintech firms to benefit from real-time payments.

The service will allow users to transact instantly through mobile phones or online. All payments will be sent and received through the bank and then credited in real time to the end-clients’ accounts.

Starling’s payment service will be avail-able to bank members of the Faster Pay-ments Scheme. The lender will also provide Mastercard issuance and access to the Bacs system, which is primarily used for direct debits and credits.

Commenting on the launch, Starling Bank COO Julian Sawyer said: “We believe that payments should be open, connected and always done in real time.” <

EPI 359 May.indd 4 07/06/2017 13:18:43


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REGULATION

UK to merge three retail payment systems operatorsA group set up by the Payment Systems Regulator (PSR) and Bank of England (BoE) has recommended that the operators of three payment systems – Bacs Payment Schemes, Cheque and Credit Clearing Company and the Faster Payments Scheme – be merged into a single entity to stimulate competition in the payments and banking industry.“The consolidation aims to develop further

the capability and capacity of the operators by bringing them within a single organisa-tion and reduces the complexity and costs of having three separate retail payment system operators (PSOs),” the regulators said in a statement.

The new single entity will be responsible for taking forward the next stage of the development of the New Payments Archi-tecture (NPA), an industry-led initiative that aims to boost competition across the pay-ments and banking industry.

However, the recommendation now needs to be reviewed and agreed by the boards of the three operators. The consolidation is expected to be substantially completed by the end of 2017.

PSR MD Hannah Nixon said: “It was the work of the Payments Strategy Forum that identified the opportunity presented by con-solidating these payment system operators. Working to a tight deadline, the Delivery

Group has produced a high-quality report that sets out a compelling approach to deliv-er the new PSO, which should support the forum’s vision.“The consolidation would be an important

first step towards a generational change in UK payments. It can help facilitate the safe and secure transition to, and management of, an NPA, which we believe could deliver more dynamic competition and innovation in pay-ments. Consumers will also benefit from new entrants coming into the market and offer-ing users of payment services new, innovative products.”

BoE director of financial market infra-structure David Bailey commented: “Con-solidation has the potential to deliver impor-tant financial stability benefits, including by delivering a new entity that is greater than the sum of its constituent parts and well placed to meet the high supervisory expecta-tions the bank has of a systemic risk manager.“As such, we welcome the report, and look

forward to seeing its recommendations taken forward in a way which promotes an orderly and smooth transition.” <

STRATEGY

Paytm receives $1.4bn infusion from Japan’s SoftbankIndia-based mobile wallet and e-commerce company Paytm has raised $1.4bn from Japanese internet and telecoms conglomer-ate SoftBank in its latest round of funding.

SoftBank is expected to purchase nearly $400m worth of shares from Paytm’s early investor, SAIF Partners, in a secondary trans-action. The bank will also purchase a minori-ty share from founder Vijay Shekhar Sharma.

With the investment, SoftBank will own nearly a fifth of the mobile payment com-pany, which is estimated to be worth $7bn.

SoftBank chair Masayoshi Son said: “In line with the Indian government’s vision to promote digital inclusion, we are commit-ted to transforming the lives of hundreds of millions of Indian consumers and merchants by providing them digital access to a broad array of financial services, including mobile payments.”

Paytm received first-round funding from Chinese e-commerce giant Alibaba and its finance arm, Ant Financial Services, in 2015.

In a separate development, Paytm has also launched a payments bank in India, offering annual interest of 4% for all saving accounts.

The Paytm Payments Bank, with no charg-es for online transactions, no minimum bal-

ance requirement and free virtual debit card, will initially be available by invitation only.

In the first phase, a limited version of the banking app will be available for employees and associates.

Paytm aims to open 31 branches and 3,000 customer service points in the first year, and has appointed Renu Satti as the bank’s CEO. It also plans to establish a network of KYC centres across the country.

In blog post, Paytm said: “The core mis-sion of Paytm Payments Bank will be to cater to the requirements of the unserved and underserved communities of India, and bring them to the mainstream economy. We are looking forward to making Paytm Pay-ments Bank available to all users very soon.”

Paytm received regulatory approval to set up the bank from the Reserve Bank of India in January 2017. <

Paytm founders Vijay Shekhar Sharma (left) and Mridula Sharma

EPI 359 May.indd 5 07/06/2017 13:18:46


Mohamed Horani , CEO, H PS Solutions, used his main key-note speech to explain the most important payment issues on

HPS’s radar in 2017.Blockchain was one of the first topics on

the agenda, although, interestingly enough, this seemed more with a view to get it out of the way of proceedings, dismissing its urgen-cy at present within payments.“This technology is a tremendous threat for

the brokerage trade; digitisation represents a bigger challenge for regulation. Central banks must encourage interoperability of payments. “The general ledger is managed by a

public management system, and issues

money without a central bank being involved,” Harani noted. “It promises trust in new business

models. It will have a place, but it is still in a period of experimentation,” he added. The HPS response?

“We are not a fintech – we have open architecture and conformity to standards. More than 20 countries use HPS for clear-ing and settling.“HPS sees new tech development as an

opportunity to:

1. Reduce time to market for clients2. Encourage customers to take advan-

tage of the changing environment

“Of every $100, $12 is invested in tech-nology based around PowerCARD prod-ucts, delivery and business models.”

PSD2 and PCI certification costs hurt“PSD2 forces all players to open accounts. There is no question that this will affect

other regions,” said Sebastien Slim, head of innovation at HPS.“The new peaks are enrolment and digital

channels – not just authorisation. NFC is happening everywhere, as well as provision-ing and open APIs,” Slim added.

A common standardLast year PowerCARD joined Nexo – a set of protocols – to provide building blocks for standardisation based on a request for proposals.

The Nexo international standards are based on and approved by SWIFT’s ISO 20022. Acceptance of acquirer protocol ISO 20022 has accelerated in the last two years.

Fraud, structured/non-structured data“The increase in non-structured data poses a massive security challenge,” said Anas Drihany, MD, PCA, Morocco. PCA is a group of banks in 11 countries.

He went on to state that the US market would be $22bn better off if fraud was

FEAT

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HPS CONFERENCE Electronic Payments International

With the advent of PSD2, data management and anti-fraud measures very much to the fore, HPS’s clients congregated in Marrakech, Morocco to compare notes on their respective developments, research and predictions in these fields. EPI reports back with the event’s highlights, insights and talking points

Harnessing the power

n LET USERS DECIDE – CONSUMER FEEDBACK ON BIOMETRIC AUTHENTICATION

Fingerprint Iris Face DNA Voice

Universality 50% 50% 75% 100% 75%

Distinctiveness 75% 75% 50% 100% 25%

Stability 50% 75% 25% 75% 25%

Measurability 100% 50% 100% 25% 75%

Performance 100% 75% 50% 75% 25%

Utility 100% 50% 75% 25% 50%

Acceptability 50% 50% 75% 25% 100%

Resistance to attack 50% 50% 75% 25% 100%

Source: HPS Mohamed Horani, HPS

EPI 359 May.indd 6 07/06/2017 13:18:51


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HPS CONFERENCEElectronic Payments International

better monitored and quoted three of Gartner’s ten main trends for 2017, sci-ence fiction-like in their nature:

1. AI and machine learning2. Interaction of physical and digital 3. Link between service and platforms

Fraud• Overal l f raud worldwide in 2015

reached $21.84bn, an increase of 21% compared to 2014.

• The domest ic market represented DH229bn ($26bn) in 2015.

• Fraud is emerging in new, non-domes-tic markets.

• Industrialisation of the fraud phenom-enon means it is moving from oppor-tunistic to premeditated.

• Explosion of non-structured data – estimations predict that in 2020 the volume of data available will be 44 times greater than in 2009.

Advanced f raud ana ly t ica l model includes sophisticated behaviour model-ling whereby the individual activity of a card is analysed against the behaviour

of the same segment as a whole, hence anomalous transactions can be identified against the overall peer group. Further areas for analysis include:

• Unstructureddata: For example, ana-lysing ATM cameras.

• External data analysis: Social net-works, including analysing the wider network of the account holder being monitored, and picking up on any sus-picious client links that the account holder may have.

For any suspicious transactions, ana-lysts can check whether the suspicious client is linked with people residing in a high-risk country. Customer voices can be analysed to the extent of picking up mood, stress levels, etcetera.

Drihany believes 90% of cases can be picked up by new anti-fraud soft-ware. This is quite the claim. He says it is all about shifting from a reactive to a proactive approach. New systems can also reduce cost of fraud management by 30%, and 80% of customers have been able to use their cards again after five days.

Philippe Vinci, MD Vinci advisorsWhat pain point do biometrics solve? We have on average over 50 passwords per person. According to Visa Europe research, 84% of Europeans would trust biometric authentication provided by their banks, the highest result when com-pared with other organisations. And 68% of Europeans want to use biometrics for payments.

FIDOThe FIDO (Fast Identity Online) Alliance is a consortium of over 250 service pro-viders, and has come up with a solution for on-device user verification for online and mobile payments. It ensures that biometric authentication data is never shared, which complies with data protec-tion regulation.

FIDO provides multi-factor authentica-tion in a single gesture, which means the combination of the physical identifier, some-times referred to as a key, in the handset with the biometric verification.

Perhaps most notably, FIDO was intro-duced on the Samsung Galaxy smartphone to authenticate the user, and has been linked up to PayPal to enable touch payments.

The alliance was established in 2012 in a bid to address the failings of passwords. Co-founder Brett McDowell was head of ecosystem security at PayPal. <

n WHY ADOPT APIS? BANKS’ AND PISPS’ PERSPECTIVES

Ecosystem

• Trusted partner

• ASIP, PISPs

• Fintech

Monetisation

• Third party pays per use

• Third party is paid for use

• Indirect monetisation

Regulation• Treasury open banking

• PSD2

Innovation

• In-house innovation

• Hackathons

• Fintechs

Distribution

• Own app store

• Apple, Google, Microsoft stores

• Partner portals

Implement all the above to:

• Comply with PSD2• Facilitate and monetise services and data• Provide new services• Expand ecosystem and aggregate partnerships value

Source: CGI

Ghela Boskovich, founder FemTechGlobal, and moderator of HPS PowerCARD Users Meeting,

EPI 359 May.indd 7 07/06/2017 13:18:54


The diet and fitness revolution is well underway – in one fell swoop the UK’s daily fruit and veg intake guideline has doubled. Dare we

mention that it is still less than two-thirds the level recommended in Japan?

It is refreshing, therefore, to see a corpo-rate entity take action and make an invest-ment that nurtures its workforce, rather than bleeding it dry.

ING Bank has launched an employee well-being programme which, over a six-month period, will train participants to become more attuned to different factors playing into their quality of life and work.

The programme is called WQ, Wellbe-ing Quotient, and is based on three years of the bank exploring EQ, emotional intel-ligence and its value to the business. WQ is a numerical figure, calibrated by four metrics – eat, move, sleep, and relax – measured on a fitness tracking band, linked to an app, which can then be linked to a Dacadoo app in which the group’s collective quotient can be measured.

To deliver the programme, ING has partnered with Lifeguard, an expert in stress management, wellbeing and “corporate fit-ness”, and TomTom Sports, which supplies the band – just don’t call it a Fitbit.

The band tracks steps taken, heartbeat, calories burned, activity and percentage body fat, and professionals are on hand in the form of former Olympic athletes, professors and coaches in nutrition, fitness and sleep.

Ninety-five percent of ING’s 350 global financial markets sales staff across 30 coun-tries have signed up to the programme. It is executed in six-week blocks, each focusing on one of the four key metrics. The pro-gramme is also open to family, friends, col-leagues and clients.

To its credit, ING Bank has done a fair amount of research into leadership qualities and the different strengths and intelligence dimensions required for good leadership.

The EQ programme focused on aspects such as communication, performance and consequence management to enhance the performance of staff and, hence, the business.

A great number of psychologists have

looked into the importance of wellbeing in all its forms on corporate performance, and ING has looked into a great many of these psychologists.

Cindy Wigglesworth, president and found-er of Deep Change, an organisation that pro-motes excellence in leadership through the development of key intelligences, identifies four key intelligences that leaders need: cog-nitive, emotional, spiritual and physical.

Physical refers to the lower-level physical needs of the body, which cannot be ignored, and must be met before any kind of so-called upper level intelligence can be employed.

The most obvious analogy to be drawn is that of an athlete or any sportsperson fol-lowing a strict regime in which everything, from the obvious metrics of diet and training, to stress management and sleep tracking, is taken into consideration.

A corporate performer is often pushed to run on empty- flights often taken at unho-ly hours, lunch skipped, working hours stretched into personal time, etc, etc. No professional sportsperson would perform on any of that nonsense.

Is it worth it?You could argue it is a selfish endeavour – a happier, healthier workforce will be more productive. But it is clearly win-win, because a happier, healthier workforce is also, well, a happier and healthier workforce.

In a working environment in which money is perhaps the only metric to the fore, vis-à-vis performance, companies do not pay attention to the maths of how much more they may get out of their employees if their employees were a little healthier all round.

A groundbreaking book in the early eight-ies, Frames of Mind by Howard Gardner, first put the notion of multiple intelligences into the broader public domain.

In his research, Gardner distinguished seven different types of intelligence. Seven. These are: linguistic, logical-mathematical, musical, spatial, bodily-kinesthetic, interper-sonal and intrapersonal.

Gardner recently even added an eighth to proceedings: naturalist intelligence – inciden-tally, he is also threatening to throw a ninth

into the equation, existential intelligence, but that’s by the by.

By this point, we may have lost some of the more sagacious, or just plain cynical, among you, so let us bring in Daniel Goleman, who defined emotional intelligence within a busi-ness context, in his 1998 Harvard Business Review article, based on his 1995 book of that name.

Persuasive linkThe article told of “a persuasive story about the link between a company’s success and the emotional intelligence of its leaders” and claimed it was possible to develop one’s emotional intelligence, if not initially inher-ent from birth. Not everyone is born blessed.

“This can be developed around four main emotional intelligence constructs: self-aware-ness, self-management, social awareness and relationship management,” Goleman says.

True, the notion of a corporate athlete may make some want to run a mile in the other direction, myself included.

It begs immediate questions: is it just a shrewd PR stunt? How many of the initial sign-up contingent will stay the course? Will it actually have a measurable impact on life quality or indeed corporate sales? Do people really want to log such personal data and feel judged by a bracelet– and then collectively judged by colleagues and bosses? The data is not shared, but the comparison conversa-tions are inevitable.

While there are many questions and many angles from which to take the cynic’s view, it does remain fact that more atten-tion should be paid to diet and stress – and fact that these largely impact physical and mental wellbeing.

Who would not want to give that a fleet-ing chance? And who would not want to be gifted a fitness tracker (doubles as a watch) by their employer?

And if it does do what it says on the tin, why judge without having tried it? It is a tad tired to be the armchair cynic.

This remains an astute move by a forward-thinking bank and I would not be surprised if we see more of these initiatives being rolled out over the next few years. <

Employee wellbe-ING a priority for top Netherlands bank

Things are changing fast. The younger workforce coming through has different habits and expectations, driving digital transformation at the same time as levelling the traditional corporate hierarchy. Now, one incumbent institution is taking note and ringing changes of its own. Anna Milne finds out more

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EPI 359 May.indd 8 07/06/2017 13:18:56


DBC DEBATE: BIOMETRIC SECURITYElectronic Payments International

The first of the Digital Banking Club’s debates of 2017 honed in on the topic of biometric security. Hosted at the prestigious Law Society in London,

the debate took the traditional form with two teams slugging it out over the motion: This house believes the password will never be replaced by your body.

Is the password past its prime?Simon Cadbury, director of strategy and innovation at Intelligent Environments, opened the debate with admiration for the maligned password. He stated that while passwords were not perfect, they could be improved.

He said: “The password has become known and understood by everyone, but when the most common password is 123456, surely we can do better. We don’t need to replace pass-words; we simply need better ones.

“However, authentication via body parts is complicated and expensive. Your body will never replace a password. Body parts do not provide a better counterpart. Body parts cannot be reset. Behavioural biometrics can’t help you if they don’t know you.”

Cadbury added: “Effective passwords rely on randomness – something that we just aren’t equipped to generate or remember. Creating and remembering one good pass-word is a serious challenge, but most of us

need 25. No wonder, then, that a third of people claim they forget a password at least once a week.

“Worse still, passwords are becoming easier to crack with every passing year. Yet, despite decades of user education, we aren’t making our passwords any stronger. The time seems ripe for biometrics to take over from passwords as the principle way we authenticate ourselves. But then again, we’ve been saying that for a very, very long time now.”

On the opposing side, Daryl Wilkinson, MD of DWC and former head of innovation at Nationwide, argued that the password was an outdated piece of kit.

“Biometrics not replacing passwords sounds like cars not replacing the horse and cart,” Wilkinson explained.

“Passwords are over 50 years old. Even the originator of the password considers them to be a nightmare. Research from Equifax showed that people shopping online actually preferred to use biometrics.”

Are biometrics enough?Ian Bradbury, CTIO financial services at Fujitsu, claimed he had no problem with bio-metric solutions, but there were flaws that limited its usefulness.

He said: “I’m not here to say biometrics do not have a part to play. My point is that it is not infallible.

“Biometrics can only ever be one factor. If biometrics don’t work, what’s the backup?

Can passwords be replaced by the human body?

As banking and payments become increasingly advanced, the security protecting them needs to be more advanced as well. An often-touted solution is biometric security, but can this ever truly replace the tried-and-tested password? Patrick Brusnahan reports from the Digital Banking Club’s latest debate in London

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DBC DEBATE: BIOMETRIC SECURITY Electronic Payments International

It will be a password or a PIN. If someone breaches my fingerprint, I can’t grow another finger,” Bradbury pointed out.

“In addition, from an inclusion perspec-tive, not all of us can use biometrics. There are people who are not comfortable using biometrics. That’s not going to change.”

Paul Trueman, SVP, global enterprise risk and security at MasterCard, started by claim-ing that all passwords are probably written down somewhere, whether we like it or not. This, in turn, needs to change.

“We’re changing our password model, because we have to. Passwords are not a horse; at best, they are a lame donkey,” True-man quipped.

“Now that everything is connected through the internet of things, there’s a lot more to steal and passwords are not accept-

able. There are a number of good and proven solutions out there that are developing. Pass-words are just a lock on the door with its key in sight.

“51% of passwords used today are for-gotten within a week. People probably have somewhere between 70 and 80 various accounts. If you only have a couple of dif-ferent passwords, those are now everywhere. The reason passwords survived so long was because they were cheap and easy to imple-ment.”

Trueman added: “There’s a need for intel-ligent friction. There is no one solution, no one perfect lock on the door. You need backups, but the backups do not need to be a password. It’s down the list, but there are many options and that’s what multilayer is all about.

“More will change in the next five years than in the past 50. You can’t put on noise-cancelling headphones and turn off the world.”

Are biometrics reliable?Enza Iannopollo, security and risk analyst at Forrester, stated: “Banks would prefer any other magic tool than something like facial recognition in terms of replacing passwords.

“Passwords are very easy to integrate and are straightforward, whereas body parts have false positives and negatives. The future is not a place where body parts will replace passwords, but enhance them.”

However, Chris Gledhill, CEO and co-founder of Secco Aura, was much more posi-tive about biometrics.

He said: “At some point between now and our bodies being replaced, passwords will be replaced. Biometrics can help people gain control on their finances and can greatly aid financial inclusion.”

As an example, he explained that custom-ers who are unable to type or remember passwords could be able to use their voices to gain access to their finances.

While there are voice-replication pro-grammes being launched, they cannot yet recreate dialects, and while in the short term there will be problems, as there are with all forms of biometrics, they will improve in the future.

“Behavioural biometrics are truly unique,” he continued. “There are fundamental prob-lems with passwords, and there problems with biometrics, but to say they will never replace passwords is impossible.” <

Results of the debate

The motion under discussion was: This house believes the password will never be replaced by your body.Prior to the debate the first of two polls was taken, with a resounding verdict against the motion.The audience voted 19% for the motion, with 81% against.At the conclusion of the debate, the second vote resulted in a dramatic shift of opinion and a win on the day for the team of Simon Cadbury, Enza Iannopollo and Ian Bradbury.The audience voted 43% for the motion, with 57% against. <

EPI 359 May.indd 10 07/06/2017 13:19:01


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The panel

Douglas Blakey, group editor, consumer finance, Verdict and chair of The Digital Banking ClubBlakey is group editor, consumer finance at Verdict, chief of judges for the annual Retail Banker International Awards and lead market advisor for Timetric’s retail banking research division. This division produces and maintains more than 50 market-leading research reports and has undertaken bespoke consultancy projects for banks, vendors and their advisors.Blakey practiced as a solicitor in Scotland before moving into business information and analysis. He maintains an editorial advisory board of leading bank executives and is a regular guest banking analyst with the BBC, NBC, New Statesman and other leading media.

FOR THE MOTION

Enza Iannopollo, security and risk analyst, ForresterIannopollo is an analyst on the security and risk team at Forrester. Her research focuses on the impact of internet regulations and data privacy issues on digital business models, as well as the technologies that underpin them. Her research coverage includes data protection, privacy in the context of cloud computing, analytics, and the internet of things.

Iannopollo also helps security and risk professionals to build and execute data and privacy protection strategies in line with the requirements of the business technology (BT) agenda. Prior to joining the security and risk team, Iannopollo was a researcher on the CIO team; before that, she was a research associate on the BT Futures team. She collaborated on a variety of research reports, covering cloud computing, analytics, smart cities, and connected business. She has also delivered webinars and presentations to clients.

Iannopollo earned a BA in political science and an MA in public policy, magna cum laude, from the University of Roma; she also earned an MSc with merit in regulation from the London School of Economics. Iannopollo recently completed an intensive course at the London School of Economics focusing on IPRs and the security and privacy of cyberspace. She speaks fluent Italian and English.

Ian Bradbury, CTO financial services, FujitsuBradbury started his working life in the IT department of Friends Provident Life Office over 30 years ago, and has been involved in technology and financial services ever since. It has taken him around the world working with many different organisations, always focused on driving transformational change.

Throughout this time he says has never seen such risk and potential for financial services organisations as there is today – through digital disruption – and he finds it to be the most exciting period of his career so far.

He very passionate about technology, how it works and how it can be used to improve society and the lives of individuals. Bradbury is also a Fujitsu distinguished engineer.

Simon Cadbury, director of strategy and innovation, Intelligent EnvironmentsCadbury is a product marketer and strategist with 18 years’ experience working for a range of major international brands. Cadbury’s role is to work with Intelligent Environments’ investors to set and deliver the company’s mid- and long-term strategy, as well as taking overall responsibility for the product development and management of Interact, the company’s core product offering.

Simon joined in 2013 from Lloyds Banking Group where he was responsible for payment technology, and also sat on the CreditCard divisions leadership team. Prior to this he worked on the launch of a number of firsts in new technology – the Blackberry (BT Cellnet), BT Openzone (BT Retail), 3G Live! (Vodafone Australia) and Sky HD (BSkyB).

AGAINST THE MOTION

Chris Gledhill, CEO and co-founder, Secco AuraTop global fintech influencer, technologist and visionary, Gledhill is on a mission to reinvent currency. Former lead of disruptive innovation labs at Lloyds Banking Group, he is now CEO and co-founder of Secco Aura, a company that monetises data and empowers the consumer. Gledhill regularly speaks and blogs about financial services and is considered a thought leader in fintech.

He is passionate about disruptive technologies such as digital currencies, blockchain, AI, biometrics and the internet of things, and how they can be applied to banking.

Daryl Wilkinson, MD, DWCFollowing the launch of DWC, the Financial Conduct Authority invited Daryl to be its strategic advisor to the senior partner of fintech and regtech. His work has produced the first strategy of its kind for regtech innovation from any regulator worldwide, and a published commitment in the FCA’s 2016 business plan to enable more efficient and effective regulation and compliance. Wilkinson’s ongoing engagement with the FCA contributes to its objectives of promoting innovation, lowering barriers to entry and improving access to financial services.

Prior to DWC, Wilkinson was an executive at the Nationwide Building Society where he established and led its Group Innovation Lab. He created a new model of open and agile innovation for Nationwide while developing key partnerships with Silicon Valley and London fintechs, delivering pioneering innovation in customer experience, channel management, marketing and operations.

Wilkinson regularly speaks as an authority on digital technology and was the first private sector speaker to be invited to address the House of Commons Parliamentary Reception in 2015 when he spoke about industry forces reshaping UK financial services. He has featured in interviews for publications such as the Sunday Times, CIO magazine, Wired and FStech magazine.

Paul Trueman, SVP, global enterprise risk and security, MasterCard Trueman is responsible for the advancement of global product solutions around safety and security for MasterCard. He works directly with technical teams on fraud solutions and authentication, as well as leadership and consumer experience.

In 2015 he led the development of the biometric narrative enabling the identity check brand Selfie Pay for global rollout. He is also working with partners on digital evolution, the internet of things and the use of artificial intelligence.

He joined MasterCard in 2011 as head of marketing UK & Ireland, successfully leading the launch of Priceless London. He has been consistently named in the list of the 100 most influential marketers 2012-2015. Prior to MasterCard, Trueman held senior positions in marketing, innovation and strategy development in global and regional roles in diverse sectors including electronics with LG Electronics, and FMCG with both Mars and Cadbury Schweppes. <

EPI 359 May.indd 11 07/06/2017 13:19:01


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TFICO Electronic Payments International

Using AI and machine learning to build credit risk models Which works better for modelling credit risk: traditional scorecards or artificial intelligence (AI) and machine learning? Given the hype surrounding AI today, this question is inevitable, but it is not an either-or conundrum. The best approach is to figure out how to use them together, writes FICO’s Scott Zoldi

In traditional risk modelling, customer segmentation is based on ‘hard’ lines and broad categories, such as new customer versus existing customer.

In contrast, you can use AI and machine learning algorithms to discover a better way to segment the scorecards. This allows you to apply AI to improving risk prediction with-out creating ‘black box’ models that do not give risk managers, customers and regulators the required insights into why individuals score the way they do.

Our data scientists are now starting to use techniques such as collaborative profiling to reveal entity segmentation based on customer behaviours. We can then group customers into micro-segments based on shared behaviours, instead of typical segmentation approaches that rely on hard business attributes.

Incorporating these subtle behaviours into credit risk modelling provides the best of both worlds for customers. It uses the traditional, time-tested analytic models and scorecards, but enhances them with AI to drive better segments and feature creation in models, resulting in more predictive score-card models.

Another approach is to use AI and machine learning to build new types of credit risk model to capture maximum predictive power,

and find new relationships among input fea-tures which can produce a stronger model.

For example, utilisation is always an important feature in a credit model, as is delinquency, but a non-linear combination of these can produce more optimal results in a machine learning model. You can then drive these new inputs into a traditional scorecard model to ensure they are easily explainable. The same techniques are essential when con-sidering non-traditional data sources where the most predictive combinations of inputs are yet to be discovered.

Improving results The following examples illustrate how you can achieve better performance and clar-ity by combining the machine learning and scorecard-based approaches.

When developing a credit card churn model, FICO data scientists used machine learning to identify a powerful interaction between the frequency of card usage, and how recently it has been used. Including this interaction as a non-linear input feature in an interpretable scorecard led to a substantial improvement of approximately 10% in pre-dicting credit card attrition.

In addition, another 15% improvement in performance was found by applying machine

learning with a much larger set of features relating to event-specific recent occurrences and frequencies.

These predictive improvements in turn can translate into substantial portfolio profit gains and a much more precisely targeted retention strategy.

In a project to build home equity risk mod-els with limited data, the lack of enough poor performing loans in our sample was causing lower-performant traditional scorecard mod-els. By building a machine learning model, we were able to confirm that we were losing a significant amount of signal by relying on a traditional scorecard which required great amounts of bad coverage.

Machine learning led us to change the model performance outcome from a binary outcome to a continuous outcome. By com-bining this machine learning model insight with scorecard technology, we created a strong, robust solution and saw a 20% improvement in model performance over the traditional scorecard model alone.

A smarter way to use AIAs a data scientist who has spent his career developing business-ready AI applications – I have 38 granted patents in this space and 41 pending patent applications – I under-stand the power of AI and machine learning. Today, though, I see a lot of naivety regard-ing how it can be used.

You do not want to throw in a lot of new data sources – many of which may not be permissible in credit decision-making, and might be easily manipulated, like social media data – into an AI model that comes up with a score that may not be explainable.

Lenders in many markets need to be able to explain how a customer was scored, and it is important regardless of regulators to understand what relationships are being learned from this data, and if these relation-ships really matter to the business.

It is unquestionable that AI presents a host of exciting opportunities for the finance industry. However, above all, it is important to ensure they are managed in a way that produces reliable, explainable results that drive better outcomes for customers. <

“AI presents a host of exciting opportunities for the finance industry. However, above all, it is important to ensure they are managed in a way that produces reliable, explainable results that drive better outcomes for customers.”

EPI 359 May.indd 12 07/06/2017 13:19:03


Cash remains the preferred consumer payment instrument in Thailand, accounting for 96.5% of the total payment transaction volume. This

is due to a lack of adequate banking infra-structure, limited awareness of electronic payments, and low acceptance by retailers.

However, use of cash is anticipated to decline gradually over the forecast period (2017–2021), as the central bank looks to promote electronic payments in Thailand. The government has launched two devel-opment plans for growth: FSMP III and the Payment Systems Roadmap.

Inclusion programs supported growthThe Thai government and commercial banks have taken initiatives to bring the wider pop-ulation into the formal banking system.

The Bank of Thailand introduced the Financial Consumer Protection Center on January 13, 2012, which both develops citi-zens’ financial knowledge and understand-ing, and provides solutions for grievances and complaints about financial products and services. Adding to this, in 2014 the Citi Foundation and Kenan Institute Asia togeth-er introduced the Literacy Improvement for Better Finance in Thailand project.

According to the World Bank, Thailand has made substantial progress in terms of financial inclusion, with the percentage of the Thai population aged 15 or above with a

bank account rising from 74.6% in 2012 to 81.9% in 2016. Rising bank penetration has led to a rise in demand for banking products such as current accounts and debit cards.

Stringent regulation to curb debtHousehold debt remained high in Thailand during the review period (2012–2016), reaching its peak in 2013, with household debt equivalent to 82.3% of total GDP.

The central bank enforced stringent regu-lations on credit card issuance in 2013 to curb rising household debt. The regulations required all banks to cap interest rates at 20% per annum, and all cardholders to pay a minimum of 10% of the outstanding bal-ance each month. The move helped issuers to identify creditworthy customers, and reduce the number of defaulters.

The new regulations led to a slowdown in new credit card issuance in the country. Annual growth in credit card circulation fell

from 10.5% in 2013 to 7.0% in 2016 – a trend that is expected to continue over the forecast period.

Credit card use, however, is expected to rise as a result of rising consumer household spending, the recovery of the automobile market, and enhanced consumer confidence.

Alternatives and e-commerce gain groundThe e-commerce market in Thailand grew significantly from $8.3bn (THB259.4bn) in 2012 to $20.7bn in 2016, at a CAGR of 25.43%, due to rising mobile and online penetration, the growing presence of online retailers, and increased consumer confidence in online transactions. The market is forecast to reach $63.3bn in 2021.

Conventional instruments – including pay-ment cards and credit transfers – remain the preferred mode of payment for e-commerce, collectively accounting for 68.9% of the total e-commerce transaction value in 2016. However, emerging methods such as mobile wallets, digital wallets and carrier billing are gaining prominence, collectively accounting for 9.4% of the total e-commerce transaction value in 2016 – up from 4.5% in 2012.

A number of leading international pay-ment solutions, such as PayPal, Master-Pass and Fortumo, have entered the Thai e-commerce market. They are complement-ed by domestic solutions such as mPay, True Money and AirPay. <

Although cash dominates the payments system in Thailand, the government has been partnering with local banking operators to bring more of the country’s large unbanked population into the formal financial fold. A fast-growing e-commerce sector is also leading to growth in mobile and digital wallets, and carrier billing

n THAI CARD TRANSACTION VALUES BY CHANNEL ($BN), 2012–2021

ATM POS

2012 169.0 26.8

2013 191.2 33.5

2014 191.5 34.8

2015 184.6 35.9

2016 (estimate) 183.2 38.1

2017 183.1 40.4

2018 184.5 43.0

2019 188.0 45.9

2020 192.1 48.8

2021 197.5 52.0

Source: Central Bank of Thailand, GlobalData

n THAI PAYMENT CARDS BY TYPE (MILLION), 2012–2021

Debit Cards Pay Later Cards

2012 43.0 16.9

2016 (estimate) 52.5 23.3

2017 54.4 24.8

2021 61.5 30.9

Source: GlobalData

n THAI CARD TRANSACTION VOLUMES BY CHANNEL (MILLION), 2012–2021

ATM POS

2012 1,076.1 295.0

2013 1,184.2 336.5

2014 1,262.0 365.3

2015 1,322.9 395.4

2016 (estimate) 1,373.5 427.0

2017 1,421.6 461.4

2018 1,468.0 499.2

2019 1,512.6 541.1

2020 1,556.1 588.6

2021 1,597.3 642.6


n NUMBER OF ATMS AND POS TERMINALS IN THAILAND (THOUSAND), 2012–2021

ATM POS

2012 52.2 264.2

2013 56.9 311.3

2014 61.6 340.2

2015 63.4 358.0

2016 (estimate) 65.3 380.5

2017 66.9 405.8

2018 68.5 433.8

2019 70.1 465.6

2020 71.6 501.1

2021 73.0 541.9


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The UK’s payment cards market is one of the most mature, high-ly competitive and attractive in Europe. Pay later and debit card

penetration rates per inhabitant stood at 1.0 and 1.7 respectively in 2016. In terms of transaction value, the market account-ed for 19.7% of Europe’s total, while in terms of volume it accounted 19.2%.

New banks such as Atom Bank, Fidor Bank, Tandem Bank and Starling Bank are attempting to differentiate themselves by being either online- or mobile-only opera-tors. With cashless transactions surpassing cash in 2014, the emergence of these banks will accelerate the shift away from cash.

Impact of BrexitThe UK’s vote to leave the EU is likely to impact the payments industry over the fore-cast period (2017–2021). There will be no immediate effect on payments policy and regulation – current payments regulation deriving from the EU will remain until any changes are agreed by the UK and the EU.

Brexit’s impact on GDP and the financial market is likely to spread to consumer lend-ing and retail spending, leading to falling rev-enue in the payments industry.

While the industry’s prospects will depend on the success of the Brexit negotiations, growth in card transactions will continue, driven by the shift to contactless payments.

Government efforts to serve the unbankedThe UK government is developing programs to better serve the unbanked population. One initiative is an agreement between the government and the UK banking industry to offer basic bank accounts free of charge.

Initiated in January 2016, basic accounts can be obtained by individuals who do not have a bank account, are ineligible for a standard current account, or who cannot use their existing account due to financial limi-tations. Banks must also provide standard services to these accountholders.

Increasing adoption of contactlessContactless cards were first issued in the UK in 2003, and numbered 102.4m in 2016. The volume of contactless transactions also rose, from 25.6m in 2012 to 1.1bn in the first half of 2016. The number of contactless card transactions rose by 194.2% annually in August 2016.

A key driver of contactless payment has been public transport. The emerging mobile and wearable NFC payment markets are also expected to support growth.

The ease of making low-value contactless payments has made consumers and retailers more open to technology. To further encour-age these payments, the UK Cards Associa-tion raised the spending limit from $31.5 (£20) to $47.9 from September 2015.

Alternatives gain prominenceA growing preference for secure electronic payments, growth in the young population, and deeper smartphone penetration saw banks, payment service providers and tel-ecoms companies launch new solutions to gain market share.

Sweden-based mobile payment provider Seamless launched the Seqr mobile app in the UK in October 2016, in association with GoCardless. Tesco Bank launched its PayQwiq m-payment solution in November 2016, allowing users to make in-store pay-ments by scanning a QR code.

Google launched Android Pay in May 2016, with support from Bank of Scotland, First Direct, Halifax, HSBC, Lloyds, M&S Bank, MBNA, Nationwide Building Soci-ety, NatWest, RBS, Santander UK, TSB and Ulster Bank. Apple launched Apple Pay in July 2015, and the launch of Samsung Pay in 2017 will stimulate market competition. <

n UK CARD TRANSACTION VALUES BY CHANNEL ($BN), 2012–2021

ATM POS

2012 329.1 815.3

2013 322.0 867.7

2014 331.1 991.2

2015 299.3 1,009.0

2016 (estimate) 256.0 919.4

2017 235.1 901.9

2018 227.9 934.9

2019 223.2 978.4

2020 219.7 1,032.4

2021 215.2 1,086.3

Source: Payments UK, GlobalData

n UK CARD TRANSACTION VOLUMES BY CHANNEL (MILLION), 2012–2021

ATM POS

2012 2,913.9 10,597.0

2013 2,891.5 11,558.0

2014 2,881.2 13,013.0

2015 2,823.0 14,540.0

2016 (estimate) 2,753.0 15,554.0

2017 2,669.1 16,509.9

2018 2,600.3 17,573.3

2019 2,553.9 18,761.2

2020 2,520.2 20,067.1

2021 2,490.9 21,500.3


n NUMBER OF ATMS AND POS TERMINALS IN THE UK (THOUSAND), 2012–2021

ATM POS

2012 66.1 1,590.7

2013 68.0 1,653.9

2014 69.4 1,781.9

2015 70.3 1,958.4

2016 (estimate) 71.0 2,139.9

2017 71.6 2,324.9

2018 72.2 2,500.6

2019 72.6 2,673.0

2020 73.0 2,834.5

2021 73.2 2,983.5


n UK PAYMENT CARDS BY TYPE (MILLION), 2012–2021


2012 108.4 63.0

2016 (estimate) 112.3 65.5

2017 113.7 66.0

2021 123.2 71.5

Source: GlobalData

As one of Europe’s most mature and well-developed payments markets, the UK is highly competitive and attractive, with contactless and alternatives flourishing. However, the likely impact of Brexit will not be clear for at least a couple of years, and small sections of the population remain financially underserved

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Despite being the fourth-largest economy in Europe in terms of nominal GDP, Italians have remained relatively slow adopters

of electronic payments.Cash is used for the substantial majority of

transactions, and accounted for 82.4% of the country’s total payment transaction volume in 2016.

The frequency of use per card stood at 39.8 transactions per card in 2016, which is low when compared to Germany (44.2), Spain (56.5), the US (77.4), the UK (103.0), Canada (110.6) and France (147.5).

The government’s drive to promote elec-tronic payments through a cap on cash transactions, and the implementation of interchange fee regulations led to a gradual increase in the payment card transaction volume during the review period. Payment cards accounted for 8.8% of total payment transaction volume in 2016, increasing from 5.5% in 2012.

EU regulations on capping interchange fees for credit and debit cards at 0.3% and 0.2% respectively were implemented in Decem-ber 2014. While merchants benefitted from lower transaction costs, banks saw their rev-enues on payment cards decrease, and this affected their overall profitability.

With the new EU interchange fee in place, payment card transaction volumes and val-ues are forecast to grow.

Debit cards maintain dominanceHigh banking penetration, the debt-averse nature of Italians and the combined efforts of banks and government bodies to promote electronic payments have led to the adoption of debit cards.

Debit cards accounted for 83.1% of the total payment card transaction value in 2016. The gradual migration of low-value cash payments to debit cards, and the rising adoption of contactless technology in debit cards have led to increased use of debit cards at POS terminals.

Government initiatives to increase overall levels of financial inclusion also supported growth in the debit cards market.

In addition to local residents, the govern-ment is focusing on bringing the immigrant population into the formal banking system. According to the Italian Banking Associa-tion, 2.5m current accounts were held by immigrants as of December 2015.

Growing adoption of contactlessContactless cards are gradually gain-ing prominence in Italy. The number of contactless cards rose from 3.1m in 2012 to 20.1m in 2016, and will post a forecast-peri-od (2017–2021) CAGR of 19.24% to reach 53.2m by 2021.

According to Mastercard, the number of contactless POS terminals that accept Mas-tercard rose by 225% in 2015 compared to 2014. Mastercard’s contactless transactions grew by 360% between January and July of 2016 compared to the same period in 2015. All major Italian banks offer contactless cards.

Alternative growth Italian e-commerce is one of the fastest-grow-ing markets in Western Europe. In terms of transaction value, the e-commerce value registered an annual growth of 22.3%, to reach $22.4bn (€20bn) in 2016. Consumers in Italy mostly use payment cards to make online purchases.

Payment cards accounted for 74% of the total e-commerce transaction value in 2016. Uptake of alternative payments among Ital-ians is gaining traction due to the availability of solutions such as PayPal, MySi, Paysaf-ecard, JiffyPay and MasterPass.

Emerging payments, including mobile and digital wallets and carrier billing, are also gaining prominence, accounting for 21% in 2016, up from 18.1% in 2012. <

n ITALIAN CARD TRANSACTION VALUES BY CHANNEL ($BN), 2012–2021

ATM POS

2012 176.5 158.4

2013 195.5 172.1

2014 237.5 188.8

2015 201.4 174.7

2016 (estimate) 207.5 191.8

2017 213.6 209.9

2018 217.9 227.1

2019 222.0 244.4

2020 225.8 262.1

2021 226.8 277.6

Source: ECB, Central Bank of Italy,GlobalData

n ITALIAN CARD TRANSACTION VOLUMES BY CHANNEL (MILLION), 2012–2021

ATM POS

2012 751.0 1,629.0

2013 801.7 1,813.2

2014 956.4 2,034.0

2015 796.2 2,269.8

2016 (estimate) 721.0 2,510.6

2017 658.5 2,757.2

2018 609.1 2,999.5

2019 573.1 3,235.7

2020 545.5 3,467.4

2021 522.5 3,699.8


n NUMBER OF ATMS AND POS TERMINALS IN ITALY (THOUSAND), 2012–2021

ATM POS

2012 50.7 1,510.7

2013 50.0 1,584.2

2014 49.7 1,847.5

2015 50.5 1,991.1

2016 (estimate) 51.3 2,120.0

2017 52.0 2,254.0

2018 52.6 2,390.3

2019 53.1 2,523.3

2020 53.6 2,653.3

2021 54.0 2,780.2


n ITALIAN PAYMENT CARDS BY TYPE (MILLION), 2012–2021


2012 39.7 28.5

2016 (estimate) 54.0 27.3

2017 57.7 27.7

2021 71.5 30.8

Source: GlobalData

Although a prominent Western European economy, Italian consumer adoption of electronic payments is lower than many might expect, with cash still holding sway in terms of the overall payment volume. Debit card use is growing, however, with a gradual migration of low-value payments to contactless cards

Italy

COU

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SURV

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ITALYElectronic Payments International

EPI 359 May.indd 15 07/06/2017 13:19:10


COM

MEN

TSIX PAYMENT SERVICES Electronic Payments International

Data insights fuel payments revolution

With millions of consumers pass-ing through the ‘touch points’ of the sales and payment value chain every day, the wealth and

scope of data that is now available is extraordinary.

With the increasing need to define a competitive edge in every marketplace, the opportunities to act upon the resulting insights have become clearer: to improve customer loyalty, through reward schemes for example, to offer new services to retailers and vendors, to find new revenue streams, and for payment service pro-viders to assume new roles in the whole financial service ecosystem. Luckily, the costs of collecting, storing, aggregat-ing and analysing this data have fallen significantly as technology has gained momentum.

There are great opportunities to enter new fields, whether in customer relations management, loyalty schemes and customer retention, through to yield management, pre-dictive analysis and benchmarking.

In some of these areas specialised pro-viders may have a strong foothold. Equally, there is value in collaborating with best-of-breed partners to provide high-quality ser-vices for merchants throughout Europe.

It is ever more important to provide a combined POS and e-commerce payment solution, and omnichannel solutions are now high in demand to support a seamless customer experience across all channels.

Being present in a variety of verticals is also crucial in creating a strong position from which to collaborate with other play-ers. The range and depth of insights that are now possible to obtain include:

• Enhancementoftheloyaltyjourney: A merchant can recognise when a customer has entered a store for the first time, so a card payment can be linked to a retail offer, to promote and nurture future loyalty.

• • Improvementofefficiency: We can devel-

op ‘heat maps’ based on payment fre-quency at restaurants, for example, linked to factors such as the weather, holidays or other social and cultural events.

• • Increasedsecurity: Payment analytics

can improve security through identify-ing exceptional payment patterns. This is

of particular value in the ever-increasing battle for fast and convenient checkout, where traditional multi-step security checks may increase payment abandon-ment rates.

• Marketintelligence: There is huge poten-

tial for connections to be made between payment analytics and other financial systems to improve general market under-standing and benchmarking.

In a nutshell, data analytics helps businesses to engage with exist-

ing customers, find and acquire new ones, benchmark against the competition, and improve business long- and short-term planning and general decision-

making.As a company, and as an indus-

try, a key question we are asking is: should insights be free or paid for? Small-

er merchants may ask themselves whether they want or need these insights. If analytics can provide them with better connections and understanding of their customers, and they cannot afford to carry out such analysis themselves, then it could be worthwhile for them.

Larger merchants may already carry out their own data analysis to some degree, or receive it from other sources such as till pro-viders. Or they may expect to get such infor-mation from payment service providers as part of their commercial arrangement.

It is up to us as a merchant’s technol-ogy partner to demonstrate that we provide genuine added-value products with tangible benefits and services which fulfil customers’ needs.

We’re sitting on a ‘golden egg’, because we are central to the POS or touch point, which the marketing world recognises as hugely valuable. If we provide added value for the merchant through these touch points, we will improve their customer retention and potentially gain new revenue streams.

One of the greatest benefits of data analyt-ics is how precisely targeted it can be. This pays particular dividends in yield manage-ment, meaning loyalty schemes can promote a certain offer to a clearly relevant target group, at a specific time. This increases effectiveness, saves time and resources, and avoids targeting non-relevant groups.

As an omnichannel payment services pro-vider, SIX Payment Services has invested in detailed research into payment and retail

trends, as we develop products that can address emerging needs.

For example, we see the self-scanning and self-service payment systems that have been introduced into many retail stores expand-ing widely in the coming years. This trend opens up new enormous opportunities for data analysis and the potential to offer more personalised products.

Overall, as a company, we are interested in moving up the value chain of customer payments and playing a greater role in the B2B2C relationship. We are looking at offer-ing additional services through the touch-points to increase merchant retention, cus-tomer satisfaction and to create new revenue streams. We are investing in new types of research, such as the Swiss innovation ‘hack-athon’, where we harness the analytic power of smart programmers and devise new prod-ucts for our customers, using location-based services, predictive analysis to present new opportunities for benchmarking, or loyalty schemes such as gift cards, guarantees or cashback offers.

Regulation and payment providersUnder the forthcoming EU Revised Pay-ment Services Directive (PSD2) conditions, the financial services landscape is about to change dramatically.

Once PSD2 is implemented in January 2018, consumers and businesses will be able to use third-party providers to manage their banking affairs.

Although money will still be held in bank accounts, these third-party providers will have the right to provide financial services in addition to banks’ data and infrastructure, through access to customers’ accounts using open Application Programme Interfaces.

SIX Payment Services offers a highly adap-tive system where vendors can plug in to our network and we can translate upcoming standards and protocols for them, offering access to touch points.

This is a unique and highly valuable ser-vice, and we are employing data analytics to improve it further still. As a result, the pay-ments value chain will change, with banks entering into collaboration with fintech companies and focusing more on customer relations.

We are open to playing a new role in this environment, working with banks and merchants, providing new value-add-ed services along an evolving and extend-ing payments value chain.<

Christian Baumann, head of value-added services at SIX Payment Services, analyses the power of analytics

EPI 359 May.indd 16 07/06/2017 13:19:11

Gold Sponsors

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