september 2015 issue 339 www ... · for many years we have been the digital heart of a diverse...

DISTRIBUTED LEDGERSPUSH OFF THE STARTING BLOCKS

•STRATEGY: Blockchain

•COMMENT: Mobile payments

•ANALYSIS: Remittances

•COUNTRY SURVEYS: Australia, Brazil, Kazachstan

September 2015 Issue 339 www.electronicpaymentsinternational.com

EPI 337.indd 1 16/09/2015 17:32:55

Multichannel digital solutions for fi nancial services providers

To fi nd out more about us please visit:

www.intelligentenvironments.com

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 always stay close 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.

We are immensely proud of our achievements, in relation to our innovation, our thought leadership, our industrywide recognition, our demonstrable product differentiation, the diversity of our client base, and the calibre of our partners.

For many years we have been the digital heart of a diverse range of fi nancial services providers including Atom Bank, Generali Wealth Management, HRG, Ikano Retail Finance, Lloyds Banking Group and Think Money Group.

IE RBI final design.indd 1IE RBI final design.indd 1 17/09/2015 11:21:3217/09/2015 11:21:32

September 2015 y 1www.electronicpaymentsinternational.com

NEW

S

EDITOR’S LETTERElectronic Payments International

Samsung and Apple have their payments all sewn 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)207 406 6701Email: [email protected]

Group Editor: Douglas BlakeyTel: +44 (0)207 406 6523Email: [email protected]

Reporter: Patrick BrusnahanTel: +44 (0)207 406 6526Email: [email protected]

Asia Editorial: Ann LimTel: +65 6383 4688Email: [email protected]

Group Publisher: Ameet PhadnisTel: +44 (0)207 406 6561Email: [email protected]

Sub-editors: Nick Midgley, Kev Walsh

Director of Events: Ray GiddingsTel: +44 (0)203 096 2585Email: [email protected]

Head of Subscriptions: Sharon HowleyTel: +44 (0)203 096 2636Email: [email protected]

Sales Executive: Alexander KoidisTel: +44 (0) 203 096 2586Email: [email protected]

Customer Services:Tel: +44 (0)203 096 2636

or +44 (0)203 096 2622

Email: [email protected]

For more information on Timetric, visit our website at www.timetric.com. As a subscriber, you are automatically entitled to online access to Electronic Payments International. For more information, please telephone +44 (0)203 096 2636 or email [email protected]

London Office71-73 Carter Lane, London, EC4V 5EQ

Asia Office1 Finlayson Green, #09-01Singapore 049246Tel: +65 6383 4688Fax: +65 6383 5433Email: [email protected]

Samsung Pay has launched in its native Korea and is due to roll out in the US late September and the UK af ter that. The launch

comes hot on the heels of Apple Pay’s UK launch, and as much under the radar.

With Samsung Pay, the Korean firm hopes to galvanise a growing momentum for mobile payments but as yet we are all just waiting to see whether or not any of these mobile pay-ment offerings are really going to take off. And when.

For a start, they need to be ubiquitous, which neither of these solutions are, both being exclusive to only the very latest and most expensive models, and they need to be accepted everywhere.

Both fare a little better in this respect; Apple Pay is accepted on any contactless EMV ter-minal (more widespread in the UK than the US, it’s true, but still, fairly generic); Samsung Pay scores an extra point for its built-in tech-nology allowing it to be used on mag stripe terminals as well, due to some fairly nifty technology (Magnetic Secure Transmission) which transmits data through the machine via electronic signals rather than through the magnetic reader. This could well give it the edge over Apple Pay, particularly in the US.

I can understand why they’ve both gone for the payments option in only the latest hand-sets- neither is hoping to overhaul the pay-ments industry overnight- it wouldn’t be pos-sible anyway as the world and its hardware simply isn’t ready for it. It will happen, for sure, and they are counting on that, for sure,

but they just know it will be a slow burn, an evolution. There will never be the uptake of, say Uber, which everybody always cites- they are incomparable. Uber is an app, you down-load it - there is no machine other than the smartphone you already own- if indeed you own a smartphone- it’s a service that filled a gap in the market.

Samsung and Apple are in no rush for such mass adoption, hence their respective deploy-ment of Apple Pay and Samsung Pay on the latest models only. Over the course of a few years (and numerous upgrade cycles) the majority of their customers will have these payment solutions at their fingertips- why go to the expense and effort of building this into older models when they are immediately going to wane in numbers and slowly become obsolete?

And of course, if this mobile payments malarkey does not take off, well, then they haven’t wasted all that time and expense installing it on said soon-to-be-obsolete mod-els.

You can be sure these companies have it all sewn up. Hence the ‘soft’ launches, prac-tically under the radar but for the gaggle of PRs and journos flapping around trying to spin the year’s biggest payments story. We shouldn’t really doubt them, much as the temptation is to do so.

And just as we went to press, Android Pay began rolling out in the US. This is available on all Android devices with NFC capability and on the KitKat 4.4 operating system.<

Anna [email protected]

CONTENTSNEWS

3-5 ROUND-UP OF INTERNATIONAL NEWS

COMMENT

2: FRANCHESCA HASHEMI, BLOCKCHAIN

9: WORLD BANK & CGI

11: MISYS, CORPORATE PAYMENTS

16: APPLE PAY- ONE YEAR ON

FEATURE

6: BLOCKCHAIN

Innovalue consultants and Locke Lord partners have authored a report on blockchain in financial services. Franchesca Hashemi examines the report in detail to uncover the wide-ranging potential of distributed ledger technology

8: RIPPLE LABS

Q & A with Ripple Labs, exploring its work with banks and regulators

10: M-PAYMENTS

Vocalink’s latest study into UK consumers and the growing adoption of mobile payments provides some interesting stats

12: SAMSUNG PAY

Jerry Norton, managing director of financial services at CGI writes about the recent launch of Samsung Pay and what it means for the mobile payments market

COUNTRY SURVEY

13: AUSTRALIA

14: BRAZIL

15: KAZAKHSTAN

EPI 337.indd 1 16/09/2015 17:32:57

2 y September 2015 www.electronicpaymentsinternational.com

So what is all the fuss about? It is a distributed ledger that speeds up transactions due to the peer-to-peer network in which it operates.

Theoretically, all the information – wheth-er that means data amounting to monetary value or records of assets- is added to the chain in a block and is publicly available. This removes the need for card processors, entities like Paypal and puts power into the people’s hands at the physical end of the blockchain (that is supposed to be you and me).

Blockchain’s acceptance has been a slow burner, to say the least. But it seems the technology is at last being stripped of its underworld connotations.

International players are actually embracing rather than entangling their brand in this open-source system. We are also at a point where, if a financial brand hasn’t voiced their blockchain plans, something must be up.

It is the new eight-year old kid on the banking block, and these century old institutions have no choice but to adapt.

The task now lies in producing an innovative blockchain solution, cut-ting costs for bank and consumer and remaining relevant to a customer base which – to be frank - does not need them anymore.

Before the world loses itself down the blockchain hole, it should be remem-bered that distributed ledger systems are very much in their infancy.

Nobody really knows how far the tech-nology, coupled with crypto-currencies, can go. This is a reason why few financial services offer a blockchain solution or have outlined a detailed strategy.

But that is likely to change. Members of Britain’s Big 4, Wall Street heavyweights and European challengers are among the list of financial organisations that have shown interest in blockchain systems.

Santander Ranked the tenth biggest bank by Forbes, Santander has published a paper on dis-tributed ledger technologies entitled The

Fintech 2.0 Paper: rebooting financial services. The bank found that open source (and private counterparts) could save up to $20bn a year by 2022.

Cross border payments, securities trad-ing and regulatory compliance were listed as key areas. Santander has also referenced smart contracts, securities, syndicated lend-

ing, trade finance, swaps, derivatives and counter-party risks as sectors that can ben-efit from innovation.

BarclaysAfter two months of experimentation with Swedish fintech accelerator Safello, Barclays is expected to become the UK’s first retail bank that accepts bitcoins.

The announcement came in September 2015, after the bank’s chief design and digital officer Derek White told the Sunday Times that the bank plans to accept bitcoin payments from charities, and that the block-chain operating system has “potential to

change financial services”.

BNP ParibasBNP Paribas analyst Johann Palychata must have ruffled a few feathers when he wrote in the company’s publication that blockchain styled systems could make legacy financiers “redundant”.

The bank, considered one of the big-gest in the world, is reportedly looking at ways to apply blockchain technology. The International Business Times has quoted a BNP Paribas spokesperson as saying cryp-to-currency “beta testing” is going on. An official statement is expected sometime in the future.

UBSThe Swiss global financial services com-pany based in Zurich has been research-ing blockchain at London’s Level 39 stu-dios in Canary Wharf.

It is a prime location for any fintech developer, and UBS is set to gain strategic insight into how it can service the financial industry with a distributed ledger system.

The company is expected to focus on business, data analysis, security and smart contracts, the latter being an apt solution in the digital age.

Smart contracts could also benefit future relationships UBS forges at its UK innovation-base, as Level 39 is touted as Europe’s largest technology centre for financial industries.

NasdaqThe American-Canadian stock exchange came forward with its blockchain plan in June 2015. The brand is trialling a block-chain-inspired record keeping system that serves fast trading between markets.

Wholesale banking and trading are con-sidered areas where blockchain systems can really take off. The technology allows high value transactions to be moved in record breaking time with heightened security and transparency.

In theory, that is. If Nasdaq creates the right solution, exchanges could take sec-onds, as opposed to weeks, to complete. <

Everyone is talking about blockchain Well, everyone in the financial world. Since its inception in 2008, bitcoin and its core infrastructure the blockchain, have divided opinion. The decentralised monetary system was once viewed as a threat to banking culture. Nowadays, blockchain is “the next big thing”. Franchesca Hashemi writes

COM

MEN

T BLOCKCHAIN Electronic Payments International

EPI 337.indd 2 16/09/2015 17:32:59


NEW

S

ROUND-UPElectronic Payments International

PRODUCTS

PayPal rolls outs One Touch service to 13 new marketsPayPal has expanded its instant checkout service One Touch to thirteen more markets across Europe and Australia.

The service, which was earlier launched in the US, Canada and the UK, is now launched in Australia, Austria, Belgium, Denmark, France, Germany, Netherlands, Nor way, Po l a nd , Spa i n , Sweden , Switzerland and Turkey.

Eligible merchants in the newly launched markets will automatically have One Touch enabled, without needing to do any integration.

Consumers who opt-in to One Touch can securely checkout across all eligible merchants without needing to enter a username, password or payment information, so long as they are using the same device.

However, consumers must have a PayPal account to checkout with One Touch.

Bill Ready, global head of merchant and next-generation commerce at PayPal, said:

"One Touch is the biggest change to online shopping in more than a decade. It is a faster, safer way for consumers to check out at merchant sites, whether in mobile apps, on mobile web or online - across platforms and payment types."Since launching One Touch, we've gotten

phenomenal feedback from consumers and merchants alike. One Touch has led to a 50% or greater improvement in conversion of PayPal on mobile and we believe ushers in a major upgrade in the way consumers and merchants will connect in the coming decade. Merchants can find out if they have One Touch enabled here." <

M&A

Wirecard to bid for British rival Worldpay

Wirecard, a German payments company, has joined the list of suitors for British payments processing company Worldpay with a $9.4bn bid.

Wirecard is competing against private-equity bidders, including a joint proposal from Blackstone Group and Hellman & Friedman.

No final decision has been made and a few potential buyers are still in the running, Bloomberg quoted undisclosed sources as saying.

Advent International and Bain Capital, current owners of Worldpay, are preparing the company for a London stock market listing which is likely to propel the firm into the FTSE 100.

To lead the listing of the company, they recently hired Barclays' deputy chairman Michael Rake as new chairman of Worldpay. <

DISTRIBUTION

FIS launches financial inclusion lab in India FIS, provider of banking and payments technology solutions, has launched a financial inclusion lab in Bengaluru, India, to develop new ways to drive banking reach.

The new lab, which is the first of its type in India, has been designed to help FIS work on creating and testing solution to improve financial literacy of the unbanked, in cooperation with the country's business leaders, government organisations and

NGOs. It will incorporate interactive data tools to detect potential roadblocks to greater financial inclusion.

One of the first projects to be conducted by the lab will be the development of kiosk-based applications, which will be deployed across India to promote financial literacy with students.

FIS executive vice president for global financial institutions Raja Gopalakrishnan

said: "FIS is proud to foster innovation and entrepreneurship that addresses societal needs through engagement of different stakeholders."FIS' Financial Inclusion Lab wil l

provide a platform for knowledge sharing and enabling high impact sustainability programs that can be utilized by banks and other financial institutions in the future." <

Products

Sainsbury’s to launch contactless payments before Christmas

British grocer Sainsbury's will roll out contactless payment in its stores before the end of 2015.

The gradual roll-out of the technology would start before Christmas and all of Sainsbury's 600 supermarkets and 700 convenience outlets would offer the new payment method by the first half of 2016.

Though precise dates have not been confirmed, the programme could see some stores offering contactless payments as early as next month.

The move is part of the retailer's ongoing drive to improve in-store technology.

Sainsbury's in April 2015 disclosed that it was trailing a shop-and-go smartphone application, which would allow customers to complete their entire in-store shopping trip using their mobile phone. <

DIGITAL

Coinbase launches bitcoin services in Canada Coinbase, a San Francisco-based bit-coin wallet and exchange service, has partnered with payment processor Vogo-go to launch its bitcoin services in Canada.

The newly launched services will allow customers in Canada to buy and sell bit-coin with Canadian dollars (CAD) using Buy/Sell service, as well as trade the BTC/CAD currency pair on Coinbase Exchange.

Also, customers in Canada can now buy and sell bitcoin with a bank account, deposit funds into a Coinbase wallet, and trade bitcoin via the exchange as well as use suite of Coinbase wallet services,

including hosted bitcoin wallets.As part of the expansion, Coinbase will

waive its retail conversion fees for Cana-da's citizens until 6 September.

Coinbase CEO Brian Armstrong told CoinDesk: "It's not where we would want to launch first, it's actually where the partners we have to work with are able to work with us first.”"There's certainly an advantage to mul-

tiple currency pairs, but we wanted to be more conservative from a legal and regula-tory sense," Armstrong added.

Currently, Coinbase services are avail-able in 27 countries globally. <

EPI 337.indd 3 16/09/2015 17:32:59


NEW

SROUND UP Electronic Payments International

RESEARCH

Consumers holding onto their social media data New research from business insights com-pany Equifax has revealed that 75% of con-sumers are unlikely to allow financial insti-tutions to access their social media data.

The online survey, conducted in collabo-ration with YouGov, found that 76% of con-sumers are not in favour of financial com-panies using the information they post on sites such as Twitter, Facebook, Instagram and LinkedIn to assess their application for a financial product. Over half (52%) said that it would actually make them angry.

In addition, 28% of respondents would be worried and 18% would be frustrated if financial institutions used social media data to assess suitability.

However, only 35% of respondents (out of 2,065 adults) would go as far as altering

what they post online if it was to be used to verify their identity or spending habits.

Paul Birks, director of decision solution at Equifax, said: "While we are fast becom-ing social media 'addicts', the survey results show that people are against financial com-panies using social media to assess their suitability for products. This raises chal-lenges as using this data can be a huge ben-efit for both companies and consumers, for example in helping fight fraud, and evaluat-ing what people can afford to borrow."With fraud on the rise, companies are

turning to social media as a useful tool to verify an applicant's identity. The number of contacts and length of time an online profile has been established is a useful way to help judge whether an application is gen-

uine or from a fraudster. A well-established, active social media presence is very hard to fake."If companies go down this route, they

have to be transparent and educate consum-ers on how social media information could be used; consumers also need reassurance that, as with any personal data, privacy will be respected. Using social media informa-tion to assess an application could be par-ticularly useful for people who don't have a traditional borrowing history and therefore may have a 'thin file', such as a young per-son applying for their first loan. Companies have a moral and regulatory obligation to lend responsibly, and should investigate all the tools available to help ensure this hap-pens." <

Digital

WorldRemit launches online money transfers to Bosnia and CroatiaWorldRemit, a London-based online money transfer service, has introduced its remittance services to Bosnia and Croatia.

The remittance service will allow customers in 52 countries to now transfer money from the WorldRemit app to all Bosnian and Croatian bank accounts.

Using the WorldRemit app, customers can send quick and low-cost money transfers to their friends and family back home, 24/7.

Bosnian diaspora, estimated at two million people worldwide, remits $1.993bn home per

year, while the Croatian diaspora, numbering some 4.5 million, sends $1.524bn home each year, according to WorldRemit.

WorldRemit senior mobile analyst Alix Mur-phy said: "The Bosnian and Croatian diaspora can now download the WorldRemit app and make low-cost money transfers with just a few taps. We make sending money as easy as send-ing an instant message."

In February 2015, WorldRemit raised $100m in a funding round led by Technology Crossover Ventures (TCV). <

RESEARCH

UK contactless cards spending crosses £2.5bn mark in H1 Britons spent over £2.5bn ($3.8bn) using contactless cards in the first half of 2015, compared to £2.32bn for the whole of 2014, according to latest data from The UK Cards Association.

Also, the upper limit for contactless payments has been increased from £20 to £30, effective 1 September 2015.

As a result, the average supermarket spend of £25 now fa l ls below the contactless limit, while the average card spend in pubs, cinemas, dry cleaners, pet shops and gift shops also falls under the new limit.

The data further reveals that contactless spending has surged to £567m in June 2015 from £287m per month in January 2015.

The U K Cards Associat ion CEO Graham Peacop sa id: "Contact less payments are fast, easy and secure. With more contactless cards in wallets than ever before and a growing number of retailers accepting contactless payments, we have seen a huge rise in the number of payments being made."The growth in contactless payments

shows people want to use contactless cards and increasing the limit gives customers even more opportunities to pay in this way." <

M&A

PayPal buys mobile payment start-up Modest Online payment firm PayPal has purchased mobile payment start-up Modest for an undisclosed sum.

The acquisition, which is PayPal's first acquisition following its formal split up from eBay, will allow the company to pro-vide merchants a complete commerce solu-tion to help them add contextual commerce channels to the ways that they sell to their customers.

As part of the deal, modest founders Harper Reed, Dylan Richard and their team will join Braintree team at PayPal and will be based in Chicago office.

Following the transaction, Modest will become a part of PayPal's Braintree business.

Braintree general manager and CTO Juan Benitez told Chicago Tribune that the Mod-est team will allow Braintree to expand its platform to serve merchants better on mobile and in social media contexts.

Founded in 2012, Modest helps mer-chants build their own apps, integrate their shop into other apps, or incorporate buy buttons into channel-based marketing efforts.

PayPal merchant and next-generation commerce global head and senior vice presi-dent Bill Ready said: "For consumers it will mean seamless, simpler, and safer ways to buy the things they want, anywhere they dis-cover them." <

EPI 337.indd 4 16/09/2015 17:33:00


NEW

S

ROUND UPElectronic Payments International

RESEARCH

Almost four in ten say they won’t need cash in ten years time: Lloyds Bank surveyAlmost four in ten people believe they won't need cash in the near future as they increas-ingly turn to cards, contactless payments and other new technologies, according to a latest research from Lloyds Bank on the future of payments.

The report says that 43% believe that contactless payments are the future, whilst nearly 25% think that in five years' time they will no longer need cash to pay for goods or services.

Recent data from the UK Cards Associa-tion shows shoppers used credit and debit cards for 1.1 billion transactions in May, an increase of 10% in a year, as the rise of contactless payments increasingly replaced the use of cash in low value transactions.

However, majority of people surveyed think that they will still be using credit and debit cards (63%) as well as cash (52%) as day-to-day methods of payments by 2025. This is followed closely by contactless pay-ments with nearly half (48%) expecting to use it on a daily basis in the next decade.

In addition, nearly 27% people opined that they will make payments using wear-able tech such as watches or wrist bands in

10 years time, 22% said they will be regu-larly using their fingerprint, and 7% think they will make payments using a microchip embedded in their body by 2025.

Nearly 9% of those aged over 45 said they will still be paying by cheque in 2025 versus just 4% of 18 to 44 year olds.

Commenting on the survey finding, Lloyds Bank head of personal current accounts Claire Garrod said: "Whether it is contactless, wearable tech, or fingerprint ID, people are increasingly expecting to use new technologies to make payments rather than rely on cash. The benefits of these new developments are gradually being under-stood and embraced by banks and their cus-tomers, to make payments more convenient without compromising security."

Following the launch of Apple Pay this year, nearly 34% of the respondents said they expect to be using a mobile device as a day-to-day method of payment in the next five years.

However there is still some way to go to persuade many people about the benefits of mobile payments, with almost half (47%) saying don't feel that mobile will ever be a

main method of paying for goods and ser-vices.

When asked about why they don't cur-rently use mobile to make payments, two in five (44%) said they do not think it is secure or safe. 18% don't have the right phone, 17% don't know anything about mobile pay-ments, with 16% also saying they don't know how to use the technology, showing a gap in knowledge on how to use the technology and its benefits that will need to be addressed before some can start to embrace it.

Regarding usage of cash, 25% of the respondents said they think that in five years' time they will no longer need cash to pay for goods or services. This figure rises to 39% of people in ten years time, and 48% of peo-ple in 20 years time.

However, 50% of those aged between 55 and 75 are likely to think that they will always need to have cash compared to 40% of those aged between 18 and 54, the report says.

The consumer survey also found that women (46%) are significantly more likely to think they will always need to have cash in the future compared to 40% of men. <

DISTRIBUTION

Visa expands availability of its online checkout service with new issuers and merchants Visa has expanded the global availability of its online check out service Visa Checkout with new issuers as well as merchants.

The new issuer partners of the service in China include China Merchants Bank, Shang-hai Pudong Development Bank, China Ever-bright Bank, Bank of Guangzhou, and The Card Centre, China Minsheng Banking.

New issuer partners in UAE include Mashreq, Emirates NBD, Majid Al Futtaim Finance, Dubai Islamic Bank, Emirates Islam-ic Bank.

Moreover, China Merchants Bank and Shanghai Pudong Development Bank are the first two issuers across the globe to introduce Visa Checkout's mobile app inline provision-ing within their banking apps.

This will facilitate customers in enrolling for Visa Checkout while shopping online at overseas merchants.

Visa digital solutions senior vice president Sam Shrauger said: "It's great to see banks like CMB and SPDB bringing best-in-class

enrolment experiences to their customers in China who are eager to shop overseas."As more merchants and issuers integrate

Visa Checkout, the number of consumers seeing the benefit of a faster online checkout experience also grows. We're starting to see the network effect kick-in."

A host of new merchants across the US, Canada, Australia, and Colombia have also signed up for the new checkout service, which include Best Buy, Barnes & Noble, Event Cin-emas, Grand & Toy, Archies, Agrocampo among others.

Visa Checkout facilitates online shopping by enabling consumers to securely store their shipping and payment information without having to re-enter the information ever while shopping online.

The service is currently available in 16 countries including Australia, Argentina, Bra-zil, Canada, Chile, China, Colombia, Hong Kong, Malaysia, Mexico, New Zealand, Peru, Singapore, South Africa, UAE, and the US. <

Mobile

CaixaBank broadens its mobile payment service range

CaixaBank has expanded the range of its mobile payment service with the launch of CaixaBank Pay, a new app for any NFC-ena-bled or android devices.

The new app is based on HCE (Host Card Emulation) technology, which allows for secure downloading of financial cards.

To use the service, customers must first download the CaixaBank Pay app, available free from the bank's app store, CaixaMóvil Store, and Google Play. Then, they must download their card to their phone.

The bank estimates that the service could be used by over 70% of its mobile banking customers.

With the new payment app, customers can download their CaixaBank Visa cards to their mobile phones and use the phone like a contactless card for purchases at any retail outlooks with an adapted POS terminal, the bank said in a statement.

Over 70% of stores in Spain now operate with this technology, implying more than 600,000 POS terminals. The app can also be used at contactless ATMs.<

EPI 337.indd 5 16/09/2015 17:33:00


FEAT

URE

BLOCKCHAIN Electronic Payments International

The blockcha in landscape i s a muddy morass of crypto-jargon that changes every day. It cannot be defined because, quite simply,

nobody is aware of its full potential. What is certain, however, is the tech-nology’s diversity and popularity. Hail-ing from the Bitcoin world, blockchain could change the global economy in the same way email has revolutionised com-munication.

Research by Innovalue and Lorde Locke, a strategic management and financial technol-ogy advisory firm, describes the blockchain as a distributed ledger system that allows transactions to be securely gathered without the involvement of a centralised body. To generalise, transferring any kind of informa-tion over the blockchain is safe because net-work “nodes” validate the work going on.

Innovalue’s report, entitled Blockchain and Financial Services: Industry Snapshot and Possible Future Developments, suggests that blockchain can replace the middle fig-ure, such as a card provider, in a payment. In order to mitigate risk, however, there are two more independent concepts underpin-ning the technology: “cryptography and open source software”.

Developers have big dreams for the future of blockchain. It really could be manipulated to serve any need, from sending or receiv-ing remittances, digitalising assets (passport, medical history or a house) to smart con-tracts and collateral management.

History and How It WorksIn 2008 Satoshi Nakamoto, a pseudonym for a mystery person or indeed group of peo-ple, introduced the world to Bitcoin, and its decentralised infrastructure system.

Bitcoin received media attention, Inno-value explains, due to “its price volatility (reaching £1,000 per coin in 2013)” and affiliation with Silk Road, the online black market. People using this Dark Web service needed a payment system that allowed the transfer of different currencies across vast geographic distances and between strangers, so they used Bitcoin.

Even though the FBI closed Silk Road

down, the report continues, its existence increased financial leaders’ curiosity for the Bitcoin ‘backbone’: blockchain.

Innovalue breaks down the technology: “The “blockchain” is the ledger (book of records) of all transactions, grouped in blocks, made with a (decentralised) virtual currency scheme.”

The book keeping element has a ‘syn-chronous’ and even manner, as Innovalue explains: “it constantly updates and with the aid of a mathematical function, allows participants to reach an agreement on the approval of transactions.”

Within this context, information regard-ing the transaction is transferred in ‘blocks’ to the ‘chain’ and between members of the community. Entries in the ledger can be seen by all participants and are added in chrono-logical order.

This system, says Innovalue, is like a pub-lic register: “The list of all transactions is, de-facto, owned by each participant. Thus, all movements of information that has been exchanged in the network can be traced, enabling the transparency of the system, assuming the IP address of the computer being party to a transaction is not masked.”

The report cites the European Cen-tral Bank’s ‘two key features’ of a value exchange system: reliability and safety. Nor-mally, a known financial brand bank would fill the role. However, as Innovalue explains, blockchain’s risk alleviating mechanisms not only bridge the third party void but “prevent double spending” through the hash function and distributed ledger design.

The Network and Virtual CurrenciesSince blockchain’s inception and its sub-sequent mainstream popularity, its basic premise – a decentralised network – has been reworked by fintech developers. This has resulted in a blockchain amalgamation, whereby centralised networks can exist within a decentralised blockchain (which is the distributed ledger aspect).

Innovalue explains that distributed ledg-ers, maintained by all participants in the network, enable transparency and integrity:“On this concept, IT firms (such as Micro-

soft and Oracle) have developed a method to distribute data among multiple devices in a way that each device can modify and/or update information, making them available to the entire system.”

The distributed ledger can differ from cen-tralised and decentralised systems, the report continues, as the information is “owned by the network’s participants, and not only by a central entity”.

This means that blockchain technol-ogy can serve multiple currencies. Pres-ently, however, financial institutions with a blockchain-inspired system underpin it with a cryptocurrency. This can be for security, as cryptocurrencies can act like a buffer, or simplicity.

Innovalue deconstructs virtual currency schemes, which according to the European Central Bank cryptocurrencies fall under, by classifying them into three main categories: closed virtual currencies (mainly with the gaming world), non-convertible virtual cur-rencies, and convertible virtual (digital) cur-rencies. The latter is significant to a financial institution’s potential blockchain strategy.

However, as the report explains, there is a difference between “virtual” and “digital” convertibles currencies. Virtual currencies deal with products via the internet, while digital convertible currencies are separated into two more categories (centralised and decentralised) and tend to have a more com-plex use.

Innovalue continues: “Centralised: cur-rencies that have a centralised depository (like a central bank in the real economy- and a principle administrator) fiat currency.”

For example, Tibado is a San Francisco-based payment company that uses digital fiat money and a centralised ledger. It, accord-ing to Innovalue, uses ‘cloud-based architec-ture’ to enable payments and mobile or web transfers.

In contrast, the decentralised convertible digital currencies do not rely on a central authority but a distributed system of trust. This can make it difficult for legacy financi-ers to embrace Bitcoin or one of its contem-poraries, as there is no safeguard in place for deflation, inflation interest or exchange

Time to unchain these cryptocurrenciesBlockchain is back on the agenda. It is a ledger of digital transactions that is distributed between different participants. The technology has a myriad of uses, from cost effective FX transfers to programmable money. Franchesca Hashemi analyses a report delivered by Innovalue and Locke Lord about the blockchain

EPI 337.indd 6 16/09/2015 17:33:00


FEAT

URE

BLOCKCHAINElectronic Payments International

rates, as Innovalue points out. Yet times are changing. The total market

capitalisation for decentralised digital cur-rencies is $4bn, with Bitcoin accounting “for nearly the entire capitalisation of the indus-try at $3.45bn”, according to coinmarket-cap.com and Innovalue.

Where We Are AtThe current movement, Blockchain 2.0, is about the technology’s evolution, main-stream bank’s adaptation, and dulling the presence of Bitcoin. The terminology is con-stantly changing, yet the core infrastructure of this distributed ledger remains unchanged from its early days.

So with each phase that blockchain and its spin-offs go through, according to Innoval-ue, a literal “plethora” of financial opportu-nities will arise.

In effect, anything that needs to be record-ed can live on the public ledger blockchain. This includes voting systems, welfare pay-ments and pensions, car hire, remittances and insurance.

It is an apt tool for the digital economy, especially since the distributed design can be used to build new information arenas that are easily accessed by the blockchain net-work’s participants. This particular point, Innovalue explains, is extremely useful for peer-to-peer transactions and the documen-tation of “intellectual capital for an idea to provide proof of ownership during patent disputes”.

Currency Exchange A.K.A the “Remittance” IndustryBlockchain as a public ledger is able to free the flow of remittances. It could provide near real time money transfers, backed up by cryptocurrencies unless a financial brand decides to innovate around this, while fees could be lowered drastically.

Many remittance companies leverage Blockchain 2.0. The result is a market full of variations, compatible with both fiat curren-cies (from Sterling to the yen and everything in between) and virtual currencies (including Bitcoin and other cryptocurrencies such as Litecoin, which has a total market capitalisa-tion of $97m, according to Innovalue, and Peercoin, with a total market cap of $7m.

These alternative network models, as Innovalue explains, could disrupt the FX and create new clearing spaces for all sorts of transactions.

A key example of a start-up transfer com-pany using blockchain to its merit is Nai-robi-based digital currency exchanger and transfer service BitPesa.

Innovalue explains: “BitPesa’s business model is based on the ability to use Bitcoin

as a foreign currency clearing and interna-tional transfer instrument between two cur-rencies.“This is done by converting the sender’s

value denominated in a fiat currency into Bitcoin at point of receipt and, almost at the same time, to reconvert Bitcoin into the receiver’s fiat currency.”

Programmable MoneyDigital currencies, according to Innovalue’s report, are characterised by industry profes-sionals as programmable money, or money with in-built functionality:“[It enables] users to encode require-

ments into a payment instruction in order to achieve autonomous, self-executing con-tracts (“smart contracts”).“Software is used to set up a contract to

specify the payment details and the condi-tions required to be met before the transac-tions take place. The conditions can be based on publicly available information.”

The software will check the requirements have been reached then follow through with the agreed payment. In effect, the smart con-tract is programmed to do the job of a writ-ten or typed contract, useful for individuals who want to sell, buy or conduct business with an unknown body over the internet.

Yet programmable money can pose secu-rity concerns, Innovalue warns. “The auto-matic and enforcing nature would make it difficult to apply conventional contract law.“Reversing disputes over the irreversible

and ‘automatically completed’ nature of such contracts may be very hard to rectify.”

The report lists consumer protection and privacy as primary concerns, because there is zero discretion in terms of a get-out clause. What’s more, legal information is publicly viewable, although it exists in code.

Smart PropertyBlockchain can be used for the transacting of information that amounts to a physical or conceptual asset. This could be anything from a house or intellectual property item such as an artists’ song to stocks, bonds, cars and commodities.

Transactions for smart property on block-chain, according to Innovalue, can be viewed as: “contracts enforced by algorithms that can automatically execute the stipulations of an agreement once pre-determined condi-tions are activated”.

In this instance, smart property and blockchain is essentially proof of ownership regarding an entity that can be digitalised.

There are many ways to facilitate smart property transactions. Innovalue provides an example of one: “By harnessing the blockchain technology as both a ledger and

trading instrument, the Coloured Coins protocol functions as a distributed asset management platform, facilitating issuance across different asset categories by individu-als as well as businesses.”

Financial brands are innovating around the smart property concept. One potential application, difficult but not impossible to execute, is the distribution of a will. To do this, the smart contract on blockchain should be programmed to scan for publicly available proof of the testator’s death (such as a digitalised death certificate or online obituary). The network will be notified once this condition has been met and within near real time of the death being verified by the nodes, money or assets from the will can be transferred digitally to beneficiaries.

How Incumbents Leverage the BlockchainSeveral legacy banks are investing in block-chain research. Santander published its ‘Fin-tech 2.0 Paper: rebooting financial services’, while Barclay’s proof-of-concepts venture with the Bitcoin spending platform Safello has been big news. Royal Bank of Scotland has also jumped on the blockchain band-wagon, with an announcement in June 2015 that it will investigate the technology with Ripple as part of its £3.5bn digital revamp.

Innovalue lists four key areas corporate and institutional incumbents are looking at: in-house platforms, direct investment in blockchain companies, partnerships with blockchain developers and the study of potential applications through accelerators.

The report also proves investment in blockchain and Bitcoin companies is increas-ing, with $95m invested globally in 2013, $350m invested in 2014 and $344m invest-ed from January to March 2015, according to CoinDesk’s figures.

What Next?Banks and developers alike are not even close to uncovering blockchain’s full poten-tial. Yet the sheer range of financial compa-nies now investing, researching and talking about blockchain proves it is a technology under serious consideration.

Financial brands are assessing areas that need revitalising and adopting the block-chain technology to suit their needs, while keeping abreast of their peers’ developments.

As Innovalue explains, the blockchain ascent continues: “It is an innovative solu-tion to the process of completing informa-tion exchanges and transactions. As with all technical advances, blockchain is undergo-ing progression from initial launch for niche applications (e.g. a digital currency) to potential large scale adoption by businesses and governments.” <

EPI 337.indd 7 16/09/2015 17:33:00


FEAT

URE

RIPPLE LABS Electronic Payments International

In June 2015 Ripple secured $28m in its Series A funding round. Interna-tional attention, coupled with great-er acceptance of distributed ledger

systems, is galvanising support for Rip-ple Labs’ place in traditional banking.

FH: Ripple can transact with basically any fiat currency, so can you explain the need for a crypto-underpinning?

ND: Cryptocurrencies are not that fundamental to what we do. It is important to understand that banks have to convert into bitcoins to transact over blockchain. However they do not have to convert into our currency (XRP) to transact over Ripple. Ripple is a distributed ledger technology; similar to Bitcoin, but our core architecture is built completely separately.

Distributed ledgers tend not to have a cen-tral operator running the system. Any clear-ing or centralised banking system has means to prevent spam and/or cyber attacks. If it receives fake transactions, the sender identity can be easily detected and shut down. There is no central operator in the Ripple world. We had to build a preventative mechanism.

FH: How does this mechanism work?

ND: For every transaction that goes through Ripple there is a small postage XRP fee. This is meant to bankrupt the user on an automatic programme. It is extremely cheap- close to zero in fact. For example $1 worth of XRPs will let you bank up to five million transactions. It is that cheap.

Let me give you an analogy: if an email provider charged a tiny fee per email, how much less spam would you get? Our XRP postage fee exercises a similar concept.

FH: So Ripple’s cryptocurrency acts as a security enhancer and spam prevention tool. How does this impact smart contracts?

ND: It depends on how the smart contract is implemented and what the underlying ledger technology is. Smart contracts are nothing more than a conformable logic. They can

work by running different servers with the same piece of software all around the world. The logic, however, differs in payments or settlements. So, theoretically, smart contracts should be able to interface with traditional clearing and settlement systems or a non-traditional one like Ripple. There are different variations of smart contracts out there. Ripple has a smart contract called Codius.

FH: Do you have a focus area within smart contacts- eg assets or conceptual transactions?

ND: There are two fundamental areas to look at. Firstly, a smart contract should be able to interface with any system from a clearing and settlement standpoint. Secondly, the customer writing their business logic shouldn't be forced to write in a language they are not comfortable with. Ripple’s smart contracts platform is compatible with any coding language so they don't have to make huge exchanges to clear existing business logic.

FH: There has been lots of talk about Ripple’s proof-of-concept project with RBS, as part of the banks’ £3.5bn digital makeover. Who else are you signing deals with?

ND: There are several references in the press about banks evaluating Ripple. In Australia both Commonwealth Bank and Westpac made public announcements about their interest in our services. RBS has the done the same. There are other examples, the Federal Reserve in the USA. We are working with them, as part of the Faster Payment Task Force Steering Committee. Our focus is working with banks then helping them use the technology aspects of Ripple for their settlement needs.

FH: Do you know if the Federal Reserve is looking for high or low value solutions?

ND: In the USA faster payments will be designed for whatever the industry decides.. From a technology standpoint, the technology Ripple has created can work with high value, low value and even micro payments.

We have no preference over what banks

focus on. So far banks have evaluated Ripple for retail, B2B, low value and cross border. By low value I mean less than $2,500. There are two reasons for that. Every payment has an inherent risk. The higher the dollar the higher the risk the bank has to take. Because the technology is new banks want to start with low value payments. The second reason is low value transactions, especially cross border, are increasing year on year, so there is a need for the banks to offer these.

FH: What are your regulatory challenges?

RL: Regulation is a big issue. We deal with it by educating the regulators about how banks use the Ripple technology in a way that is compliant with local regulations. Some concerns have been around the transmitter fee and ensuring that sensitive information is not sent over the open protocol. We ensure we ‘sanction screen’ and follow Politically Exposed Person (PEP) protocol for every transaction that uses the technology.

We also have a partnership with Earth-port, an open global bank payment network, where they can use some of Ripple’s benefits as solutions for their customers.

FH: Are regulators receptive to Ripple Labs?

ND: Absolutely. The banks must acquire formal approval from their local regulators before the technology can go live.

Just to clarify one thing, Ripple is not based on the blockchain model. The only similarity we have is the distributed ledger system, where two parties can confirm trans-actions without a third party. We are not based on blockchain. We built this technol-ogy from the ground up.

FH: For the customer using Ripple, do you have any idea what they could be charged at this early stage?

ND: It depends on the bank because there is no way for customers to use Ripple on its own. We think banks will pass on the savings our value proposition provides to their customers. <

Ripple Labs is making waves globallyRipple Labs has built a protocol reminiscent of bitcoin’s blockchain: algorithms facilitate its peer-to-peer network, removing the need for a card machine or correspondent bank. Franchesca Hashemi speaks to Nilesh Dusane, VP sales and client relations at Ripple Labs, about legacy banks’ interest

EPI 337.indd 8 16/09/2015 17:33:01


REMITTANCES

Dilip Ratha, lead economist for global remittances and migration, World Bank“Technology can bring down the cost of remit-tances due to the inherent efficiency of digital. However, money laundering regulations such as ‘Know your customer (KYC)’ mean that digital-first companies are not much better off. They may even have a disadvantage. “The crux of the question, I think, is not so

much whether digital companies are riskier than bricks and mortar providers, as the latter can verify the identity in person. That is a sec-ondary question. The real question is whether small remittances- under £1000 for the UK, or an equivalent amount for Europe and the USA, something simple and rule based- pose a real systemic risk of money laundering. My argument is that no, small remittances are almost entirely used for personal, genuine purposes. “Beyond that [£1000] threshold, we could

ask for further ID checks. This process could immediately free up the compliance border on MTOs and all the whole industry. “We know some MTOs charge high fees

because there is a lack of competition. There is now a cost premium in Africa. This is due to market fragmentation, as the region has 47 countries and 800 million people. This means MTO s have to acquire 47 licenses- that is a cumbersome task. The premium is also due to regulatory problems; I wouldn't blame a spe-cific company that is trying to make money as long as they play by the rules. “The technology is already out there. Digi-

tal-first companies are as a good as any tra-ditional MTO to provide remittance services and indeed better placed to provide them in a more convenient way.

“So what is the prognosis going forward?

If the AML CFT is relaxed and exclusivity agreements opened up, then costs can drop immediately. The economy has the technol-ogy to provide remittances for less than 1%.”

So what is on offer? Distributed ledger sys-tem, blockchain and digital currencies could free the flow of cross border transfers. While regulations surrounding the infrastructures vary substantially from country to country, distributive ledger companies like Ripple Labs work with governments in order to mitigate risk.

Moreover, global remittances are projected to hit $586bn by the end of 2015, $610bn in 2016, rising to $636bn in 2017, accord-ing to World Bank. This illustrates a need to rejuvenate traditional FX practices and while complying with ever-tightening AML CFT regulations, see table below.

Blockchain and remittances potentialAs banks exit high-risk remittance countries, will money transfer operators emerge as FX modernisers? Blockchain-inspired technology, while in its infancy, could be the answer. Franchesca Hashemi speaks to the World Bank and CGI about tightening remittance regulations, high fees and blockchain derivatives

Improving AML CFTAnti-Money Laundering (AML) Combating Financial Terrorism (CFT) is an internationally recognised framework that impacts all financial providers. Improving its structure is an ongoing task and requires input from a number of bodies: the International Monetary Fund, World Bank, Financial Action Task Force (FATF), as well as development institutions, domestic governments and regional organisations.

AML CFT recommendations include, but are not exclusive of:

• Customer due diligence (CDD). This, accord-ing to HM Revenues and Customs, is espe-cially pertinent when establishing business relationships, on occasional transactions more than €15,000, and if there is any cause for the financier’s suspicion

• Enhanced due diligence on high risk corri-dors. While specific regions are not explicitly set out, FATF publish a comprehensive public statement three times a year listing sanc-tioned regions or places deemed ‘strategic AML/CFT deficiencies’

• Internal controls, staff training, and ongo-ing reviews that cater specifically to AML CFT risks

• Comprehensive record keeping of CDD data

Jerry Norton, Head of Strategy financial services, CGI “The distributed ledger idea allows a company to update in near real time many thousands of different entities distributing in a big network. “Where it is very good is serving a potential-

ly large number of participants spread over a huge geographic distance. This may be high volume transactions for some of the system’s participants but others could be very infre-quent and of low volume. What the ledger is trying to do is keep all those people up to date and in guaranteed way. It can be a brilliant net-work if you have thousands of people, some of whom are very infrequent, and who want to keep something up to date.“A lot of the ideas and derivatives are either

allowing people to work in different currencies or in certain cases different currencies with an underlying cryptocurrency for various reasons.“However, the whole space of blockchain,

what we call distributed ledger system, is mov-ing at an incredibly speed, so whatever you say today will be different in months’ time. People use the term ‘dog year’s’ to talk about block-chain: 1 blockchain year is equivalent to seven normal years. “The way the technology is designed is that

it completes updates in many seconds rather than sub-seconds. It is still fast, I’m being

pedantic, but the jargon is “near” real time. It might happen in 15 seconds but it won’t com-plete the update in sub-seconds. It’s brilliant at that sort of application. If the financial services analyse where it might be useful and try map-ping it into those attributes and that is how you come to a solution. “People are evaluating the technology to

understand its strength and indeed weaknesses, and then potentially embarking on concepts or pilots to understand how it could be applied, and the potential benefits for banks. Every-body is trying to do that. “In the last 6 or 7 months there has been a

phenomenal amount of activity based on new players in the market place as well as banks and others looking at it. I think it is quite likely that there will be significant pilots by the end of this year if not next year. It is moving at a ridiculous rate. Conversations we were hav-ing at the beginning of the year were about how the tech works, you might be able to use it. Now we hear people saying yes, we know all that, I want to try this or we want to use it for that. “Foreign exchange, clearing equity and

retail are areas the financial services are look-ing at. <

COM

MEN

T

Electronic Payments InternationalElectronic Payments International

EPI 337.indd 9 16/09/2015 17:33:01


FEAT

URE

M-PAYMENTS Electronic Payments International

Mobile banking has been on the rise and mobile payments are coming to the fore. What will it take to push them into the main-

stream? A little nudge from the bank, apparently. Other key findings were:

• Consumer apprehension has shifted from security concerns to connectivity and battery life

• Parking remains the third most popu-lar area for use of mobile payments and joint-second highest growth area of mobile payments in the last 18 months

• When people use once they adopt

• Consumers are confused through no fault of their own and could be easily encouraged to adopt mobile payments

• Opportunity is rife for banks

"No one likes cash these days. It's spent too easily", was one quote that emerged from the survey- an interesting counter-narrative to the usual line that mobile payments, in removing the 'painful' element of physical cash handover, make it too easy to fritter money away.

The main obstacles that need to be addressed for widespread mobile payment adoption, according to VocaLink’s study, are: lack of ubiquity, lack of awareness. Banks need to address consumer confu-sion because they (still) have it all to play for, explained Cara O'Nions, marketing and customer insight director at VocaLink.

We need an interconnected set of rails, which would, ideally, extend cross border, as David Bannister suggested.

Allayed security concerns are down to "increased familiarity with the technology, reflected in increased uptake and more fre-quent use, with 46% of smartphone own-ers now using their device for some form of mobile banking (almost doubled from 27% in 2013)", according to the report.

But that's mobile banking, mobile pay-ments remain "relatively nascent", said the

report, despite encouraging growth stats. Awareness of mobile payment brands is very low and confusion is rife as to which solution works in what way and with which banks. And the banks are best placed to rec-tify this. Moreover:

• 47% are more likely to use new pay-ment services if provided by their bank

• 42% are more likely to use new pay-ment services if provided by PayPal

• 41% are more likely to use new pay-ment services if provided by a card scheme eg Visa, MasterCard

• 31% are more likely to use new pay-ment services if provided by a service provider recommended by their bank

• 21% are more likely to use new pay-ment services if provided by the govern-ment

"With so many mixed marketing messages, banks have the opportunity to provide lead-ership and guidance at a time of universal confusion," said Paul Stoddart, managing director, strategy, products, marketing and business development.

There are likely be three or four winners, and whether customers will choose one solu-tion for everything or will be happy to have the few main solutions is as yet unclear.

Findings indicated that people tend to "reduce down quickly" and when they find something they like, tend to look no further. But it is also likely that consumers will have

"one or two subsidiaries" and it all depends on how well the key issue of ubiquity is addressed.

According to the study, smartphone adop-tion stands at 84%, up from 60% in 2013. And customers are happier using biometrics than before as well.

Paym was regarded as not having nearly enough promotion as it might have benefited from, but Zapp could be set to make waves in light of its upcoming launch, particularly in the wake of awareness brought about by Apple Pay's UK launch in July. Both Paym and Zapp were built by VocaLink.

Consumers’ decision to use Paym based on:

• Bank’s recommendation, 47%• Friends/family using it, 46%• Reading about it in dedicated pub-

lished feature, 34%• Video tutorials, 26%• Seeing an advert about it, 17%

UK bank-owned VocaLink commissioned Illuminas to carry out the study. The sam-ple was 5,000 UK consumers aged 16 to 75, plus focus groups. VocaLink provides the platform for Bacs, Faster Payments, the seven day switching service and the LINK ATM network.<

UK Customers expect banks to push mobile payments Banks should be the drivers for mobile payments because consumers expect them to be. So goes VocaLink’s key finding from its latest commissioned study to better understand what is fuelling consumer behaviour and how the industry needs to react. What are the crucial factors to increase adoption? Anna Milne writes

n MOBILE PAYMENT ACTIVITY INCREASES

% Using smartphone to pay... 2013 2015 Increase in activity (% points)

Friends and family 9 33 24

Bills 7 21 14

Parking 6 20 14

Larger expenses, eg airline tickets or electronics 6 17 11

Public transport 5 17 12

Small daily purchases 6 16 10

Motorway tolls / congestion charge 4 15 11

Taxis 3 14 11

Source: Vocalink and Illuminas

EPI 337.indd 10 16/09/2015 17:33:01


COM

MEN

T

DR. PAUL CURRY, MISYSElectronic Payments International

Today’s corporates expect a lot from their banks. Research has shown that 65% of corporates feel that their financial institutions do not under-

stand their needs (Aite Group) while 63% of corporates say service innovation is key to their business – only 40% see banks per-forming (EY – Successful Corporate Banking Report).

Simple provision of transaction services is no longer enough for a bank to retain and grow its corporate customer base. These days, there are three essential characteristics a service must have:

• Provision of a holistic view. If a corpo-rate is going to put multiple lines of busi-ness through a bank, it expects to be able to take full advantage of this in terms of visibility and control. For example, a corporate treasurer will demand access to data on its consolidated position and the ability to sweep liquidity between these lines of business to get the most benefit from what is increasingly an expensive commodity.

• Competitive and agile pricing structures for the services. A bank must be in the position to offer relationship based pric-ing as opposed to simple product pricing based upon individual business lines.

• Excellent user experience. We are increasingly used to engaging with digi-tal channels, the characteristics of which include intuitive user interfaces and access to rich real-time data that can be readily and flexibly analysed and con-sumed. Traditional GUIs may still be acceptable in the back-office of a bank, but not for a corporate user

Meeting these service characteristics poses several challenges for banks:

1. Bank operations still tend to be in silos. Even if there is an organisational desire to address this, the legacy infra-structure (still in place after 30 years in some cases) can often make this a seem-ingly impossible challenge. Banks are in a dilemma: they have substantial IPR invested in applications that are simply not equipped for the challenge, yet a corporate will expect new service offer-ings to be reflected in days. However, relatively simple changes in the bank will require coding with a release cycle of

months. Where banks have attempted to replace these applications they have frequently under-delivered in terms of functionality and with a much higher TCO than predicted – “rip and replace” is simply too expensive and brings an unacceptable risk profile (a major FI that I’ve worked with estimated a figure of $50m to replace its high value payment system and I have also seen implemen-tation timeframes in excess of 2 years). This is frequently exacerbated by frag-mented front end systems. A corporate will expect an omni-channel portal to bring all lines of business together, so it can view and act upon consolidated data. Banks must offer front to back office solutions that have this capability.

2. Few applications are “enterprise aware”. The above example of pricing is an excel-lent case in point. All lines of business in the bank will implement some form of pricing, however as it resides in channel-specific applications it will be product-centric rather than customer- centric. Banks need to be able to offer innovative pricing that truly reflects the value of the full portfolio of a corporate business - concepts such as promotional offers and bundled pricing are common in other industry segments (eg telecoms), but banks struggle to offer this. Opera-tional dashboards and analytics face the same problem - banks need to offer state-of-the-art technology solutions to give corporates greater insight into their banking services, as well as the ability to refine and tailor them. They need to be able to make evidence-based decisions about their banking relationships.

3. Insulating the corporate from change. As many aspects of transaction process-ing become commoditised, corporates expect their banks to shield them from efforts on their side to adapt to infra-structure changes while ensuring they can take full advantage of market inno-vation. This means that banks need to stay ahead of the curve in transaction banking developments in a way that provides business benefit to a corporate, without the onerous task of the corpo-rate continuously changing their systems.

What practical steps should a bank undertake to ensure the health of its

corporate business?• Implement hub-based solutions. These

are centralised “command and con-trol” points for transaction processing. In addition to fulfilling the need for a holistic view of the corporate business, it helps to address points 1 and 3 above. Hub-based solutions provide a point in the bank’s infrastructure where every-thing comes together. The use of stand-ards-based interfaces (ISO20022 being the one that has gained most traction) means that banks can leave their exist-ing applications in place doing the job that they were designed to do (and often continue to do well), while gaining the benefits that can only come when their data is viewed and acted upon “in the whole”. If transaction processing has a point of centralisation, changes (regula-tory, scheme-based etc.) can be applied in one place – not in individual channels

– reducing effort, cost and risk. Further-more, hub-based solutions, establish clear contracts with the connected appli-cations and the bank (if it has the appe-tite and capabilities), can undertake its own adaptations and integration work on this basis.

• Rationalisation of business processing. Only put into the transaction hub what belongs in the hub. Many failed projects are the result of compromising on this principle and result in a new solution which is a mirror image of the original one on a new platform. The impact is that, once again, the bank finds itself unable to respond to change because (unintentional) silo based processing is being developed. Pricing and opera-tional dashboards are areas where banks should utilise best of breed components as opposed to a partial solution in the channels or hub.

• Providing excellent user experience. Banks need to ensure that providers have strong credentials in digital chan-nels solutions. The “shop-window” has to be impressive – it needs to oper-ate across business lines and be equal to what the user-base expects based upon their everyday experience (e.g. social media and Google search capabilities) .

Corporates are very choosy with respect to where they place their business. Banks have an excellent opportunity to both retain exist-ing corporate business and grow this revenue stream, by ensuring that their systems meet client expectation – an achievable challenge if they follow the steps above when they choose a vendor or develop their systems to deliver their transformation programme. <

Meeting the Corporate ChallengeBy Dr Paul Curry, product manager for payments and messaging, Misys

EPI 337.indd 11 16/09/2015 17:33:02


FEAT

URE

SAMSUNG PAY Electronic Payments International

The mobi le payments market is evolving rapidly, with new pay-ment intermediaries, providers and services emerging all the time. The

launch of Apple Pay, Samsung Pay and Android Pay signals the growing role of non-bank payment intermediaries in this market.

Mobile payments technology, together with enhanced consumer expectations, are putting added pressure on banks to innovate with mobile payments, driving significant investments in this area and a renewed focus on developing more competitive mobile pay-ment strategies.

Moreover, as the mobile payment options offered to consumers increase, financial institutions will have to respond faster and look beyond their own resources in order to compete more effectively with new market players.

But will emerging services such as Sam-sung Pay disrupt the traditional payments landscape? Both Samsung Pay and Apple Pay are based on standardised technologies developed by the international card schemes which essentially replace the physical credit card with a mobile device. In this sense they are more an evolutionary step, rather than a revolution.

Industry standardsOne of the most important aspects of these

“Pays” will be the consolidatation of exist-ing industry standards for mobile payments. Just like Apple Pay and others, Samsung Pay uses Near Field Communication. Unlike them, it also adds an emulation of the mag-netic stripe used on credit and debit cards

- Magnetic Secure Transmission (MST). Samsung Pay should therefore be able

to work at most existing POS terminals, regardless of whether or not they have been upgraded to handle chip & PIN.

This will enable merchants to easily adopt the new payment method, as they won't need to upgrade their terminals to be able to offer mobile payments to their custom-ers. This is of particular relevance to those countries that still rely on magnetic stripe technology e.g. the USA, which is only now

rolling out chip & PIN.As more and more merchants roll out chip

& PIN and NFC enabled POS terminals, and banks allow their cards to be stored in mobile wallets, consumers will be able to benefit from more convenience and choice. This in turn will open the way to new players and tech start-ups entering the market with solutions that leverage the underlying tech-nology standards and payment networks provided by banks.

In this sense the “Pays” won’t replace tra-ditional card banking transactions but will push financial organisations to innovate faster in this space.

How can banks adapt to this fast-changing, highly competitive environment?First of all, the financial services industry needs to look at the underlying infrastruc-ture that enables payments innovation. This will require a concerted effort from financial organisations and their national associations.

The US, Canada, UK and other European countries are already making significant efforts to improve their payments infrastruc-ture. The UK’s Faster Payments Service is a good example of such and has led to signifi-cant improvements in bank payments in the past couple of years.

However, infrastructure itself is only half of it. Providing access to these payment frameworks for all players in the market is still an issue that needs to be addressed. Under the current model only direct mem-bers of these initiatives or organisations sponsored by a direct member can access such payments frameworks.

This could potentially limit the opportuni-ties for new market entrants to benefit from infrastructure improvements.

Another key area that is driving innova-tion in the payments space is the increased collaboration between banks and third party organisations. As the payments ecosystem becomes increasingly complex, playing solo, so to speak, could be a massive disadvantage.

This is why banks are looking to create APIs (Application Programming Interfaces) that can be used by third party developers to create innovative complementary services

and payment products.The Open Bank Project is one such exam-

ple. It’s an open source API and App store for banks that allows them to drive innova-tion in payments and other areas by using an ecosystem of third party applications and services.

Such services will enable banks to offer a wider range of web and mobile apps to their customers and compete more effectively with challenger payment providers such as Apple and Samsung.

According to Gartner, by 2016, 75% of the top 50 global banks will have launched an API platform and 25% will have launched a customer-facing app store.

To be able to make the most of this oppor-tunity, banks need to integrate this set of services into utilities that deliver packaged payments solutions to customers.

This involves a number of challenges such as finding effective ways to protect banks’ APIs and creating an effective regulatory framework that governs how banks share certain data and technology with third party providers.

However, financial organisations are already making significant progress in this area and the introduction of a new set of more competitive payments products and services is only a matter of time.

As the payments industry is undergoing dramatic changes banks are beginning to transform how they operate to catch-up with the innovation created by non-bank payment providers.

The launch of emerging mobile payment services such as Apple Pay and Samsung Pay marks a historic move of major technology firms into the payments arena.

However, banks will continue to play a key role in providing the underlying infra-structure that facilitates mobile payments and will increasingly collaborate with other industry players to drive banking innovation.

This increased collaboration will trans-form traditional payments as we know them today and will create more opportunities for launching frictionless, easy to operate ser-vices for consumers that will revolutionise how we make payments. <

Samsung Pay: m-payments evolution, not revolutionJerry Norton, managing director of financial services at CGI discusses the impact on banks of new payments providers, how they can rise to the payments challenge laid down, what they are already doing to address this and how they may be able to play the fast pace of change to their advantage in the long run

EPI 337.indd 12 16/09/2015 17:33:02


COU

NTY

SURV

EY

AUSTRALIAElectronic Payments International

Australia’s payment cards market is one of the world’s most developed. In 2014, the Australian payment cards market accounted for 5.1% of the

transaction value, and 11.2% of the trans-action volume in Asia-Pacific. The average number of monthly card transactions, and the average annual spend per card are higher in Australia than in other mature markets such as the US, the UK, Canada and Germany.

Electronic payments have steadily gained in popularity in Australia, aided by contactless technology’s rising prominence in the country. Banks such as CBA, National Australia Bank (NAB) and Westpac offer payments based on contactless technology.

Key elements in the rapid uptake of contactless payments were initiatives taken by multinational providers Visa and MasterCard to gain market share in Australia. The domes-tic debit scheme provider, Eftpos, supported by central bank the Reserve Bank of Aus-tralia (RBA), raised $41.3m (AUD40m) via the $0.01 scheme fee introduced for all trans-actions in 2011. The funds were utilised to move to Europay, MasterCard, Visa (EMV) standards and implement contactless technol-ogy.

Consumers increasingly use faster and more secure payment options, resulting in mobile operators, traditional and online retailers, and other service providers intro-ducing digital payment options. These include online and mobile payments, and are conducted through alternative instruments such as Bpay, Paymate, MasterPass, Visa Checkout and POLi.

Debit cards continue to dominate the pay-ment cards marketPayment card product preferences changed during the review period, with a gradual shift in favour of debit cards. Debit card transac-tion values increased from $274.9bn in 2010 to $315.3bn in 2014 at a review-period CAGR of 4.90%. Credit card transaction values recorded a CAGR of 4.00%, increas-ing from $179.6bn to $196.9bn during the same period.

The shift away from credit card use can be explained by factors such as increased consumer avoidance of debt, and RBA initia-tives to regulate interchange fees. The RBA’s intervention to cap the debit interchange fee, remove surcharges on card transactions, and

the ‘honour all cards’ rule to allow merchants to accept cards, succeeded in changing the rel-ative prices of using debit cards. This resulted in increased spending on debit cards during the review period, a trend that is expected to continue over the forecast period.

Regulatory reforms changed the dynamics of Australia’s credit cards marketThe central bank has introduced several reforms to the credit cards market since 2003. Among other measures, interchange fees were reduced. To compensate for revenue loss, banks increased annual fees on credit cards, and made reward points and other benefits offered on credit card spending less generous.

Card schemes provided banks with incen-tives to promote cards with higher costs, but within the RBA’s rules. Card issuers respond-ed positively, formulating new strategies by turning their attention to high-income con-sumers. Some new pricing strategies focused on upgrading gold cards to platinum cards, and offering more generous value-added ser-vices or rewards at no additional cost.

Furthermore, banks started offering com-panion cards to their customers. A compan-ion card is linked to two different credit card networks that allow customers to earn the benefits of whichever one they choose to use at the purchase point. As a result, credit card products with companion cards attached have increasingly replaced traditional single-card rewards programmes in the product lines of all major banks. For instance, CAB,

NAB, ANZ Bank and Westpac offer at least one companion card account as part of their premium card accounts.

Mobile payments (m-payments) gaining traction in AustraliaM-payments are growing in prominence among Australian consumers, offering an opportunity for both banks and non-bank-ing companies to increase their shares in the mature Australian payment cards mar-ket. The large-scale adoption of contactless technology is also anticipated to support the growth of mobile contactless payments. In March 2015, CBA launched mobile contactless payments for Android phone users, having already made them available for iPhone users. Customers need to purchase PayTag stickers for $2.7 (AUD2.99), enabling them to make contactless m-payments of up to $90.3 (AUD100).

In 2014, Westpac rolled out m-payments in partnership with Visa. The service uses an NFC chip embedded in Android smart-phones and supports Samsung Galaxy S5, S4 and Note 3. Users can store all their Westpac debit and credit cards – Visa, MasterCard and American Express – in the Westpac bank-ing app.

In September 2013, the NAB launched an m-payment service that enables users to send, receive and request payments via NFC, QR codes, a mobile phone number, an email address or Facebook account. Customers can use the service by downloading an app and completing a registration process where they link their bank account to the app.

Users can then launch the app, choose whether they wish to send or request a pay-ment, enter the amount they wish to send or receive and, at the bottom of the screen, choose from three options: Contacts, QR code or Tap. <

AustraliaA healthy contactless market, a steadily growing mobile payments segment and positive effects from regulatory impositions are all strong features of Australia’s bouyant cards and payments sector

n AUSTRALIA CARD TRANSACTION VALUE BY CHANNEL ($BN), 2010–2019

20102011

20132015

0

100

200

300

400

500

20182016

20142012

US$ bn

20172019

ATM

POS

Source: Reserve Bank of Australia and Timetric

EPI 337.indd 13 16/09/2015 17:33:03


BRAZIL Electronic Payments InternationalCOU

NTY

SURV

EY

The Brazilian market's openness to competition and its well-developed financial infrastructure makes it one of the most promising payment card

markets in Latin America. Consequently, the country has attracted both regional and international banks and card issuers. In 2014, the Brazilian payment card market accounted for significant 60.3% and 60.9% shares of Latin America’s transaction value and volume respectively. A tradition of technological development and a huge population eager to embrace new technology were instrumental in the development of the country’s payment card market during the review period.

Government policy driving growth in electronic paymentsDespite the country’s economic progress, cash is still the primary payment instrument, as consumers – especially in rural areas – still do not have access to basic financial services. However, payment cards are gradually emerging as a substitute for cash, as the government and banks begin to provide basic financial access to the unbanked population. This includes the government’s policy for financial inclusion, the expansion of banking infrastructure in rural regions, and the appointment of banking correspondents.

The central bank has simplified the process of opening bank accounts, making access to basic banking products such as current accounts and debit cards easier. Accounts can be opened by individuals free of charge in government-owned banks, with no maintenance fee charged. Furthermore, the government introduced the Bolsa Familia programme to help low-income families. Through the programme, social security benefits are disbursed by direct fund transfers, which can be withdrawn using a payment card linked to users’ bank accounts.

Heavy use of credit cards resulted in growing outstanding balancesIn the last ten years, the Brazilian credit card market has recorded robust growth in terms

of the number of cards in circulation, and transaction value and volume, supported by high consumer spending.

Credit cards have traditionally been most commonly used by high-income consumers, but more recently they have become sta-tus symbols for the low- and middle-class populations, which then started to apply for credit cards and loans that were previously out of reach.

Banks lowered underwriting standards to encourage these consumers, making credit easily available through credit cards and attractive instalment plans to finance pur-chases such as new cars.

Over the forecast period, the Brazilian credit card market is anticipated to get tougher as card debt rises. To curb the rising incidences of payment default, the BCB raised minimum payments and increased capital requirements for long-term consumer loans with effect from June 2011.

Despite these regulations, the overall credit card outstanding balance grew from $93.1bn (BRL163.9bn) in 2010 to $146.0bn in 2014. The average outstanding balance per credit card grew from $569.6 in 2010 to $571.9 in 2014. However, these figures are still low in

comparison to other developed markets.

M-payments set to shift the cards and payments industry’s dynamicsMobile penetration in Brazil increased from 100.6% in 2010 to 133.5% in 2014, and is anticipated to increase further to 153.1% in 2019. Despite this, m-payments have been relatively slow to take off. However, this is set to change over the forecast period, as the government approved a bill in October 2013 giving the BCB authority to regulate m-payments.

This is expected to encourage m-payments and reduce the use of cash, especially among the unbanked and rural populations. A growing young population, favourable eco-nomic conditions and government support to encourage m-payment initiatives should lead to growth in the m-payments market.

In May 2015, Visa was involved in a near-field communication (NFC) pilot with Oi and Banco do Brasil, enabling users to con-nect Visa-branded Banco do Brasil cards to contactless SIM cards in their smartphone via an Oi app. Users can then make contactless m-payments at 1.4 million contactless termi-nals across Brazil. <

Brazil

n BRAZIL’S CARD TRANSACTION VALUE BY CHANNEL ($BN), 2010–2019

20102011

20132015

0

100

200

300

400

500

600

20182016

20142012

US$ bn

20172019

ATM

POS

Source: Central Bank of Brazil, Bank for International Settlements and Timetric

EPI 337.indd 14 16/09/2015 17:33:06


KAZAKHSTANElectronic Payments International COU

NTY

SURV

EY

Despite Kazakhstan’s economic pro-gress during the review period (2010–2014), the penetration of financial services is still relatively

low. According to the European Bank for Reconstruction and Development (EBRD), 5.9m individuals − accounting for 52% of Kazakhstan’s population − did not have access to any form of formal banking ser-vice as of January 2013. The government launched the Road Map program in 2009 to generate employment opportunities for citizens; it was extended in 2010 and led to more employment opportunities and an increase in disposable incomes. This will benefit the cards and payments industry as more people opt into formal banking.

The central bank was instrumental in increasing the share of non-cash payments by requiring retailers to install POS ter-minals to accept payment cards. Further-more, an initiative by the NBK to limit cash transactions for sole proprietors and com-panies, with tax incentives for businesses who accept payment cards, is anticipated to increase the share of non-cash payments over the forecast period (2015–2019).

While the transaction value of credit transfers, direct debits and checks declined, transaction values and volumes for debit and credit cards grew, and recorded respective review-period compound annual growth rates (CAGRs) of 19.97% and 13.85%.

Changing lifestyles, rises in the economi-cally active population and per capita dis-posable income, the growing popularity of online shopping, the increased acceptance of cards at retail outlets, and the adop-tion of new technology such as Europay, MasterCard, Visa (EMV) and contactless supported the growth of payment cards dur-ing the review period; a trend that is antici-pated to continue over the forecast period.

Debit cards continue to dominate the payment cards marketIn 2014, the debit cards market accounted for 88.7% and 93.9% of the overall pay-ment cards in terms of transaction volume

and value respectively. The rising popularity of debit cards supported this trend.

Banks such as Halyk Bank and Kaz-kommertsbank have developed projects to encourage companies to deposit employees' salaries directly into their bank accounts as part of their Salary Projects, resulting in the increased use of debit cards. Similarly, the government prefers to distribute social ben-efits such as pensions and scholarships via debit cards. This has encouraged banks to offer social or pension cards.

Mobile payments (m-payments) are gaining prominence in KazakhstanM-payments are an emerging trend in Kazakhstan. One of the most popular m-payment services is MyPaykz; launched in 2011 by Halyk Bank and e-commerce firm Intervale, its popularity is growing. A number of companies have been looking to replicate MyPaykz’s service, which reflects the growing popularity of m-payments.

In June 2014, Kazkommertsbank launched a mobile contactless payment ser-vice based on MasterCard’s PayPass technol-ogy. The bank has installed 500 POS termi-nals in supermarkets, restaurants and retail

establishments to support this move.

Growing banking infrastructureThe number of ATMs in Kazakhstan increased at a review-period CAGR of 4.89%, from 7,605 in 2010 to 9,206 in 2014. This figure is expected to increase at a forecast-period CAGR of 1.99%. Banks are expanding ATM networks into rural areas.

The number of POS terminals in Kazakh-stan recorded a review-period CAGR of 23.99%, rising from 26,625 in 2010 to 62,920 in 2014. In November 2012, the NBK required certain categories of retail-er to install POS terminals. On January 1, 2014, the regulation was extended to all traders, regardless of business model. Con-sequently, the number of POS terminals grew during the review period, a trend that is anticipated to continue over the forecast period.

In addition to conventional POS termi-nals, merchants are installing mobile POS (m-POS) terminals. In August 2014, Kcell launched mobile POS terminals in Kazakh-stan. Similarly, Halyk Bank offers Pay-Me m-POS terminals at a cost of US$67, with a fixed commission of 2.75%. <

Kazakhstan

n KAZAKHSTAN’S CARD TRANSACTION VALUE BY CHANNEL ($BN), 2010–2019

20102011

20132015

0

10

20

30

40

50

60

20182016

20142012

US$ bn

20172019

ATM

POS

Source: National Bank of Kazakhstan and Timetric

EPI 337.indd 15 16/09/2015 17:33:09


COM

MEN

T MOBILE Electronic Payments International

Since the announcement of Apple Pay in the US last October, it seems the new innovative payment method hasn’t succeeded as well as

predicted by Apple’s Chief Executive Tim Cook , who in January stated that 2015 would be “the year of Apple Pay”.

According to a survey by InfoScout, the number of eligible Apple Pay users who tried the service dropped from 15.1%in March to 13.1% in June.

Despite the accelerating growth in the number of iPhone 6s being sold, it seems a lower percentage of the users are not adopt-ing or even trying Apple Pay - this is largely due to concerns around the lack of security. As a result, customers declining to use Apple Pay went from 15% to 19%.

In contrast, a recent survey conducted by Wristly found that 80% of Apple Watch owners in the US and UK have already used Apple Pay, and suggests that this number could eventually hit 95%.

Research also found that owning an Apple Watch dramatically increased the chances of using ApplePay. Despite this, many retail-ers are still not accepting Apple Pay due to insufficient customer demand.

Not only this, but also the cost of termi-nals and computer upgrades required to accept these types of payments appears to be deterring retailer uptake.

The US market is a demographic much more familiar with credit card swiping as opposed to contactless payments, and this lack of suitable technology is another reason why the US is largely delayed on embracing Apple Pay.

Another reason for the US’s slower adop-tion than expected of Apple Pay is due to Wal-Mart and 18 other top retailers challenging Apple Pay with a mobile wal-let called CurrentC, which is scheduled to launch later this year.

Any retailers participating in CurrentC will not be allowed to accept any other mobile wallet, for example Apple Pay, until 2016. Nineteen of the NRF’s top 100 retail-ers will therefore not be able to accept Apple Pay by the end of the year, thus affecting the growth in consumers using Apple Pay.

The UK however, is much more familiar with these payment methods and already has support for contactless payments through debit and credit cards, so much so that 10 contactless payments are made every second.

In total, contactless payments were up 255% in 2014, while 58m contactless cards were in circulation.

On Transport for London alone, commut-ers tap to pay over one million times a day.

As Apple kick-started the mobile payments process in the US market last year, the UK was given the chance to prepare, and was therefore ready to adopt Apple Pay before its arrival to the UK was even announced. <

Tobias Schreyer is co-founder of the PPRO Group

One year after the announcement of Apple Pay, the world has hardly been set alight. Even less so the skies as, currently, only two air-

lines (JetBlue and Emirates) accept Apple Pay, whether that be while onboard or while booking via mobile devices.

This is startling as many airlines accept a variety of currencies and payment methods, even postage stamps if you ask nicely.

However, there are signs of encourage-ment. Apple expects its new platform to be available at 1.5 million merchant loca-tions in the US by the end of 2015.

In addition, approximately 450 banks are signed up and ready to support Apple

Pay. The only thing that Apple Pay seems to lack is users.

In January, Apple CEO Tim Cook said: “Apple Pay makes up more than two out of three dollars spent on contactless pay-ments across three major US card net-works.”

This seems like a huge amount, until you realise that less than 10% of cards shipped in the US in 2014 contained contactless technology, according to the Smart Payment Association.

So the contactless market is fairly small at the moment. When you add the fact that Apple Pay is only available on the latest iPhones or an Apple Watch, the likeliness of many people utilising contactless in general, never mind Apple Pay, shrinks. ‘Two out of three dollars spent’ may only amount to two dollars in total spent.

There was nothing more specific said on the amount of users, only that adop-tion was strong.

However, industry reports suggest that while iPhone 6 sales are strong, Apple Pay usage statistics are not. More people can use Apple Pay now, but less people are choosing to.

Meanwhile, the launch of Samsung Pay in the US grows ever closer. While a date has not yet been set, it could be next year or next week, certain retailers are report-edly already advertising that they accept the unlaunched payment method. The introduction of more direct competition may cause Apple trouble yet.

In the meantime, some Android users were able to access Android Pay prior to its launch on 16 September 2015. Luck-ily, another rival, CurrentC (developed by MCX), has suffered a number of set-backs, including a security hack and a delayed rollout.

Apple won the top slot on the Pay-ments Innovation Index in 2015, so it has proved that is innovative in the financial field. It still needs to prove if it is accept-ed. <

Patrick Brusnahan, EPI roving reporter

Apple Pay in the US - one year onTobias Schreyer, co-founder, PPRO Group and Patrick Brusnahan examine Apple Pay’s year since its US launch announcement on 9 September 2014. Samsung Pay and Android Pay have followed suit almost 12 months on. So now, as we await the launches across other major markets, it’s over to the consumers

EPI 337.indd 16 16/09/2015 17:33:10

POWERED BY

Or

Intelligent Environments, the international provider

of digital fi nancial services solutions in association with

Retail Banker International, Cards International,

Electronic Payments International, Private Banker

International, and Motor Finance publications.

Join The Club!www.thedigitalbankingclub.com

Membership is free

For further information please email:

[email protected]

Membership benefi ts

Join thousands of fi nancial services professionals who

have joined The Digital Banking Club to understand

the future of mobile and online fi nancial services

10% discount for new subscribers

Annual subscription to Retail Banker International, Cards International,

Electronic Payments International

World Market Intelligence’s archive of over 250 Retail Banking and Cards and

Payments research reports for new report purchasers

Annual subscription to Retail Banking and Intelligence Centre

World Market Intelligence Ltd’s bespoke research and consultancy services

TDBC RBI - final design.indd 1TDBC RBI - final design.indd 1 17/09/2015 11:02:3617/09/2015 11:02:36

september 2015 issue 339 www ... · for many years we have been the digital heart of a diverse...

Documents