stars in their eyes€¦ · calls bitcoin ‘a fraud’ • klarna wraps up billpay acquisition •...

COUNTRY SURVEYS FEATURE INSIGHTKey payments data for

Argentina, Mexico and the Czech Republic

The present, and future, of payments at the World

Economic Forum

The ever-evolving and increasingly sophisticated threats from cybercrime

STARS IN THEIR EYES

CELEBRATING ASIA’S CARDS AND PAYMENTS WINNERS IN

SINGAPORE

Issue 363 / SEPTEmBER 2017w w w. e l e c t r o n i c p ay m e n t s i n t e r n at i o n a l . c o m

EPI September 363.indd 1 20/09/2017 15:57:17

2 | September 2017 | Electronic Payments International

contents

NEWS

05 / EDITOR’S LETTER06 / DIGEST• JPMorgan boss Jamie Dimon

calls bitcoin ‘a fraud’• Klarna wraps up BillPay acquisition• Equifax struck by large-scale breach• Dubai and Malaysia regulators sign

fintech co-operation agreement• IBM, UBS partner to develop

blockchain payments for cars• FCA issues warning about ICO risks• Bank of Ireland partners WorldFirst• ECB, Bank of Japan say blockchain

technology immature• Ripple eyes Indian remittance market• Square aims to add banking

10

this month

Editor: Anna Milne+44 (0)20 7406 6701

[email protected]

Group Editor: Douglas Blakey+44 (0)20 7406 6523

[email protected]

Senior Reporter: Patrick Brusnahan

+44 (0)20 7406 [email protected]

Group Editorial Director: Ana Gyorkos

+44 (0)20 7406 [email protected]

Sub-editor: Nick Midgley+44 (0)161 359 5829

[email protected]

Publishing Assistant: Joe Pickard

+44 (0)20 7406 6592 [email protected]

Director of Events: Ray Giddings+44 (0)20 3096 2585

[email protected] of Subscriptions:

Alex Aubrey+44 (0)20 3096 2603

[email protected]

Sales Executive: Jamie Baker +44 203 096 2622

[email protected]

Financial News Publishing, 2012. Registered 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.

For more information on Verdict, visit our website at www.verdict.co.uk.As a subscriber you are automatically entitled to online access to Electronic Payments International.

For more information, please telephone +44 (0)20 7406 6536 or email [email protected].

London Office: 71-73 Carter Lane, London, EC4V 5EQ

Asia Office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected]

Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected]

CEPI AWARD WINNERS

COVER STORY

follow EPI on twitter@Payments_News

06


www.electronicpaymentsinternational.com | 3

contents

september 2017

FEATURES

10 / CEPI AWARDSRecognising market-leading offerings in cards, e-wallets, remittances, merchant acquiring and marketing in Asia-Pacific’s key markets, the fourth annual Cards and Electronic Payments International Summit and Awards went off with a bang in Singapore on 7 September. EPI proudly presents the definitive winners’ list

12 / WORLD ECONOMIC FORUMAnna Milne selects the key findings and takeaways of one of the industry’s most comprehensive overviews of the payments industry’s present and future, with additional comments from Citibank, DBS, Standard Chartered and ANZ

14 / PROJECT UBINSingaporean regulator MAS is forward-thinking in its approach to innovation and technology. It teamed up with a number of banks and the R3 consortium at the end of 2016 to investigate the use of Distributed Ledger Technology. Anna Milne highlights the key points from the project report

21 / SMARTSTREAMSince when is there a niche to be found in the payments market? It looks like financial software business SmartStream Technologies has not only found one, but is also on track to corner it. Is this the first in a stream of services signalling a fintech evolution? Anna Milne speaks to marketing director Nathan Gee

s to talk about cracking China, disrupting SWIFT, and leveraging WeChaCOUNTRY SNAPSHOTS

18 / ARGENTINACash remains the predominant payment instrument in Argentina, mainly for low-value day-to-day transactions. Overall, cash accounted for 78.5% of the total payment transaction volume in 2016

19 / MEXICOCash remains the preferred form of consumer payment in Mexico, especially among the rural population, primarily due to limited knowledge of payment cards or limited access to banking infrastructure

20 / CZECH REPUBLICThe Czech economy has registered robust growth since 2014, supported by a decline in oil prices, increased investment activity, and government policy to encourage exports and domestic demand

s to talk about cracking China, disrupting SWIFT, and leveraging WeChaINDUSTRY INSIGHT

22 / GEMALTO UKHuge growth in demand for digital banking has been accompanied by the ever-evolving – and increasingly sophisticated – threats from fraud and cybercrime. Gemalto UK’s Howard Berg looks at biometric solutions

20

PAYMENTS FINTRACKER

17 / WAVE MONEY, GRABWave Money, Myanmar’s largest mobile wallet service, has teamed up with Grab, the country’s first mobile ride-hailing service, enabling Grab drivers to accept payments from Wave Money accounts rather than in cash

ANALYSIS

09 / APPLEApple’s P2P functionality comes when demand is growing fast. However, even Apple Pay will find it hard to overcome its limitations, according to GlobalData Financial Services

16 / GRAB PAYGrab is competing with Uber in a race to serve the underbanked. Is partnering with a payments platform and launching a loyalty scheme the key to success? Anna Milne writes

19

14


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 thousands of fi nancial services professionals who have joined The Digital Banking Club to understand the future of mobile and online fi nancial services

Membership benefi ts

Annual subscriptions to Retail Banker International, Cards International, Electronic Payments International

World Market Intelligence’s archive of over 250 Retail Banking and Cards & Payments research reports

Subscription to the Retail Banking and Cards International Intelligence Centres

10% discount for new subscribers/purchasers on:

Join The Club!www.thedigitalbankingclub.com

@TheDBclub

Membership is free

For more information please email:[email protected]

TDBC Adverts - 2017 MG Edit.indd 1TDBC Adverts - 2017 MG Edit.indd 1 27/07/2017 12:49:0727/07/2017 12:49:07


editor’s letter

Or

Intelligent Environments,

the international provider

of digital nancial services

solutions in association with

Retail Banker International,

Cards International, Electronic

Payments International, Private

Banker International, and

Motor Finance publications

Join thousands of nancial services professionals who have joined The Digital Banking Club to understand the future of mobile and online nancial services

Membership bene ts

Annual subscriptions to Retail Banker International, Cards International, Electronic Payments International

World Market Intelligence’s archive of over 250 Retail Banking and Cards & Payments research reports

Subscription to the Retail Banking and Cards International Intelligence Centres

10% discount for new subscribers/purchasers on:

Join The Club!www.thedigitalbankingclub.com

@TheDBclub

Membership is free

For more information please email:[email protected]

TDBC Adverts - 2017 MG Edit.indd 1 27/07/2017 12:49:07

The cream of Asian cards

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

Anna Milne, Editor

Asia-Pacific is a fascinating region, and the focus of this month’s issue. It is a place where developing countries sit alongside highly

developed payments markets. Some developing markets are leapfrogging – take Myanmar

for example. Since the end of military rule, to say the country’s appetite for mobile and online activity and digitisation has soared is almost an understatement.

In the space of two years, the number of SIM cards in the country had increased by 400% and the number of people going online by 95%, according to government figures as of the second half of 2016.

Singapore’s government is involved in a serious project assessing the viability of blockchain to decentralise its real-time gross settlement system. And in H2 2017, the Monetary Authority of Singapore (MAS) announced the formation of a payments council which has since been tasked with devising a common QR code standard. These are big developments.

Certainly something was needed to boost the city state’s drive towards cashlessness. According to Standard Chartered’s global head of credit cards, the number of cards per head in Singapore is into double figures, at ten per person, making the volume of cash transactions in the country rather disproportionate, at 40%. A common QR standard could be just the ticket to bring the hawker trade into the electronic payment realm. The public transport system has already been

given a digital makeover.There is huge potential in this region to capture unbanked

market share and to capitalise on the trend towards digital services, and it will be an interesting track to follow, because it is likely that development here will cause increased divergence between this and other global regions.

For all the conversations about common standards and convergence, individual ecosystems will inevitably evolve in different countries to suit its own citizens, taking into account culture, current infrastructure, established banking system, and so on. Take a look at pages 12 and 13 in this month’s edition for the World Economic Forum’s take on the various and divergent global payment pathways.

In India, as an example, after the sudden demonetisation effort, the progress of Paytm has been astronomical, building its own ecosystem out of a most singular set of circumstances.

But back to Singapore. It was an absolute privilege and pleasure to chair the Cards and Electronic Payments International CEPI Summit and Awards, which honoured the best of the best Asian card and payment products and services.

As the chair of the Global Payments Innovation Jury said of late, just under 50% of jurors would choose Asia as the location if they were starting a payments business today.

Congratulations to all the winners at CEPI. We are looking forward to seeing what the next year’s worth of brilliant innovation brings. <


News | Digest


Klarna wraps up BillPay acquisitionSwedish e-commerce payments company Klarna Bank has completed the acquisition of German online payments firm BillPay.

Founded in 2009, BillPay allows online shops to offer invoice, direct debit and flexible pay-later instalment option. The company offers services in Germany, Austria, Switzerland and the Netherlands.

Klarna co-founder and CEO Sebastian Siemiatkowski said: “We are delighted that BillPay will now officially join Klarna Group. Combining our talent and technology will enable Klarna to continue to push the boundaries of innovation and product offering in existing and new markets with increased speed and confidence.”

Klarna DACH MD Marc Berg commented: “We are convinced that Klarna and BillPay together will now deliver even more attractive payment solutions to our merchants and customers in the region. We look forward to welcoming the experienced and dynamic BillPay team in Berlin into the Klarna Group.” <

news digestJPMorgan boss Jamie Dimon calls bitcoin ‘a fraud’

JPMorgan CEO Jamie Dimon has called bitcoin a “fraud”, which will eventually “blow up”.

Speaking at a bank investor conference in New York, he said: “The currency isn’t going to work. You can’t have a business

where people can invent a currency out of thin air and think that people who are buying it are really smart..

“It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed,” Dimon added, pointing out the absence of an underlying monetary base to support its value. “Currencies have legal support. It will blow up,” he predicted.

If any JPMorgan trader traded in bitcoin, he said: “I would fire them in a second. For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.”

However, he differentiated between the bitcoin currency and the underlying blockchain technology, which he said can be useful and has a brighter future.

“The technology will be used, it may even be used to transport currency but it will be US dollars.”

Following Dimon’s comments, bitcoin’s value fell by as much as 2.7%, trading at $4,106.23 in New York. <

Equifax struck by large-scale breachAround 143 million US customers of credit reporting firm Equifax may have had information compromised as part of a cybersecurity breach.

Information compromised may include social security numbers, addresses, and birth dates. Some UK and Canadian customers were also affected by the Equifax breach.

The hackers also accessed credit card numbers for about 209,000 consumers.

Equifax said hackers accessed the information between mid-May and the end of July, which was when the breach was discovered. Hackers gained access to the systems by exploiting a “website application vulnerability”.

“I apologise to consumers and our business customers for the concern and frustration this causes,” said Richard Smith, Equifax chair and chief executive. “We pride ourselves on being a leader in managing and protecting data, and

we are conducting a thorough review of our overall security operations.”

Commenting on the Equifax breach, Chris Morales, head of security analytics at Vectra, said: “Equifax needs to raise its cybersecurity score. Enterprises have to realise they cannot

address cybersecurity by simply spending money on intrusion-prevention solutions and instead need to shift investments to detection and response solutions that are being used by today’s advanced attackers.

“The cyberattackers gained a foothold by seemingly exploiting a web application vulnerability. From there, they most likely escalated privileges, abused credentials and admin protocols, moving laterally through the network, which businesses rarely have the necessary tools to detect.”

Joe Hancock, cybersecurity lead at Mishcon de Reya, said: “The Equifax breach could affect as many 143 million records, but the fact that this is still considered a ‘potential’ breach demonstrates how hard it is to understand the full extent of the loss.

“It’s clear that Equifax wasn’t prepared for this kind of event, even though it is alleged the breach was detected in June.” <


News | digest

Dubai and Malaysia regulators sign fintech co-operation agreementThe Dubai Financial Services Authority (DFSA) and Securities Commission Malaysia (SC) have signed an agreement to support fintech innovation in the two jurisdictions.

The two parties will exchange information on fintech developments, refer innovative businesses between their respective innovation functions, and offer regulatory guidance.

The authorities will also explore joint innovation projects on fintech, with focus on developments in Islamic finance.

DFSA CEO Ian Johnston said: “Our fintech regime is developed to enhance and improve access to finance and the efficiency

of markets. We also want to encourage innovative financial services and solutions. By collaborating with the SC, we will further strengthen our fintech proposition across traditional and Islamic finance markets.”

The agreement builds on an existing relationship between the two regulators, which joined forces in 2006 to support Islamic finance transactions between the markets.

The two parties have also agreed mutual recognition for the cross-border distribution and marketing of Islamic funds between the two markets. <


IBM, UBS partner to develop blockchain payments for cars

Tech giant IBM has partnered with Swiss investment bank UBS and German car parts manufacturer ZF Friedrichshafen to build a blockchain-based payments system for the automotive industry.

The open automotive transaction platform, Car eWallet, will act as a digital assistant, enabling secure and convenient payments. It can also perform other tasks such as opening car trunks or doors.

The platform is built on IBM Blockchain technology, which will remove the

need for a third-party vendor or central computing hub to process transactions and commands.

The partners also revealed that they plan to build a secure blockchain network that can collect fees for parking and tolls, as well as future use cases such as car-sharing, energy provisioning to the power system, or delivery services.

ZF Friedrichshafen CEO Stefan Sommer said: “The trend toward car-sharing and future autonomous vehicles requires, now more than ever, a transaction ecosystem that everyone can use. The Car eWallet technology will reduce risks and costs while dramatically improving convenience for owners and users.”

IBM Global general manager for automotive, aerospace and defence Dirk Wollschlaeger said: “Time of great change requires transformational solutions. Together with UBS and ZF, we are engineering a new mobility platform to redefine how, when and where traditional transactions occur.”

UBS head of innovation Veronica Lange added: “In today’s digitally connected world, no single institution works in isolation.

“As a leading financial services institution we pursue the development of a new platform that will transform how transactions and payments between vehicles and other machines can be done efficiently and safely.” <

FCA issues warning about ICO risks

The UK’s Financial Conduct Authority (FCA) has issued a warning on the risk of initial coin offerings (ICOs), asking consumers to fully research before investing in digital tokens.

In its warning, FCA termed ICOs as “very high-risk, speculative investments”, adding that most of them are outside its regulatory oversight and, therefore, without UK investor protections.

The watchdog said ICO projects are in early development phases, and tokens’ values are extremely volatile. As a result, investors may risk losing their entire stake.

Moreover, ICOs offer inadequate documentation that can be incomplete or misleading, and therefore requires technical understanding to gauge the risks, the FCA added. Hinting at ICOs’ potential for fraud, the FCA said some issuers might not use funds raised in the ways promised.

“You should only invest in an ICO project if you are an experienced investor, confident in the quality of the ICO project itself – e.g. business plan, technology, people involved – and prepared to lose your entire stake,” the watchdog said.

The FCA’s warning is the latest in a line of similar warnings issued by other regulators worldwide, including the US Securities and Exchange Commission, the Securities and Futures Commission of Hong Kong, and the South Korea Financial Services Commission.

Chinese regulators have already declared ICOs as illegal, and ordered an immediate ban on related fundraising activities. <


News | Digest

Bank of Ireland partners WorldFirstBank of Ireland Global Markets, a unit of Bank of Ireland, has teamed up with UK fintech WorldFirst to launch a new foreign exchange and international payments service for US customers.

The Bank of Ireland Global Payments service will include spot contracts, bulk payments, regular transfers and forward contracts. It will be rendered to US businesses, free of transfer fees.

Bank of Ireland global markets US head Darsh Mariyappa said: “Our research has clearly shown that US-based companies have a strong appetite for a fast, secure,

easy and efficient alternative to their traditional solution for international payments.

“Bank of Ireland’s new service with WorldFirst will ensure that business customers have access to a seamless interface that offers great rates, no transfer fees and is powered by a platform that customers can trust.”

WorldFirst global head of partnerships Alex Arnold added: “This represents an exciting partnership, opening up a more diverse client base for Bank of Ireland, and we’re delighted to be working together.” <

Ripple eyes Indian remittance market with Mumbai officeSan Francisco-based blockchain payments company Ripple has set up a new office in India’s financial capital, Mumbai, to gain a share in the country’s multibillion-dollar remittance market.

The business has selected former HSBC and Citibank executive Navin Gupta to head its operations in India.

Commenting on the move, Ripple CEO Brad Garlinghouse said: “India is transforming itself into a digital economy and is an innovative leader in payments. Our new office in Mumbai, led by Navin, will allow us to respond to the rapidly growing demand for frictionless payments by our current customers, Axis Bank and YES Bank, as well as other bank and non-banks across the country.

“Navin brings a wealth of global banking and payments expertise that we are confident will drive demand for Ripple payments solutions into India. We are very excited to welcome him to the team.”

Ripple linked its entry into the Indian market to the Indian government’s vision to transform the country into a digitally empowered society. It quoted reports that suggest India’s digital economy will surge to from the current figure of $270bn to $1trn by 2022.

Gupta said: “India is the largest recipient of corporate and retail remittances worldwide, totalling close to $71bn.

“Businesses and Indian expatriates sending money into the country want cross-border payments to be as fast and seamless as payments made within India’s domestic digital payment network. Why should a cross-border transfer take longer than an electronic transfer within India?

“Ripple’s instant, cost-effective blockchain-powered payments can be a transformative component of India’s economy, helping bring the many who have limited access to payment services into the fold. We are committed to building our presence in this market with significant investment, and I look forward to expanding our local team with this vision.”

The company, which offers global payment services to financial businesses worldwide, has previously opened new offices in Australia, Japan and the UK. <

ECB, Bank of Japan say blockchain technology immature to replace systemsThe European Central Bank (ECB) and the Bank of Japan have concluded that distributed ledger technology (DLT) is currently not mature enough to be used for large-scale applications such as real-time gross settlement (RTGS) systems.

The decision follows research on DLT launched by the regulators last year to explore its viability in the financial market system. The project included the replication of the liquid saving mechanisms of the Eurosystem’s RTGS Target2, and Bank of Japan’s RTGS BOJ –NET in the publicly available DLT application Hyperledger Fabric version 0.6.1.

Through the study, named Project Stella, the regulators highlighted that DLT-based

solutions could comply with RTGS systems’ performance requirements. The study also found that network size and node distance impact DLT performance, with payment processing likely to take more time if a network is bigger and the distances between network nodes are longer.

“In conclusion, while the test series produced promising results, it should be taken into account that no direct conclusions can be drawn from the test setup with respect to a potential usage in production. Given the relative immaturity of the technology, DLT is not a solution for large-scale applications like BOJ-NET and Target2 at this stage of development,” ECB said in a statement. <

Square aims to add banking to its services

Square, the payments business founded by Jim McKelvey and Twitter CEO Jack Dorsey, is to file an application for a banking license.

Confirmed by Square Capital chair Jacqueline Rees, who will also chair the new bank, Square will apply for an industrial loan company (ILC) charter. An ILC, unlike a bank, is able to offer non-financial services such as Square’s food delivery service Caviar, and sales of its signature dongles.

The move will be capitalised with $56m in cash, and its acting CEO will be Lewis Goodwin, who recently joined Square from Green Dot Bank.

Square’s card readers and POS devices were only launched in the UK in March, and are also currently available in Canada, Japan, Australia and the US.

US firm Social Finance also applied for an ILC charter earlier this year. If granted, it will be the first new ILC charter in 10 years. <




analysis | apple

the iphone x: apple pay p2p unlikely to lead to real growthApple’s new P2P functionality comes when demand and competitiveness for mobile payments is growing fast. However, even Apple Pay will find it hard to overcome its limitations, according to GlobalData Financial Services

Apple has revealed the latest series of iPhone with new features to mark the 10th anniversary of the iPhone.

The new iOS 11 operating system software will add P2P payments, marking Apple’s entry into the last of the major mobile payment verticals.

Apple currently provides online and in-store payments through Apple Pay, and the only market left to enter was P2P payments.

The Cupertino-based firm has been planning to upgrade the iMessage app to become a multifunctional platform whereby consumers can conduct a range of activities such as gift-giving or P2P payments. By including P2P functionality, Apple’s messaging platform can now compete with other apps that already offer this option, such as Venmo or Square.

Current Apple Pay users will need to first upgrade their software to the latest version. P2P payments can then be made to other Apple Pay users via iMessage, and transferred credit is stored within a new prepaid account called Apple Pay Cash. Credit can then be used for purchases via Apple Pay.

Although a step up in convenience for Apple Pay users, the new P2P feature is inherently limited to Apple device owners – with recent models of iPhone, iPad or Apple watch which are maximum of two years old – meaning it has a limited market opportunity.

Apple Pay has been on the market since 2015 and so far it has proved to be a qualified success as the most prominent Western mobile wallet. During the Apple Worldwide

Developers Conference it was claimed that Apple Pay is the number one contactless payment service on mobile devices in the US, and by the end of the year will be accepted in over 50% of retailers in the country.

In 2016, the transaction value by Apple Pay was estimated at $90bn, making it the fourth-largest alternative payment tool globally, according to GlobalData. However, it still lags behind global leaders such as PayPal and particularly Alipay, which processed five times the transaction value in the same year. Furthermore, while Apple Pay’s transaction value is impressive in a vacuum, it is dwarfed by the $5.66trn spent by US consumers at the POS using payment cards in 2016.

Apple Pay is available in other markets including the UK, France, and Australia and it is likely that although the new P2P functionality will only be available in the first instance in the US, it will become available in other countries where it operates. However, it will have to compete with other already established P2P payment options such as Pingit in the UK and Venmo in the US.

This new feature will be beneficial for current Apple Pay users as it allows fast payments between peers. If it were available to other types of device, it would have a far greater reach and therefore much greater potential for growth. Although the possibility to expand exists, Apple’s long standing “walled garden” policy will not allow this.

As a result, the move into P2P and the launch of two new iPhones is unlikely to drastically change Apple Pay’s fortunes. <

Comment: face value?Face ID replaces Touch ID in the latest iPhone has been introduced to great fanfare, not least because it is the 10th anniversary of the first iPhone – only 10 years?Apple has made a huge step towards a potential new era of authentication – and where Apple goes, many follow – by introducing facial screening to verify payments on its new iPhone X model.The question is, will it be faster? I do not consider myself an Apple fan, per se, but I do have an iPhone and I was perfectly satisfied with Touch ID. The question of whether new technology actually ushers in a better experience always hangs over any new launch and hence, whether Face ID speeds up the authentication process on the new iPhone would be the only marker to justify a change. Tighter security would be a close second justifier; crucially, the data is not stored on the server but on the device.Currently, Apple Pay payments take a good few seconds, and a fair bit longer than a contactless card. Not great in a queue through the transit system turnstiles at rush hour. To activate payment, users double-click a side button, and the 3D front-facing camera is launched, capturing and verifying the user’s image. The feature incorporates machine learning such that it is ‘smart’ enough to accommodate subtle changes in the user’s appearance, such as changes in facial hair or the wearing of a hat.Security-wise, Apple pitted the chances of fraudulent unlocking at one in a million, compared to Touch ID’s one in 50,000. Apple differs from Samsung, which with its S8 launch earlier this year, proffered both iris and facial recognition, with a leaning towards iris as the most secure. Apple also follows Alibaba in its pursuit of facial recognition – Alibaba recently launched smile-to-pay at KFC.Face ID for Apple Pay is available on the new model, the ‘X’ only, unsurprisingly. It will be widely available as of the end of October, until which time we won’t get to learn of the true consumer experience. <



Feature | cepi awards

The Cards and Electronic Payments International Awards programme was created to identify industry

leaders and trailblazers that are setting new standards in cards and payments for their respective organisations and client markets.

Digitisation is evolving on a phenomenal scale, and the move towards cash displacement is being driven by all industry stakeholders, from the regulators through to the startups, the heavyweight banks and all the numerous schemes in between. Competition in this field has never been stiffer.

Asia-Pacific is an exciting region in which there are still so many underbanked markets to serve, where we frequently see whole populations leapfrog from cash dependency to heavy mobile and internet banking usage within the space of just a few years.

Partnership and collaboration is increasing among players large and small, and consumers are becoming more aware and empowered as payments are becoming more and more integrated into social media networks.

Staying relevant is harder than ever, and breaking new ground is certainly no easy

feat. There are infrastructural challenges and cultural differences that need to be overcome in order to develop and integrate the right services at the right time.

How do banks and vendors identify changing client needs, segments, key markets and the right platform capabilities to keep pace and steer things to the next level?

The quality and quantity of the submissions paid testament to the commitment of Asia’s financial organisations to developing innovative solutions and shaping the future of the cards and payments landscape. <

the 2017 CEPI AWARDS: Asia-pacific’s leaders, disruptors and innovatorsRecognising market-leading offerings in cards, e-wallets, remittances, merchant acquiring and marketing in Asia-Pacific’s key markets, the fourth annual Cards and Electronic Payments International Summit and Awards went off with a bang in Singapore on 7 September. EPI proudly presents the definitive winners’ list



Feature | cepi Awards

CARDSBest Card Offering – Southeast AsiaHighly commended: FE Credit, RCBC BankardWinner: DBS MulticurrencyBest Card Offering – North AsiaWinner: E.SunBest Card Offering – South & Central AsiaWinner: Citi ThailandBest Card DesignHighly commended: Visa Infinite, Taishin BankWinner: RCBC BankardBest Debit Card Product, Asia-PacificHighly commended: E.Sun, Kasikorn BankWinner: Siam Commercial BankBest Commercial Card Product, Asia-PacificWinner: Taishin BankBest Credit Card Product, Asia-PacificWinner: Altitude Card, DBS Bank

Best Contactless Card InitiativeWinner: Citi ThailandBest Prepaid Card Product, Asia-PacificWinner: CB Bank

TECHNOLOGYBest Initiative for Customer EngagementWinner: MaybankBest Data Analytics ProgrammeWinner: CTBC BankBest NFC-Enabled Service InitiativeWinner: Maybank

Best Mobile Point of Sale InitiativeHighly Commended: E.Sun BankWinner: FasTrack, DBS SingaporeMost Innovative Digital Solution – Consumer Highly Commended: Express Debit Card kiosk, MaybankWinner: CitiBest Technology Implementation – Front EndHighly Commended: CitiWinner: FE Credit, VP BankBest Technology Implementation – Back OfficeHighly Commended: CTBCWinner: DBS BankBest Security InitiativeWinner: E.Sun Bank

MARKETING & COMMUNICATIONSBest Affinity Co-Branded ProgrammeHighly Commended: Siam Commercial BankWinner: Passion Card, DBS BankBest Loyalty ProgrammeWinner: DBS TaiwanBest Social Media Marketing CampaignBest Digital Marketing CampaignWinner: Citi SingaporeBest Product, Service or Innovation LaunchWinner: CTBC BankBest Brand Engagement ProgrammeHighly Commended: Taishin Bank

Winner: Citi SingaporeBest CSR InitiativeHighly Commended: CitiWinner: DBS TaiwanBest Marketing Campaign – OverallHighly Commended: Kasikorn BankWinner: Citi Singapore

MERCHANT ACQUIRINGBest Merchant Product OfferingBest Merchant Acquiring Technology SolutionWinner: Kasikorn BankBest Merchant E-commerce SolutionWinner: E.Sun BankBest Merchant Acquiring InitiativeBest Merchant CRM ProgrammeWinner: Taishin Bank

PAYMENTSBest Digital Wallet InitiativeWinner: CitiBest Omnichannel Payments InitiativeBest Peer-to-Peer Payments InitiativeBest Commercial Payment OfferingBest Remittance OfferingWinner: Standard Chartered Most Innovative Retailer AdoptionWinner: FasTrack, DBS BankBest Payment Initiative – OverallWinner: ANZ Vietnam

CEPI Asia Leadership Award – Institutional The winning bank clocked up a total of eight awards and one commendation, which is testament to its prowess in the field of cards and payments. Year on year it continues to impress with its products and results.

Its approach to technology and innovation is unique. It is a bank in which the CIO is the only tech person in his team, a bank which values people over technology, fostering the right culture rather than developing technology for technology’s sake.

Winner: DBS Bank

CEPI Asia Leadership Award – Individual

The winner has been CEO of Maybank Singapore since January 1, 2014. He is responsible for driving the bank’s community banking strategy across all geographies, spanning the full suite of products and services.

In his career spanning 35 years for Maybank, he has won awards for his work and helped steer the bank to being the top-tier institution it is today. A member of various banking associations internationally, his expertise is keenly sought by peers across the globe.

Winner: Datuk Lim Hong Tat, Maybank

CEPI Asia Disruptor Award – Institutional

The multiple award-winning disruptor to take the crown in this category has developed a payments gateway service and technology which is being utilised in over 13 countries worldwide. The solution has been widely adopted by 5,000 e-businesses and over 100 financial institutions.

It undergoes continual upgrades to keep up with the fast-changing payments environment, and this continuous improvement is achieved through the company’s 90-plus team members.

Winner: Asiapay



A dramatic shift from physical to virtual commerce; the inevitable dominance of the so-called large

tech companies; the growing power of merchants to influence the payments ecosystem and increasing consumer empowerment all threaten the livelihood of traditional payment institutions, according to the World Economic Forum’s report on the future of fintech.

Yet the banks still retain the dominant customer share. And, crucially, the fintechs misunderstood consumer appetite for switching and have only succeeded in emerging markets without much of a financial services footprint.

These things considered, how will the landscape evolve- will there be further divergence or increased collaboration? The report takes into account the various factors influencing the payments path of progression, and while we cannot say yet what the future holds, there are some top tips not to be ignored.

REGIONAL VARIATIONSHighlighting the factors leading to regional

variations in financial services models, the World Economic Forum has come up with three archetypes across three different regions:

In Europe, Regulatory focus on consumer protection and open data drives the development of platform ecosystems across many verticals, resulting in pressure for incumbents. Example – MiFID: The European Markets in Financial Services

Directive is designed to introduce more transparency to capital markets; trade execution firms must show clear evidence of “best execution”.

In China, an ecosystem based on mobile connectivity and the absence of major consumer-focused bank services along with regulation that for the most part encourages innovation have enabled large tech organisations to build significant market share.Example – Alipay: In the absence of a mature payments system, the Alipay mobile payment app now owns over 50% of the $5.5trn Chinese mobile payments sector, with tech giant Tencent as its only major competitor.

In the US, a mature financial ecosystem in combination with unclear regulatory direction means that changes to the current ecosystem will be gradual. Example – Nacha: The Automated Clearing House (ACH) network is moving to same-day payments, but progress remains slow compared to other countries, such as the UK, which adopted real-time payments in 2008.

LARGE TECHSThe report alludes to the inevitable dominance of what it calls the “large techs” – Amazon Web Services (AWS), Alibaba, Apple, Google, WeChat, Facebook – leading to all firms becoming dependent on these large techs or else falling behind.

AWS already has a variety of financial services firms – from JPMorgan to startups such as Xignite – using its data processing and storage services.

DBS BANKChew Yung Jin, senior vice president and head of card products, DBS Bank, explained how the bank maintains a pioneering approach to problem-solving.

This is the bank where the CIO is the only ‘tech’ person in his team. “We took eight people out of their day jobs – across cards, deposits, marketing, operations – and sent them to work on this problem,” the problem being, to create a payment product for children, to educate them in the way of digital financial services.

DBS Bank won a total of eight awards at the annual Cards and Electronic Payments International (CEPI) Summit and Awards on 7 September, including the Institutional Leadership Award.

POTENTIAL END STATESThe report gives three potential so-called end states for payments. It specifies cash displacement, regional disparity and pressure on payments businesses’ margins due to regulatory pressure and increased competition as hallmarks of disruption in the last decade.

To specify further, consumers have come to expect payments to be free as a result of ‘hidden fees’ and schemes such as faster payment schemes, which are free to the end consumer.

Feature | world economic forum

world economic forum: an overview of global paymentsAnna Milne selects the key findings and takeaways of one of the industry’s most comprehensive overviews of the payments industry, with additional comments from Citibank, DBS, Standard Chartered and ANZ

fintechs change competition, not the landscapeFintechs have seized the initiative – defining the direction, shape and pace of innovation across almost every subsector of financial services – and have succeeded as both stand-alone businesses and crucial parts of financial value chains. They have reshaped customer expectations, setting new and higher bars for user experience. Through innovations like rapid loan adjudication fintechs have shown that the customer experience bar set by large technology firms such as Apple and Google, can be met in financial services.

However, fintechs have overestimated customer willingness to switch away from incumbents. Customer switching costs are high, and new innovations are often not sufficiently material to warrant the shift to a new provider, especially as incumbents adapt. Still, in geographies where incumbent service providers did not exist and in segments where incumbents were not meeting customer segments’ needs, new entrants to financial services have been able to build significant scale.



Feature | world economic forum

The WEF states: “Several jurisdictions, including Europe, Canada and Australia, have either passed or are passing legislation limiting the fees charged on transactions, thus limiting the profitability for all intermediaries.

“Europe, specifically, is implementing the EU Interchange Fee Regulation (IFR), and weakening ‘honour all cards’ rules (which forbid merchants from being selective over card acceptance), making high-fee credit cards unattractive for merchants to accept.”

Fintechs are also moving into forex, according to the report, lowering revenues that financial institutions can earn in this area. Apple Pay, Bitcoin and Uber are given as epitomes of the changes in the system.

Interestingly enough, the Forum states categorically that mobile payments remain compromised in card-based markets, as they “have not sufficiently exceeded the functionality of pre-existing solutions”.

As for alternative currencies, Bitcoin and the like, these “remain almost non-existent”. JP Morgan boss Jamie Dimon came out against bitcoin at an investor conference in New York in September saying it was “worse than tulip bulbs. It won’t end well. Currencies have legal support. It will blow up,” adding he would fire any trader in a second who traded in bitcoin.

Cash displacement, incidentally, has been driven in the main by the shift from bricks-and-mortar shopping to online, according to the report. The change in the space of just one year in the US on Black Friday illustrates this.

US E-COMMERCEA great deal of e-commerce growth in the US in 2016 can be attributed to Amazon – 53% no less, according to Slice Intelligence – and this can be attributed in large part to the success of Amazon Prime, which now counts 80 million subscribers.

In November 2016, China’s physical retail market recorded its lowest level of growth in

over a decade as it slowed to 10%, according to the Financial Times.

Singles Day, the online shopping phenomenon that kicks Black Friday into touch, was devised by Alibaba to “celebrate” singlehood, and falls on 11 November (11.11), signifying single status.

FRAGMENTATIONIf the payments landscape continues to fragment, and payment apps continue to increase in number, tracking and budgeting apps may become more popular, and could be a focus for intermediaries with which to provide a service.

The real nut to crack is, however, data monetisation, and the report reiterates this over and again. It is not yet clear how exactly this can happen; it is the golden question. It does state, however, that “data streams will be significantly more valuable where they are granular (e.g. product-level data) and multidimensional (e.g. location data), making cooperation and partnerships critical to successful monetisation.”

The WEF predicts that payments institutions will focus on how their customers

prefer to pay, rather than what the latest technology will enable, leading to regional solutions, based on culture.

Large merchants will become even larger and more powerful, says the report. A combination of their product-level payments data and their position to be able to influence consumer payment choice- especially in online transactions will grant them greater authority to negotiate lower fees and mould the direction of payments ecosystems.

Balaji Natarajan, head of payments and receivables, Asia, ANZ, made similar remarks at the Cards and Electronic Payments (CEPI) annual Summit and Awards in Singapore, early September. He said online retailers such as Amazon are in a brilliant position: “They have a complete end-to-end view of the customer, and have all that information about customer behaviour and preferences easily accessible and right in front of them. The banks don’t have that.”

Banks are looking to try to gain a better overall view of customers. At CEPI, Surabhi Agarwal, head of premium cards, Asia and EMEA, Citibank, explained what Citibank calls Contextual Commerce; this is the bank “embedding itself in the customer’s life”.

Partnering with LINE, Thailand’s premier mobile app and messaging platform, the bank was able to get a rich view of its customers – who apparently spend on average five hours a day using the service, but that is a different story – enabling it to design and grow a loyalty rewards programme based around the growing travel sector.

And JP Morgan has implemented a new customer management and analytics tool, to inform and enable cross-selling, “a little bit like how Amazon suggests what you might like to buy next”. <

payments: The known unknownsThe WEF report project three potential future pictures of the payments landscape, based on five key uncertainties. These are:

• Whether the worlds of physical and virtual will diverge or converge

• Who will be able to best monetise payments data? Likely only the market leaders – as payments become a loss leader, smaller companies will look to partner.

• Will PSD2 successfully create new payment value chains in Europe?

• Will mobile payments ever capture a major (double-digit) share of retail payments in card-based countries?

• What will the first national digital currency look like, and when can we expect it?

IMPLICATIONS AND OPPORTUNITIESFor fintechsThere will likely be scope to collaborate with large techs, which would be mutually beneficial: The fintechs broaden their reach while the large techs gain a portal into financial markets. Fintechs will also be attractive to incumbent banks on the hunt for tech talent.

For regulationIn terms of regulation, the regulators have their work cut out in how they treat large techs, as this will have a huge impact on the way in which the tech companies can interact with financial institutions.

For incumbentsCompetition with large tech over talent acquisition will inevitably drive up the cost of said talent. Incumbents need to adopt an open and progressive approach to engaging and partnering with large techs, which may go against the grain, being inherently protective of their independence.

For all financial institutionsAll financial institutions will need to find ways to partner with large techs without losing their core value proposition. All firms risk becoming dependent on large techs, which necessitates the loss of some control over both costs and data.Source: WEF/EPI



Feature | project ubin

blockchain, bitcoin and the asian regulatorThe Monetary Authority Singapore (MAS) is forward-thinking in its approach to innovation and technology. At the end of 2016 the regulator teamed up with banks and the R3 consortium to investigate the use of Distributed Ledger Technology (DLT). Anna Milne highlights the key points from the project report

Project Ubin was implemented with the chief aim of reducing risk and cost for cross-border

settlements of payments and securities in Singapore, primarily through the use of cryptocurrency.

Announced in November 2016, it was a proof-of-concept project between the Monetary Authority Singapore (MAS), R3 and a consortium of financial institutions to conduct interbank payments using blockchain technology. Partner banks include Bank of America Merrill Lynch, Credit Suisse, DBS Bank, HSBC, JP Morgan, Mitsubishi MFG Group, OCBC Bank, Singapore Exchange and UOB Bank, with BCS Information Systems providing the technology.

The World Economic Forum 2016 report The Future of Financial Infrastructure, produced in collaboration with Deloitte, predicted that 80% of banks would initiate DLT projects in 2017, the driving force behind these ventures being to reduce the significant cost, risk and friction of existing financial services infrastructure.

Antony Lewis, director of research, R3, and co-author of the Project Ubin report, wrote a piece, separate of the MAS project, explaining the “compelling reason to decentralise as much critical financial and digital infrastructure as possible,” and that reason is cyberwar.

Project Ubin aimed to place a tokenised version of the Singaporean dollar (SGD) on a distributed ledger, with each token fully

backed up by fiat currency, i.e. a depository receipt model.

Based on Deloitte’s research, these three innovations were core to DLT’s invention:1. Peer-to-peer networks: Each peer in

the network is a server and client, both supplying and consuming resources. This could facilitate the creation of a currency without a privileged third party, amongst other types of decentralised financial interactions. This enables the facilitation of transactions without a central, privileged third party, even in the absence of trust.

2. Public key cryptography: This is a method for verifying digital identity with a high degree of confidence. Public and private keys consist of a sequence of random numbers – a numeric code. This allows for increased security and protection of data and identity in the system.

3. Consensus: Consensus algorithms that ensure agreement between two parties on a network can help validate the data’s authenticity as well as transactions and control when it can be written into the system. This capability prevents double spending by ensuring chronological recording of data. This enables the secure automation of complex, logical agreements and the business processes using data gathered by Oracles.

objectives for future phases of project ubin• Technical consolidation to address

immature coding tools, consider alternatives, establish immutability and future proof by supporting ISO XML standards for API. And enabling data encryption.

• Perform business analysis of the model, including business case benefits and future operating model

• Explore cross-border payments, with Payment-vs-Payment prototype network to be developed with other jurisdictions, specifically Canada, HongKong, and potentially Australia, Japan and India

• Conduct international research to explore various legal, regulatory and monetary policy implications



Feature | project ubin

FURTHER BENEFITSThe immutability of data on the network makes it resistant to double-spending, fraud, censorship and hacking, creating a more secure, transparent network and new avenues for regulators. Real-time settlement is another attractive feature of distributed ledgers, as it removes friction and risk.

The first phase of Ubin was to assess the feasibility and implications of DLT and to identify the elements required for future enhancements, in the main to identify its feasibility and benefit to the real-time payments system. As part of this investigative process, the project used the MAS MEPS+ system to enable real-time fund transfers to issue funds on a DLT.

When considering the risks and inefficiencies within cross border transactions, Project Ubin could do well to put some of these to bed:• Replacement risk, when a counterparty

cancels or delivers late; • Settlement risk, when a counterparty

defaults; the precautionary measure of funding costs, where parties on both sides of a transaction pre-fund accounts early, safeguarding against a worst-case scenario, and

• Reconciliation costs, which are multi-way and required across payments and securities to understand real-time stock position.

Phase 2 and beyond will involve developing real-world applications based on the prototypes created in Phase 1. It will provide opportunities for students and working professionals to get involved in app

development, and spin-off projects will have a focus on cross-border payments and securities transactions.

The SGD-on-ledger is a specific-use coupon issued on a one-to-one basis in exchange for money. The coupons have a specific usage domain – in this case the settlement of interbank debts – but no value outside this. The coupons are exchangeable into cash at a later point. Each token is fully backed by the equivalent value in real SGD, meaning the overall money supply is unaffected by the issuance of the on-ledger dollar movements.

The prototype, built on the Ethereum platform, integrated both Ripple and Stellar blockchain platforms, enabling P2P transactions across geographies. Also, crucially, the ledger holdings do not gain interest- reducing the complexity of managing the payment system.

Deloitte has built over 30 blockchain proofs of concept and prototypes for industries including consumer and industrial products,

financial services, life sciences and healthcare, plus other cross-industry applications.

Singapore is renowned for fintech innovation. If Project Ubin turned out to be a success, it would be the first Asian digital currency. One key factor to address in order to bring it to fruition would be the underlying legality of the system. Furthermore, a future phase would experiment with banks being able to borrow digital SGD from each other without posting cash with MAS.

Will it work? The key is to differentiate between a decentralised real-time gross settlement system and a central bank digital currency – the former being a background process and a system to which the general public would not be privy.

To this end, it makes a great deal of sense. The question is whether blockchain technology is capable of doing what so many claim is possible with it. And certainly there are many sceptics. MAS and R3 should have an answer for us soon. <

DLT: An introductionDLT is a type of database that is spread across multiple sites, countries or institutions. It is decentralised in nature, eliminating the need for an intermediary to process, validate or authenticate transactions. Each party – individual, organisation or group – is represented by their computer, called a node, on the network. Each node keeps its own copy of all transactions on the network, and nodes work directly with one another to check a new transaction’s validity through a process called consensus. Each of these transactions is encrypted and sent to every node on the network to be verified and grouped into timestamped blocks of transactions.Blockchain is one such type of distributed ledger that has gained notoriety as the core technology behind Bitcoin. For example, let us say that John initiates a transaction to pay Sally $20 through a DLT-based solution. A copy of that

transaction is sent to all the other nodes on the network, and each of these nodes would then verify that its copy of the ledger is the same as the others to ensure that the transaction is valid.

Each transaction has a unique signature, called a hash, that includes a reference to the previous transaction as well as a digital signature from the node initiating the transaction. This hash gives the nodes on the network a common signature with which to validate the transaction.

Nodes on the network called miners compete to solve complex algorithms to write batches of valid transactions, such as John and Sally’s $20 exchange, to a block.

This block is a timestamped group of transactions that is chained to previous blocks, forming an immutable, tamper-resistant ‘block-chain’ of historical transaction data. <

DLT

Global interest

Central banks

Research

Consortiumefforts

Bankexperimentation

Venturecapital

2,500 patents in the last 3 years

90+ corporations have joined blockchain

consortia

80% of banks predicted to initiate

DLT projects by 2017

Over $1.4bn ininvestments over the

past 3 years

90+ central banksengaged in DLT

discussions worldwide

24+ countriescurrently investing

in blockchain

Global traction in DLT

Source: Deloitte



Grab has made the bold move to team up with mobile wallet service Wave Money in Myanmar to

launch GrabPay.Riders will earn points per ride, and be able

to cash them in for a newly expanded network of “top-tier merchants across Southeast Asia” – from airlines to eateries and entertainment venues.

Predominantly a cash-based market, it could be seen as a risky strategy; however, take-up is likely to emulate a leapfrog pattern in Myanmar, where appetite for digital services could not be higher. And this is precisely what Grab is gunning for.

Myanmar is a fascinating market, not least because of the astronomical growth in mobile and internet usage in the country in the time since the end of military rule. Government figures as of the second half of 2016 stated the number of SIM cards in the country had increased in the space of two years by 400%, and the internet-using population had increased by 94.9% in the same time scale.

Consider this alongside World Bank figures stating that in Myanmar, less than a quarter of the population aged over 15 has a bank account, and the exponential curve from unbanked to saturation begins to draw itself.

In November 2016, CEO of Myanmar’s Yoma Bank, Hal Bosher, told Electronic Payments International group editor Douglas Blakey that the banked population of Myanmar could feasibly treble in the next 10 years, from 10% to 30%. The current

population is 50m. Grab is in for one hell of a ride if it can pick up new customers and keep them happy.

Wave money is a mobile payments provider with more than 9,000 outlets across Myanmar. A partnership between Telenor, First Myanmar Investment and Yoma Bank, it is mainly used for P2P transfers, often domestic migrant workers sending money home, and was the first venture of its kind to be given the green light by the central bank in Myanmar.

According to Grab, 620m people in Southeast Asia use the service, and it also hosts a P2P platform, Grab Pay.

Grab operates in Singapore, Indonesia, Philippines, Malaysia, Thailand, Vietnam and Myanmar and tots up around 2.5m rides daily. It has the largest driver base in the region with more than 930,000 drivers across 55 cities.

There have been more than 45m downloads of the Grab app since launch in January 2012 in Singapore by Anthony Tan.

GrabPay head Jason Thompson said: “With our new expanded GrabRewards programme, we’ve created an ecosystem in which our customers stay loyal because a dollar spent with Grab is more valuable than a dollar spent elsewhere.”

He added that during the soft launch, a number of GrabPay’s merchant partners hit their redemption targets four times over.

“With as little as a week’s worth of rides to and from work, our loyal GrabPay users will be able to get valuable benefits like movie tickets and free meals,” Thompson continued.

Wave Money knows that a strong distribution network is crucial to the success of bulking up subscriber numbers, and spreads its shops wisely, putting its agents to work to enlighten locals about its offerings. And with Grab’s experience in Singapore and other Asian markets, the pairing seems bound for success and may even outdo Uber, which jumped on the bandwagon in Myanmar immediately afterwards, announcing an imminent launch in the region.

Next on the map is likely Indonesia, where Grab Money already has a network of 500,000 agents “helping” the unbanked and underbanked access GrabPay’s platform. It will have to fend off competition from local ride-hailing app Go-Jek – and Uber for that matter. But if I were them, I would not rest on my laurels. <

analysis | grab pay

Grab is now on a major drive to expand across Asia, competing with Uber – one of its main rivals – in a race to serve the underbanked. Is partnering with a payments platform and rolling out a comprehensive loyalty programme the key to Asia’s most valuable startup’s success? Anna Milne writes

Asian taxi business Grabs A piece of the action by combining rides with financial inclusion

a dollar spent with Grab is more

valuable than a dollar spent

elsewhere



payments fintracker | wave money, Grab

payments fintrackER

Using five common criteria, the GlobalData FinTrack reports give critical at-a-glance information on the latest developments in the fast-moving world of financial technology

Wave Money and Grab push for cashless taxis in Myanmar

Wave Money, Myanmar’s largest mobile wallet service, has teamed up with Grab, the country’s first mobile ride-hailing service, in a bid to reduce cash-based transactions in the country. The partnership means Grab drivers can accept payments from Wave Money accounts, rather than requiring customers to pay with cash. Grab will use set fares for people paying using Wave Money, removing the need to haggle.

Is it original?

Grab and Wave Money’s partnership allow drivers to accept electronic payments instead of cash. This is not new: Uber is active in the market and its partnership with PayPal enables it to accept electronic payments. However, in a country where – according to the World Bank – less than a quarter of people aged 15 or over have a bank account, the move is quite forward-thinking, especially given Grab’s market newness.

✗

Is it long-lasting?

With Myanmar’s high unbanked population, Wave Money has the potential to appeal to a wide variety of consumers and boost financial inclusion. The tie-up with Grab gives consumers more of an incentive to use the wallet, which is likely to lead to long-term success.

✓

Is it operationally game-changing for the provider?

For Wave Money, the partnership with Grab will boost user numbers and usage frequency without requiring any significant changes to its current offering. The only major work needed is to share data between the two partners on account usage, meaning the deal will bring in revenue while not requiring heavy investment for Wave Money.

✓

Will it significantly improve the user experience?

The new feature will remove the need for consumers to carry cash in order to pay taxi fares, and will also remove any uncertainty and bargaining related to the cost of a ride, making the process much more convenient for users.

✓

Is it market-changing?

For a frontier market such as Myanmar there is a lot of room for services to transform the country away from cash dependency. Paying for transport has proven to be a gateway to wider acceptance and usage of electronic payment tools in markets such as the UK (with contactless), and this tie-up could do the same for mobile payments in Myanmar.

✓

Total Score: 4/5



High interchange fees on debit and credit cards are acting as a hindrance for retailers in Argentina

to accept electronic payments. The average interchange fees on debit and pay later cards stood at 1.50% and 2.17%, respectively.

Government financial inclusion initiatives, coupled with improvements to banking infrastructure by commercial banks, have led to a gradual rise in electronic payments. In 2016, the average number of monthly card transactions in Argentina stood at 2.36 – higher than peers including Chile (2.32), Brazil (2.24), Peru (1.13), and Colombia (1.02).

The government has been encouraging the use of debit and credit cards by offering tax benefits and strongly promoting the use of payroll cards in the country. One initiative was the implementation of a mandatory wage account regulation by the Central Bank of Argentina, which requires payroll funds to be directly credited into wage accounts.

The regulation was introduced in 1997 and came into force in 2001. The

account is also used for the disbursement of social benefits such as retirement, pension and social welfare funds. In line with these objectives, the central bank in 2016 introduced guidelines for convenient account opening and switching between banks, with the aim of promoting competition.

Debit cards remain the preferred payment card type, accounting for 66.3% of the total payment cards transaction value in 2016. In Argentina, debit cards are offered as a complimentary product with savings or current accounts.

In line with the government’s wage account regulation, banks are increasingly offering payroll accounts. All major banks, including Banco Nación, Banco Provincia and Banco Galicia, now offer payroll

account, which are usually preferred over current accounts as they are exempted from the government taxes applicable to current account deposits and withdrawals. Holders are also offered benefits such as no annual fees, preferential rates on personal loans and mortgages, and cash advances.

While debit cards continue to dominate, the use of credit cards is anticipated to rise with the abolition of the tax on credit card transactions made in foreign currencies. Rises in Argentina’s middle-class population and household consumption are also expected to drive local demand for consumer credit.

Payment companies are developing voucher-based payments for the large unbanked population, allowing consumers to make payments without a bank account or payment card. Cash-based payments through vouchers such as Pago Fácil and Rapipago remain a preferred mode of payment among consumers. However, voucher-based payments are also hindering the government’s vision of turning Argentina into a less-cash society. <

country snapshot: argentina

country snapshot | argentina

CARD TRANSACTION VALUES BY CHANNEL ($ BILLION)

ATM POS

2012 135.3 59.1

2013 137.7 71.3

2014 115.9 66.8

2015 121.2 80.6

2016 (estimate) 92.0 72.0

2017 92.1 83.3

2018 92.9 95.6

2019 93.7 108.3

2020 95.8 119.8Source: GlobalData

CARD TRANSACTION VOLUMES BY CHANNEL (MILLION)

ATM POS

2012 915.3 1,344.8

2013 1,026.7 1,542.2

2014 1,135.9 1,726.4

2015 1,230.1 1,954.1

2016 (estimate) 1,327.7 2,199.5

2017 1,418.5 2,450.2

2018 1,505.0 2,697.8

2019 1,587.3 2,940.0

2020 1,662.2 3,173.4Source: GlobalData

NUMBER OF ATMS AND POS TERMINALS (THOUSAND)

ATM POS

2012 16.0 402.8

2013 17.8 434.2

2014 18.7 461.0

2015 19.7 487.0

2016 (estimate) 20.7 513.2

2017 21.7 540.1

2018 22.5 568.3

2019 23.3 597.0

2020 24.1 626.3Source: Banking Association of Argentina, GlobalData

Cash remains the predominant payment instrument in Argentina, mainly for low-value day-to-day transactions. Overall, cash accounted for 78.5% of the total payment transaction volume in 2016

ARGENTINA

PAYMENT CARDS BY TYPE (MILLION)

Debit Pay later

2012 27.1 27.9

2016 (estimate) 39.9 37.9

2020 46.2 50.5Source: GlobalData



country snapshot | mexico

country snapshot: mexicoCash remains the preferred form of consumer payment, especially among the rural population, primarily due to limited knowledge of payment cards or limited access to banking infrastructure

MEXICO

Cash is primarily used for small-value payments at retailers in Mexico, and to pay utility bills, taxes and

transport fares.A significant proportion of the

population is engaged in informal activities, including farmers, street vendors, domestic servants and self-employed workers.

Card penetration in Mexico stood at 138.4 per 100 inhabitants, which is lower than peers Brazil (243.1), Chile (196.6), Argentina (178.4) and Venezuela (151.5). The low penetration rate is a result of the small banked population and low levels of financial literacy in the country.

As the government and banks have started to provide basic financial services to the unbanked population – by expanding banking infrastructure, launching new branches, adopting the agent banking model, and making efforts to change consumer payment habits – payment cards have gradually become more accepted, with their use consequently growing during the review period (2012-2016).

The government has identified access to financial services as a key priority, and

has encouraged initiatives that make bank accounts essential for every individual. The central Banco de México has directed banks to simplify the process of opening bank accounts, easing access to products such as bank accounts and debit cards.

Debit cards have grown in prominence with the introduction of electronic payroll services, an increase in the banked population, and government distribution of social welfare funds through cards.

Mexico’s government is focusing on financial inclusion by undertaking three social benefits programs: Oportunidades, Programa para Adultos Mayores, and Procampo, disbursing benefits through bank accounts and cards. The programs are supervised by the Ministry of Social Development.

Banks have also supported the financial inclusion programs, resulting in an increase in the share of the banked population from 31.5% in 2012 to 46.8% in 2016.

Despite its small size, the Mexican credit card market recorded robust review-period growth in terms of cards in circulation, and transaction value and volume, supported by high consumer spending. However, the market may be affected by Donald Trump’s presidential victory in the US, with banks cutting credit card exposure to counter a potential rise in consumer defaults and an economic shock should the Trump government restrict trade with Mexico. Banks are therefore reducing credit card spending limits and raising consumer lending standards. Bank profits would suffer if the US scraps the North American Free Trade Agreement or discourages US businesses from moving to Mexico.

Cards remain the most popular payment method among online shoppers, accounting for 60.8% of total e-commerce transaction value in 2016. Alternatives such as PayPal, MercadoPago, DineroMail, and SafetyPay are also used widely for online shopping. <


ATM POS

2012 107.7 43.7

2013 115.5 49.5

2014 128.5 55.0

2015 139.4 65.8

2016 (estimate) 153.0 75.8

2017 166.8 86.9

2018 180.0 98.9

2019 192.3 111.7

2020 203.6 125.1Source: Central Bank of Mexico, GlobalData


ATM POS

012 1,422.2 1,475.0

2013 1,470.7 1,676.4

2014 1,588.8 1,933.6

2015 1,649.2 2,259.5

2016 (estimate) 1,759.9 2,547.2

2017 1,869.3 2,861.1

2018 1,969.9 3,193.6

2019 2,058.8 3,538.5

2020 2,138.8 3,883.7Source: Central Bank of Mexico, GlobalData


ATM POS

2012 40.5 621.6

2013 40.2 682.1

2014 43.0 765.2

2015 45.9 864.7

2016 (estimate) 48.2 946.4

2017 50.6 1,033.5

2018 52.9 1,127.6

2019 55.1 1,229.1

2020 57.1 1,337.1Source: Central Bank of Mexico, GlobalData


Debit Pay later

2012 114.1 25.4

2016 (estimate) 141.2 31.3

2020 145.9 38.0 Source: GlobalData



Country snapshot | czech republic

Economic growth and disposable incomes are expected to accelerate over the forecast period (2016-2020),

which will drive investment in the Czech cards and payments industry.

Cash remains the preferred method of consumer payment, accounting for 56.2% of the total transaction volume in 2016. Consumers in the Czech Republic generally use cash for day-to-day, low-value transactions. However, its use declined during the review period as preference for payment cards grew and contactless transactions increased.

The payment cards market grew significantly in the Czech Republic during the review period (2012-2016), as consumers increasingly spent with payment cards. The total number of payment card transactions increased at a CAGR of 15.8% from 480.6m in 2012 to 865.1m in 2016.

The Czech Republic’s payment card penetration was 1.1 cards per inhabitant in 2016, higher than peers Slovakia (1.0), Bulgaria (1.0), Hungary (0.9), Poland (0.9) and Romania (0.8). This high level of penetration of payment cards offers further

scope for growth in the Czech cards and payments market.

Contactless cards were first introduced in the Czech Republic by Citibank in 2011. It was followed by other banks, and the majority of domestic banks now allow customers to make contactless payments. The number of cards with contactless functionality was 10.9m in 2016.

According to data reported by Visa Europe in February 2015, Czechs use contactless payments for 3.3 transactions per month per card on average – the highest in the EU, followed by Poland (2.6) and Slovakia (1.3).

According to Visa Europe, the Czech Republic was the third-largest market for Visa contactless cards in Europe with 13.9m transactions in March 2015.

According to a 2015 report by Mastercard, nearly 52% of Mastercard and Maestro in-store transactions in the Czech Republic are contactless.

The e-commerce market’s total transaction value posted a review-period CAGR of 32.2%, from $2.0bn (CZK52.9bn) in 2012 to $6.3bn in 2016. A high mobile penetration rate, consumer confidence in online transactions, and the presence of a secure online gateway were responsible for driving this growth.

According to Ecommerce Europe, 80.0% of the Czech population aged above 14 years – equivalent to 7.1m individuals – use the internet, and 3.7m shop online.

Banks and other participants are introducing options to encourage electronic payments and improve convenience in online shopping. For example, UniCredit Bank launched the Pay button on its internet banking platform in association with online payment service provider PayU in December 2015. Consumers can use the option to make payments on e-commerce and price-comparison websites including Mall.cz and Heureka.cz. <

country snapshot: czech republic


ATM POS

2012 24.5 11.1

2013 25.0 12.5

2014 27.0 14.6

2015 26.7 17.4

2016 (estimated) 26.6 20.6

2017 26.7 24.2

2018 27.0 27.9

2019 27.4 31.5

2020 28.0 35.2Source: Bank Card Association of Czech Rep., GlobalData


ATM POS

2012 172.4 308.2

2013 175.8 377.9

2014 181.0 479.7

2015 178.6 580.4

2016 (estimated) 177.8 687.2

2017 178.3 801.4

2018 179.5 915.8

2019 181.3 1,024.4

2020 183.5 1,129.0 Source: Bank Card Association of Czech Rep., GlobalData


ATM POS

2012 4.3 87.0

2013 4.4 94.9

2014 4.5 110.3

2015 4.5 142.9

2016 (estimated) 4.6 176.5

2017 4.7 210.0

2018 4.8 242.8

2019 5.0 271.0

2020 5.1 296.2Source: Bank Card Association of Czech Rep., GlobalData


Debit Pay later

2012 7.6 2.5

2016 (estimated) 9.7 2.3

2020 12.5 2.5 Source: GlobalData

The Czech economy has registered robust growth since 2014, supported by a decline in oil prices, increased investment activity, and government policy to encourage exports and domestic demand

CZECH REPUBLIC



feature | SmartStream Technologies

Having pretty much invented reconciliation processing, SmartStream Technologies has

found a corner in the market for retail payments. And the reaction from banks and payment processors has been quite staggering.

A lot of reconciliation is still being done manually. We should not be surprised, of course. As of last year there was still a financial services firm in the City of London whose ‘computer’ system worked in shillings and pence, and that may still be the case.

SmartStream does not rest on its laurels; the company jets about. And at so many of its international events scoping out interest and opportunity for automated retail payments reconciliation and exception handling, its has been met with great interest – to the extent that its is hosting its own events to talk on the subject.

“Often senior representatives from retail payment organisations, such as credit card issuers and acquirers, tell us that they did not know this technology existed,” says Nathan Gee, SmartStream’s marketing director.

“A lot has been done manually to this date and has been ignored all these years. It’s like a mini renaissance, driven by the consolidation of fintech innovations, which has been referred to as Fintech 2.0,” Gee adds.

Fintech 2.0 denotes a new attitude in payments which is more exercised with consolidation and integration than disruption,

as new technologies move deeper into middle- and back-office processes.

It has a primary focus on business model development, volume and growth, and there is a realisation that better overall control of the payments lifecycle is required, Gee explains.

“Fintech innovation is no longer a matter of individual, isolated single apps, it’s about end-to-end integration of technology innovation into a bank’s existing business,” Gee notes. “Fintech 2 means we are able to provide change to processes and infrastructures,” he adds.

REAL-TIME REPORTINGGee explains that the main driver is the pressure of regulatory reporting in real time, responding to margin pressures and the proliferation of startups, consumer-led companies, technology giants, and banks buying new innovation.

“From a tech point of view, banks are looking to have it explained and solved for them,” he says.

SmartStream has conquered post-trade reconciliation automated processing; when a company does it for 70 of 100 of the top global banks, it is safe to say it has mastered it. Since 2000 it has grown through acquisitions and now it offers processing across the middle and back office, as well as data management.

Delighted by the prospect of branching into retail payments, Gee says: “A whole

new market has emerged in terms of retail payments reconciliation.

“A new door has opened up and banks are realising new technologies do mean something and are now taking it seriously.”

“We have the controls they need to handle transactions from start to finish – reconciliation, acceptance, management,” Gee continues.

“Payments are so competitive and the margins are lower. We provide cost savings.”

The euro value of single transactions is on the downward slope and there is a lack of automation in this space, according to Christian Schiebl, head of the software’s business unit. Clearly introducing an automated process would help save costs in an area where margins are already squeezed.

“Rather than develop a deep system solution that attempts to be everything to everybody, we collected feedback from the main players in this market, identifying typical use cases.

“The climate in which players are competing is exceptional. Pressure from financial regulators is increasing, all while card schemes, consumer protection bodies and fraud prevention agencies are all adding to the complexity and expense of doing business,” Schiebl notes.

“Startups have apps, etcetera. Even with blockchain, no one has talked about reconciliation. We seem to be the only ones in this space.” <

fintech 2.0: Making thE Jump into the smart streamSince when is there a niche to be found in the payments market? It looks like financial software business SmartStream Technologies has not only gone and found one, but is also on track to corner it. Is this the first in a stream of services signalling a fintech evolution? Anna Milne speaks to marketing director Nathan Gee to find out



industry insight | gemalto

For banks and other institutions involved in making payments, there is significant pressure to maintain

and build consumer confidence by protecting them from harm.

But evidence is growing that consumers are growing weary of a seemingly endless cycle of clunky, demanding username-password authentication procedures. With new threats emerging almost daily, measures to protect end users from hacking and fraud have to be delivered without jeopardising the consumer experience.

Today’s banking customers demand a personalised experience, and a more secure and convenient banking journey. This means the ‘one size fits all’ approach, in which new security policies and innovations are applied equally without considering the unique requirements of each individual consumer, is no longer the best way forward.

With the rise of fintech startups and the imminent revised Payment Service Directive regulations set to increase competition in the sector, the customer experience is becoming an increasingly important differential, so a more nuanced approach is necessary. Banks need to ensure they are ahead of competitors in developing an engaging and easily navigable customer experience, and new biometric technologies offer a way of achieving this.

Using biometric data to authenticate identity is something many of us have become familiar with thanks to the prevalence of

fingerprint readers in smartphones. Now we can look to many more types of biometric data – from iris or finger vein patterns, to unique characteristics in the way someone types on a keyboard or moves a mouse.

This data can be used to create a unique profile for every customer, which can also incorporate device-based indicators, such as IP address or geo-location. By applying machine learning and risk assessment techniques, it is then possible to provide consumers with a much more personalised security experience.

For example, a low-value transaction in keeping with normal behaviour patterns can be processed instantly. However, if a heightened risk is detected, such as an unusual location or unknown IP address, the transaction can be blocked, or additional authentication requested. Personal habits and regular movements can be learnt over time, so customers will have far fewer incidences of cards being temporarily blocked, or calls from the bank to check an individual transaction.

A solution like this offers benefits for consumers and banks alike. For financial institutions, it allows them to cut operating and administrative costs, as it instantly picks up unusual purchasing patterns without the need for human involvement and provides bank managers with detailed information on the nature of the potential fraud.

Furthermore, it enhances risk-management processes by establishing multiple layers of assessment, such as device, location and user

behaviour. The customer, meanwhile, benefits from an effective security solution that does not compromise the seamless experience they expect from digital services. It also provides personalised authentication, altering the verification steps required based on the transaction and user profile.

Biometric technology can also be applied in cards themselves, to further help shift security away from the PIN and the password. The arrival of the biometric payment card will allow the holder to simply touch a fingerprint sensor embedded in the card when making a contact or contactless transaction. To confirm the customer’s identity, this image is compared with the one stored securely in the card’s chip. No data needs to be sent to a third party for authentication, eliminating the possibility of fingerprints being intercepted or any other tampering with the process.

The integration of biometric authentication within banking services will continue to improve with new technologies and contextual analysis techniques. Consumers will enjoy an even more seamless experience, but the industry must exercise extreme caution when working in this area. Biometric data is arguably the most personal and private data that anyone has. And unlike a password or PIN number, you are not able to change it.

If personal biometric data is compromised or lost, the impact on consumer confidence could be catastrophic. A recent study we commissioned showed that 44% of consumers would leave their bank in the event of a security breach, and 38% would switch to a competitor. That is why banks and other financial institutions interested in biometric technology must work with partners which have the security and technology expertise to ensure every link in the chain is protected. If they do not, their own customers will not accept it, and overall confidence in biometrics could be damaged – preventing the technology from meeting its full potential.

With fraud and cybercrime continuing to make headlines with depressing regularity, protecting customers from exposure to risk should be at the top of banks’ agendas, along with improving the customer experience.

But the margin for error is small. Consumers will not accept banks treating biometric data without the utmost care and protection, so banks must ensure their security strategies are robust and ready. If we can achieve that, greater peace of mind can be realised without compromising the speed and convenience on which the digital banking revolution has been built. <

the fight against fraud: moving beyond the pin and the passwordHuge growth in demand for digital banking has been accompanied by the ever-evolving – and increasingly sophisticated – threats from fraud and cybercrime. Gemalto UK’s Howard Berg looks at biometric solutions


Navigating the Transformation of Retail Banking in Europe

For more details please contact Ray Giddings on [email protected] or call +44 (0) 20 3096 2585

Top industry movers and shakers will meet to debate the importance of new strategies, business practices and partnerships in the industry. We invite you to become an active voice

in this discussion to shape the future of retail banking.

Retail Banking: Europe 201715th November 2017 l Amsterdam

Key Issuesl Innovation in banking – Evaluating new

technologies changing the face of retail banking l Succeeding in a digital economy - Catering to

the changing customer mindset, behaviour and expectations

l Big data and the power of analytics - Utilising advanced data modelling

l Ensuring safety and security in a digital world: Digital identity, cyber security and fraud management

l Collaboration instead of competition: Highlighting the need for synergies between FinTech and banks

Why Attendl Hear from leading retail banks as they discuss

digital disruptions, technology innovations and new generation of customers

l Join expert panel discussions that off er insight into some of the most pressing issues impacting the retail banking sector in Europe

l Examine key industry trends in a day packed with keynotes, case studies and interactive debates

l Take part in thought-provoking discussions covering the most critical industry issues using out new technology tool Slido

l Earn CPD points towards your professional development and take away key fi ndings from the day

Headline Sponsor Silver Sponsors Brand Sponsors Exhibitor In association with

0817Timetric_RBE_Ad.indd 1 01/09/2017 10:38Untitled-2 1 21/09/2017 10:57

Intelligent Environments is an international provider of innovative financial services technology. Our mission is to enable our clients to deliver a simple, secure and effortless digital customer experience.

We do this through Interact®, our digital financial services platform, which enables secure customer acquisition, onboarding, engagement, transactions and servicing across any digital channel and device. Today these are predominantly focused on smartphones, PCs and tablets. However Interact® will support other devices, if and when

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 digital customer engagement platform 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 financial services providers including Generali Worldwide, HRG, Ikano Retail Finance, Lloyds Banking Group, MotoNovo Finance, Think Money Group and Toyota Financial Services.

To find out more please visit:

www.intelligentenvironments.com

Simple, secure and effortless digital solutions for financial services organisations

@IntelEnviro

Untitled-1 1 27/07/2017 10:53:13

stars in their eyes€¦ · calls bitcoin ‘a fraud’ • klarna wraps up billpay acquisition •...

Documents