Mar/APR 2013

The Magazine of Transactions, Cards & EBPP in Canada

: s e i r a d n u o b d n o y Be d n a s l a i t n e d e r s c s g e l n i m h a s i e l s b s a t t s n e e m y a p making

also in this issue:

Data disruption Facing fraud Switching payment processors

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table of contents MARCH / APRIL 2013

COLUMNS & DEPARTMENTS 4

Editor’s Desk

6

Industry News

12 Association spotlight

FEATURES

14

Segment update Six reasons to switch payment processors.

16

Special report BYOC puts an end to passwords.

20

22

Payment innovations break down barriers.

Monetizing transaction data could revolutionize Canada’s payments marketplace.

Beyond boundaries

5

Vertical market Privacy and personal data collection in the Smart Grid.

8

16

Paper payments lose ground to traditional and emerging payment methods.

The driver of new revenue streams for the aviation industry.

Pay channel

Modern monetization:

march / April 2013

Data disruption

24

One on one Ellen Richey talks about facing fraud. PAYMENTSBUSINESS

3

Editor’s Desk

Security beyond boundaries

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n this magazine issue, we’re looking at North America as one market and the challenges we face in payments when we cross political boundaries. The world is a tangled web of regulations, tariffs and currencies but Canadian businesses need access to markets outside our borders to compete and thrive. Catherine Johnston looks at some of the inroads Canadian financial institutions are making to facilitate and secure business interactions with our southern neighbour. Fraud is a subject that comes up quite often as we try to figure out methods of balancing security and accessibility. We want to prevent fraud but we don’t want to frustrate consumers in the process. Despite our preoccupation with fraud prevention, rates are low and declining – payments are increasingly secure with EMV and analytics protecting our cards and our accounts. According to Ellen Richey, fraud is currently around five cents per hundred dollars. And yet privacy and security concerns are the primary reason many consumers are hesitant to adopt mobile payments. Consumers must feel assured their information is secure – education is the key to easing their fears and convincing them to make payments on their smartphones. New technologies are increasingly secure and as we find better ways to use the data generated by our online activity, it is easier for our financial institutions to verify that we are who we say we are. Now that so many Canadians are carrying smartphones in pockets, we’re creating a phenomenal amount of data that can be sorted and analyzed. This data has the potential to authenticate a person’s identity, bring in revenue to offset the cost of using mobile devices for payments and provide insight into consumers’ behaviour. We’re only beginning to understand how payments will change when we are able to analyze the incoming data.

Next issue… may/june — Cards 4

PAYMENTSBUSINESS

march / April 2013

March/April 2013 Volume 4 Number 2 Editor Amie Silverwood amie@paymentsbusiness.ca Associate Editor Amy Bostock amy@paymentsbusiness.ca Publisher Mark Henry mark@paymentsbusiness.ca Contributors Dr. Ann Cavoukian, Serge Rivest, Ferham Patel, Ed Glassman, Kristen Graminga, Andre Boysen, Scott Swartz, Catherine Johnston Creative Direction Demigroup demigroup.com Photographer Gary Tannyan Advertising Sales Rep Brent White brent@paymentsbusiness.ca President Steve Lloyd steve@paymentsbusiness.ca For subscription, circulation and change of address information, contact subscriptions@ paymentsbusiness.ca Publications Mail Agreement No. 40050803 Return undeliverable Canadian addresses to: Circulation Department 302-137 Main Street North Markham ON L3P 1Y2 t: 905.201.6600 f: 905.201.6601 info@paymentsbusiness.ca www.paymentsbusiness.ca Subscriptions available for $40.00 year or $60.00 two years. 2012 Lloydmedia Inc. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Printed in Canada Reprint permission requests to use materials published in Payments Business should be directed to the publisher.

Made possible with the support of the Ontario Media Development Corporation

Vertical market

Privacy and personal data collection in the Smart Grid By Dr. Ann Cavoukian

T

he technological advancements in the Smart Grid have opened a multitude of new concerns for privacy and data collection. When initially designed a century ago, the main goal of the electricity grid was to provide power. However, present day concerns, such as individual energy efficiency, environmental conservation, consumer-tailored choices and cyber security, require the grid to provide much more. Today’s evolving Smart Grid can offer a comprehensive look into a person’s daily life, providing granular levels of information about their routine and household chore habits — it has literally opened a new virtual library. The ability of smart meters to record and report electricity consumption on an hourly basis provides consumers and utilities with enormous benefits. Consumers can access their meter data and make choices about their energy use by taking into account timeof-use rates. Through an initiative dubbed Green Button, and with permission from the consumer, outside third parties, such as app developers, have the opportunity to use customer energy usage data (CEUD) for new initiatives such as energy conservation products and services. While this technology is clearly beneficial in terms of its valuable efforts to curb consumers’ energy bills, it raises significant questions about how the personally identifiable information is collected, stored and shared. This comprehensive data collection is gold for marketers and entrepreneurs but if mismanaged, it could be a threat to personal privacy. As a privacy regulator, I need to ensure that privacy is never overlooked and attempt to prevent the possibility of a harmful breach

from ever occurring, especially in emerging technologies. In my role as Information and Privacy Commissioner of Ontario, I have worked with our provincial energy providers, as well as several utilities across North America, to build in privacy protection, not only to ensure privacy is protected but also to enable innovation to grow. The solution for utilities, as it is for many businesses dealing with the collection of personal information, is that privacy needs to be baked in at the design stage, embracing the actionable framework of Privacy by Design – an approach developed to ensure the protection of personal information by making privacy the default in the design of new technologies and business practices. The Privacy by Design approach is costeffective, proactive and most importantly, user-centric. It’s all about control – allowing the consumer to preserve personal control and freedom of choice over one’s data flows and data-related decisions. If we give consumers assurances that their privacy is protected, we can then ensure consumer confidence and trust, which will allow for the widespread acceptance of the Smart Grid, in turn contributing to the overall goal of using energy in more efficient and environmentally friendly ways. The customer energy usage data (CEUD) collected by utilities may be used in a number of scenarios: utility-to-customer, utility-to-third party, or with the use of an installed device in the home, device-tocustomer allowing the individual to share their data independently. Privacy issues may arise in the three high level areas of: information technology (which controls the access, transmission and

march / April 2013

authentication), policies and procedures (directing the control of the use, collection and disclosure of personal information) or in the design and networked infrastructure. In addition, the development of accountable business practices can impact privacy in varying degrees, such as the design of authorization methods, the definition of primary versus secondary uses of CEUD and any clauses contained in the contractual arrangements that ensure the third party follows accepted privacy practices. These risks should be approached proactively from a positive-sum and privacy-enabling perspective to reach the goals of encouraging both innovation and privacy protection regarding third party access to CEUD. We cannot and need not sacrifice privacy for energy efficiency or business success. A positive sum “win-win” outcome for all – electrical utility providers, consumers, the environment and privacy – is working. The result is enabling both the Smart Grid and privacy to grow in tandem, while preventing the harm of data breaches. These practices of embedding privacy should be applied by any organization collecting personal information from new technological sources such as smartphones and online shopping. To achieve a significant privacy payoff, companies need to earn consumer confidence by embedding privacy into technical specifications, architecture, systems, devices and business practices. If you don’t lead with Privacy by Design, you may end up with privacy by chance – or worse, privacy by disaster! Dr. Ann Cavoukian is Ontario’s Information and Privacy Commissioner. PAYMENTSBUSINESS

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industry news

Tracing the path to purchase These days, a smimple “Bricks and Clicks” approach isn’t enough. Consumers are increasingly savy: they’re browsing, compairing, and adding products to their carts on all sorts of devices.

Designed by 03 World.

With so many consumers now shopping online across all their devices, merchants need to consider all the ways a shopper may interact with their brand over the course of a single sale. The concept of mobile is kind of a grey area these days. The fact is that most people have a highly sophisticated group of devices they use to access the internet from the moment they 6

PAYMENTSBUSINESS

wake to the minute they go to sleep. The internet is with them constantly and so is the desire to interact, consume content and buy products and services.

What does this mean for eCommerce? The web is an endless web of touch points and conduits that guide users to product information and, hopefully, lead

to a purchase. Assuming you’re leveraging some combination of e-mail, social media and/or paid/organic search to drive your digital marketing, you can bet that brand engagement is no longer a single-session occurrence. It’s more likely a long-term cycle of check-ins, price comparisons and product research before a purchase is ever made. march / April 2013

What should a retailer do? The overall goal is to give the user a consistent experience across all devices. As we look into the near future, with browsers like Chrome allowing us to share tabs across devices, a more device-agnostic approach to content and eCommerce site design will become a necessity for the online merchant.

industry news

Building a secure mobile payment system By Serge Rivest

There is no question that mobile is the next major propeller of change in the payment industry. Businesses that fail to capitalize on the opportunities it presents will severely limit their chances of success in the digital economy. But adoption of mobile payments is not without its challenges, and among the greatest of these is security – often seen as the primary barrier to the use of banking services on mobile devices in Canada. Any secure mobile system must meet the current security threshold in Canada’s payments system. The system must protect both financial and consumer data. Identity theft issues affect consumers but in tandem can also harm business transactions. For that reason, security considerations such as data breach issues and an ability to mitigate these risks must be built into any mobile payments system. The bottom line is that understanding where risk lies in the mobile system is key to implementing and using it successfully. When you examine the mobile payments sector, it’s clear that not only are a tremendous variety of solutions available from established financial institutions and new entrants, but that the market is growing rapidly. A Parliamentary report on eCommerce noted that Canadian retail eCommerce was a $15.3 billion market in 2010, which was almost double that of 2005. New business models such as PayPal,

Zoompass and Square are active in our marketplace. Non-bank systems offer prepaid accounts and person-to-person (P2P) transfer services using a mobile phone or a device with access to the internet. Payments companies are working to develop an ewallet or “mobile wallet” that will combine personal financial information with the ability to use the device at a retailer’s near-field communication (NFC) terminal. Already NFC communication has opened access to a number of credit and debitbased tap-and-go systems used at a Tim Hortons or Starbucks to buy a morning coffee, for example. This level of choice is vastly extending the range of available payment options beyond debit and credit cards to electronic P2P transactions and the newly emerging ewallets. In fact, a Canadian Payments Association report, “Examining Canadian Payment Methods and Trends,” found that prepaid cards, ewallets and electronic P2P payments grew at a rate of over 100 per cent in volume from 2008 to 2011. And, as Canadian smartphones add NFC technology, mobile payments and contactless payments will continue to expand at a growing rate. This growth in demand for new mobile payments brings with it a greater need for proven security protocols, and it is essential to continually work to support, enhance and develop these systems as you expand march / April 2013

your mobile payment offerings. In order for a mobile payments system to be successful, customers must feel confident that it was developed with their safety in mind. The joint business and government Task Force for the Payments System Review suggests in their Going Digital report that perception of security is the biggest barrier to smartphone users’ adoption of financial banking apps. The voluntary guidelines developed by banks and credit unions (the Mobile Reference Model) are a big step toward clarifying how information is exchanged within the payment transaction ecosystem, and these guidelines work with current secure contactless technology. At the same time, EnStream, a joint venture of Bell, Telus and Rogers, has created a Mobile Advisory Council and is working to develop a “single interconnection gateway” for secure mobile payments. All of this helps to overcome the security barrier but your challenge as a payments business executive is to keep this foremost in your mind and ensure that security of the customer’s financial information is paramount. All parties have a massive vested interest in developing and promoting mobile systems that may very well soon be more secure than PCs or laptops. Device fingerprinting and geo-locating to authenticate

mobile-banking users are two solutions which could provide reliable identification measures as could voice recognition, facial recognition, and retina scanning applications. None of this is science fiction; all of it is coming. Perhaps one of the most valuable things payments professionals can do at this stage is also the easiest. I encourage you to get up to speed, to become as engaged as possible in learning about the imminent advances in Canada’s mobile payments ecosystem. With more senior managers actively participating in industry groups, for example, and more executives promoting the study and use of emerging mobile technologies, the faster we can overcome the largely perceptual issues surrounding security. We’re now witnessing the rapid innovation and changing customer demand that have fuelled the expansion of electronic mobile payments. But with this explosion of new product offerings and evolving technology systems, we also need to ensure that payments are secure and transfers effortless. A secure and sustainable mobile payment system is essential if you are going take advantage of the benefits of expanded mobile commerce. Ultimately, with close to 9 million smart phones in Canadian hands, customers expect no less. Serge Rivest is the executive vice president, payment products and marketing programs at D+H. With the company for 29 years, Serge has served in a number of senior sales and marketing roles at D+H and is focused on developing programs that help payments providers grow and compete. Prior to joining D+H, Serge worked in marketing services at CIBC. PAYMENTSBUSINESS

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pay channel

Does the digitalization of the financial landscape pose a threat to EFTs? By Ferhan Patel

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t’s nothing new to say that the world of payments is undergoing a transformation. The financial landscape has been constantly evolving to keep up with the increasingly online world of the last two decades. Little by little, the public is shedding the baggage of antiquated and expensive traditional forms of payment, while emerging payment categories are becoming mainstream. But it’s not black and white. It’s tempting to think of traditional and emerging payments as two extremes, struggling to control the marketplace but it’s more complicated than that. Because the public is increasingly comfortable with connectivity, they want their money to be connected too, and the importance of paper in the financial world is shrinking as a result. Cash and cheques are losing their share of the payments market and digital payments, both traditional and emerging, are filling the gap. The data used in this article was published by the Canadian Payments Association in “Examining Canadian Payment Methods and Trends,” October 2012.

Paper In Canada, financial data shows a steady increase in total payment volume, with a growth of 4.2 per cent from 2008 to 2011. Most of the volume growth has been in the traditional digital payments category, but emerging payments are experiencing the highest rate of growth by market share. The cash category (cash, cheques and ABM transactions), on the other hand, is rapidly decreasing in its popularity as a payment method. In 2008, cash still accounted for almost 50 per cent of the total payment volume in Canada but by 2011 it had lost 7.8 per cent of its market share – a decrease of 8

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more than half a billion dollars. This is, in part, due to an increase in the selection and accessibility of established alternatives to cash and credit, namely debit cards, prepaid cards and e-wallets. It’s natural to assume that the cause of the change in spending behaviour is the change in spending options but traditional digital payments, which have been established for decades, are showing the most growth by volume of any transaction category.

Traditional digital payments Credit cards transaction volume in Canada increased by over 23 per cent between 2008 and 2011. Debit cards also showed a significant increase of 17 per cent and electronic funds transfers (EFTs) have shown a 13.5 per cent increase. This is indicative of the public becoming more comfortable with payment cards, moving away from cash and increasingly adopting eCommerce in the place of traditional retail. The growth of eCommerce has allowed the public to separate the concept of money from just cash, which has in turn caused the substantial growth of new alternatives to both cash and credit. EFTs (electronic funds transfers and wires) are popular among businesses and consumers paying bills, mortgages and preauthorized debits. This payment method is showing significant growth in volume, primarily due to an increase in the average transaction size.

Emerging payments E-wallets and prepaid cards are still emerging payments, but while their market share is relatively low compared to long-established payment categories, it is growing at a tremendous pace. Between

2008 and 2011 prepaid card market share grew by more than 130 per cent and e-wallets/P2P payments grew by more than 170 per cent. As e-wallets and prepaid cards become more accessible, more of the public uses them and as more of the public uses them, the technology to accept emerging payment methods is integrated by more and more businesses, creating a snowball effect.

Different roles The emerging payments category is growing by more than 30 per cent per year in Canada and is posing a real threat to traditional payments but people are still favouring EFTs for transferring money into their e-wallets. Even though e-wallets have made a dent in their market share by providing an affordable way to make small transactions, EFTs still have a role to play in a payments landscape that continues to digitalize. Emerging payment methods are built on top of the existing landscape and without EFTs as their foundation they could not get very far. The popularity of bank wires and bank transfers may be diminishing in the face of less expensive options but their role is not disappearing, it’s changing. Ferhan is Payza’s Executive Vice President and leads the company’s marketing and compliance operations. He is responsible for Payza’s overall marketing strategies - from product identity, placement and strategic promotion, to corporate, public and marketing strategies and communications. As the Head of Compliance, Ferhan oversees the company’s operating procedures as they affect both the business and the customer. He manages the guidelines, strategies and implementation of the company’s AML/CTF, Risk and Compliance, Fraud Detection, KYC and Verification policies. Contact him at Payza@claritycommunications.us. march / April 2013

pay channel

Physical and virtual cards hone their edge against other B2B payment mechanisms By Ed Glassman

A

lthough cheques, wire transfers and EFT dominate the Canadian corporate payments landscape, new developments in card technologies and data provision are opening opportunities for card networks to take a share of those payments. Further, the terms often associated with card payments may improve an organization’s ability to pay and to manage cash flow.

The stakes are high Commercial and public sector spend in Canada is about two and a half times larger than consumer spend. But in that space, card use has just scratched the surface. The majority of payments continue to be made with traditional cheque; with EFT and wire transfer services also making up a good portion. Although each has historically proven valuable, those mechanisms aren’t painfree, and card networks are developing vehicles to compete. Cheques, while ubiquitous, are perhaps the most burdensome to Accounts Payable managers. Approval processes, paper-based reconciliation, time to payment, loss of paper instruments and other complexities can inhibit the smooth flow of funds and cut into productive time for personnel. Cheques may be similarly cumbersome on the supplier side of the equation. Wire and EFT offer their own

difficulties. Depending upon the time to settlement—real-time or delayed—a wire transfer or EFT payment may immediately impact a buyer’s balance. Wire payments to foreign suppliers frequently serve up additional complexities in order to reconcile payments schema across borders. And they’re not cheap. Purchasing cards combat all of these challenges by safely decentralizing payments authority, consolidating invoices, bringing payment data online, automating aspects of reconciliation and removing much of the paper from the process. Card use for cross border transactions are much easier to execute than complicated and costly wires and provide faster payment to foreign based suppliers. And because banks frequently offer volume-based financial incentives and have the flexibility to set credit terms and repayment options, corporations may find cost savings for these transactions and enjoy more predictable cash flow and borrowing terms. But those benefits of cards have long been evident. More compelling are the innovations of the last several years in datadriven payments.

Enhanced data For instance, capturing Enhanced Data for card payments will encourage buyers to use cards for all types of purchases beyond traditional categories march / April 2013

such as maintenance, repair and operations. Beginning in October 2013, MasterCard will incent merchants to pass rich line item data on commercial transactions in Canada. Lineitem detail, delivered along with the payment, can help buyers with vendor negotiations, accounting and reconciliation and tax reporting. And consider the advantages of virtual cards. Virtual account numbers, including single use accounts, are gaining significant traction due to the benefits associated with increased control and reduced fraud. Purchase amounts can be authorized once or numerous times within a set period of time, and for specific merchant types, reducing the liability associated with an “open” card. Fully matched enhanced data accompanies the payment, automatically securing the details necessary for accurate

accounting. Integration between purchase orders and payments counter the problems that arise when employees neglect best practices and an invoice arrives before an employee opens a PO.

Accounts Payable and bounced cheques The old methods, as good as they are for certain functions (large-value payments for capital expenditures may still be out of reach for most standard card programs), haven’t changed as quickly as card-network-enabled channels. There are significant procure-to-pay advantages inherent in cards, and in new data capture and ever-greater access among buyers and suppliers to electronic methods that make card-account-based payments more convenient and secure. Ed Glassman is Group Executive Global Commercial Products for MasterCard Worldwide. PAYMENTSBUSINESS

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Segment update

Six reasons to switch payment processors By Kristen Graminga

W

hile few companies accept only cash or checks today, almost every business takes credit cards as payment. If you’re a store owner, you’re well aware that large numbers of credit card processing companies represented by an army of sales representatives can’t wait for you to switch your processing services over to them. Before you make a change, consider the following six reasons to switch payment processors: 1. Rates Rates can vary greatly, and sometimes it’s difficult to determine exactly what factors make up your current rate. Base fees, interchange costs, mark-ups and others are added together to determine your rate. To figure out your rate, review your current statement, add up the charges your processor has deducted from your account that month, add up your credit card sales, and then calculate the fee as a percentage of the sales. The figure is probably around 3.5 per cent. Whenever a salesperson calls to tout his or her processing company, make sure their offer beats your current rate. If it doesn’t, there’s no reason to proceed. 2. Hardware Many retailers still use antiquated hardware that slows the transaction process. Especially in places like restaurants and bars, speed is a necessity. If you are offered lower rates with old terminals, think twice before making the switch. Also beware of hardware costs. Some credit card processing salespeople are independent contractors who make big money by selling hardware.

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3. Reliability Never be in a position where you can’t complete a customer’s purchase because your processor’s system has gone down. Check to ensure that any historical downtime has been absolutely minimal. All of the pennies you save can disappear quickly if you can’t complete sales. Plus, a system should be in place to manually enter charges or run them later if an outage does occur. 4. Customer support Sure, all processors have an 800 number to call for service, but how many of them actually answer the phone in a timely manner? If a customer’s card is denied in error, you need to speak to a human ASAP or you risk the loss of the sale. You need assurances and actual proof of the company’s customer service capabilities before you consider changing processors. 5. Grey areas If you’ve been using a certain processor for a long time, you’re probably comfortable with the company. What you may not know is that your processor has also become comfortable with you. Because of this relationship, the company will give you more transaction leeway than if you were a new customer. If you consistently run single charges for $10,000, your current processor won’t blink an eye when a large charge comes through the system. But if you recently changed processors, you may be in for an unpleasant surprise. Even if your salesperson is aware of the large charges you run, this fact may not have been effectively communicated to your new company. Thus, your charge may

Fraud incidents decline according to the 2013 AFP Payments Fraud Survey A majority of organizations experienced actual or attempted payments fraud in 2012 but the incidence of fraud decreased for the third straight year, according to the 2013 AFP Payments Fraud and Control Survey. The positive trend is the result of corporate migration to electronic payment methods and a range of fraud mitigation strategies. Now in its ninth year, the survey, sponsored by J.P. Morgan, found that 61 per cent of participating companies were subject to businessto-business payments fraud in 2012, a higher incidence than reported in the first AFP survey but 12 per cent lower than its 2009 peak and the second lowest in the survey’s history. Other findings: • 27 per cent of affected organizations saw the number of fraud incidents increase • 16 per cent of those affected report that the incidence of fraud decreased • 87 per cent of affected organizations had cheques targeted • 29 per cent of those affected had corporate/ commercial purchasing cards targeted • The typical financial loss from payments fraud was $20,300. The survey found that fraudsters tended to target large companies. Sixty-seven per cent of organizations with annual revenues over $1 billion were victims, compared to half of those with annual revenues under $1 billion. Seventy-four per cent of companies with annual revenues over $1 billion and more than 100 payment accounts were targets, compared to 64 per cent of similarly sized organizations with 25 or fewer payment accounts. While the share of organizations affected by payments fraud decreased overall, it is important to note that those who were affected typically experienced an increase in the types of their payments methods targeted, particularly corporate purchasing cards—an indication that fraudsters’ attack methods are evolving with the times. march / April 2013

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Association spotlights

CARTES America focused on dynamic American smart technologies market The second CARTES America exhibition and conference brought smart technologies, mobile commerce and digital security authorities and leading technology providers to Las Vegas on April 23 to 25 for 80 educational sessions with more than 100 presenters. From the keynote sessions to the conference tracks and exhibit hall floor, the event focused on the topics, trends and technologies to facilitate new business in the large and dynamic North American market for innovative smart technologies. With the EMV standard paving the way for the evolution in the United States from magnetic stripe cards to more intelligent payment devices, key stakeholders in the financial services and retail industries presented a roadmap to EMV adoption in a series of daily keynote conference sessions. On April 23, Catherine Johnston, president and CEO, ACT Canada, hosted a retail panel on Why are merchants and their acquirers so outspoken about EMV, consisting of representatives from the Merchant Advisory Group, the National Restaurant Association and NACS, the National Association for Convenience and Fuel Retailing. MasterCard’s Mario Shiliashki, senior vice president & group head, Global eCommerce Product Development, addressed how convergence is the foundation for future payment in his keynote address on April 24. In the closing keynote session on April 25, ABnote’s CEO Steven Singer presented EMV by itself is not the Holy Grail. The CARTES America conference program included a number of sessions addressing three broad themes: EMV and Near-Field Communication (NFC) deployments, mobile & advanced payments and security. Conference participants learned new ways to minimize their risks and encourage customer adoption for their services whether their organizations are launching a mobile payment application, instituting an EMV initiative or securing an electronic transaction. The opportunities and barriers to widespread adoption of NFC, including managing a complex ecosystem, addressing security concerns and increasing consumer education, are just some of the issues CARTES America participants explored.

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BAI Payments Connect 2013 In March, BAI hosted our annual BAI Payments Connect 2013 at the Phoenix Convention Center in Phoenix, AZ. The conference provided a forum for payments, fraud and cheque professionals to analyze emerging thinking from bank competitors, solutions providers and non-bank innovators. The conference offered three specific summits covering Consumer Payments Insights, The Future of Payments Fraud and CheckImage. During the summits, payments professionals were provided access to insights and subject matter experts to help them reevaluate or develop a payments strategy and identify how threats such as increasing regulation, fraud and the emergence of non-bank payments players and new technologies can become opportunities. Attendees also garnered insights into payment hubs, migration to real-time, payment channel growth and back office contributions to customer experience. In addition, BAI launched a new Payments Innovation Track, putting spotlight on some of the most innovative payments solutions providers who presented their new payments business ideas, innovations and technology solutions in rapid-fire 8-minute presentation demos. Onsite, we hosted two BAI Executive Sessions – The Future of Payments in Retail Banking and Monetizing Mobile for your Organization. The Executive Sessions were designed to tackle the crucial challenges that confront today’s payments leaders through dialogue and expert presentations around important issues and trends in payments.

BAI Mobile Tracking Study, powered by Alix Partners In January, BAI recently launched BAI Mobile Tracking Study, powered by Alix Partners. The study brings cutting edge insights on consumers’ mobile preferences, behaviours and attitudes. It was designed to help to financial services providers better understand mobile adoption and usage trends, adoption of new mobile options, and how mobile is impacting and changing within the banking industry via longitudinal data analysis.

BAI Retail Delivery Coming this November, BAI will host our annual BAI Retail Delivery Conference & Expo at the Colorado Convention Center in Denver, Co. BAI Retail Delivery brings together the industry’s best ideas, insights and solutions to help financial services providers rebuild profitability. Although not focused solely on the payments space, payments affects all areas of retail bank profitability and we weave valuable payments content into all our summit sessions (Technology for Business, Multi-Channel Strategy, Marketing & Product Management and Sales Effectiveness). In addition, we will have many of the top solutions providers who provide payments technology solutions to the retail financial services industry exhibiting at the conference. This year, due to the convenience of location in Denver and the growing influence of Canadian financial services institutions on the US financial services industry, we are looking at innovative ways to include more Canadian banks and credit unions in the BAI Retail Delivery experience. march / April 2013

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13

special report

BYOC puts an end to passwords By Andre Boysen

U

sing a web-based service frequently makes it easier to remember a user ID and password. However, when people use many different services—and some of them only occasionally—remembering passwords and user IDs becomes quite complicated. For financial institutions and online merchants, managing user password resets and application-related databases is complex and costly. And that’s why the “bring-your-own-credential” trend, or BYOC, is gaining momentum in the payments world.

BYOC—a new model The “bring-your-own-credentials” (BYOC) trend is important because it connects with banking customers across identity, authentication and payment touchpoints. With a BYOC approach, users obtain credentials from a trusted provider whose assurance level matches the assurance requirements of the application the user wishes to access.

Making authentication a service The problem with app-centric enrollment Today, internet-based services enroll subscribers by creating a database of users and their associated privileges. Users access the service by providing the application with a user ID and a password, or credential. For example, a bankcard plus PIN is also a credential. The credential is provisioned when the user enrolls in the service. Users tend to subscribe to multiple online services, which demands managing a long list of user IDs and passwords. To cope, people make their passwords as short as possible, use the same password on multiple sites, and store passwords in a “safe” place, such as a spreadsheet or smartphone. All of these coping mechanisms dilute the security policies designed to protect users and their data. In addition to frustrating users, forgotten passwords can create significant management costs for online services. In response, large social sites like Facebook have allowed users to share their Facebook logins with sites like Tripit.com, Hotwire.com, or Expensify.com. While this can make it easier for users to manage their online lives, there are limitations.

Assuring privacy The first limitation is that social site login credentials have weak assurance levels. Assurance refers to how much rigour is applied in issuing, managing and authenticating credentials. For example, the low level of assurance for a Facebook credential means that it is not suited to change the legal title to a house. By contrast, using a Google account to access a travel site or using an ePassport credential to access an online government service are examples of having assurance levels matched to the application’s requirements. High assurance levels are critical for users accessing applications such as government services, healthcare data, tax information and vehicle data. Neither do social site credentials meet the banking industry’s due diligence requirements of complying with Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines. In addition, although users can simplify credential management, they trade away privacy because shared credentials reveal their online destinations. 14

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The core of BYOC is authentication. Authentication answers the question, “Is the user that is now seeking access to my service the same as the person who enrolled in my service known as SmartAmy123@biginternet.com?” Authentication is a trust service and banks are in the trust business. Governments and retailers have their own identification requirements, which frequently do not enable them to verify citizen or customer identities outside of their own borders. For example, if a Canadian citizen owns vacation property in the United States and wants to establish utility service, he must authenticate with the utility provider in the U.S. However, financial institutions already routinely identify and authenticate users anywhere in the world through the international banking regulations. They are ideally positioned to help their customers reach web destinations and generate revenue for providing the service at the same time. In BYOC, users’ bank credentials become a trust token to help them reach web destinations. Credential subscribers (web destinations) like BYOC because authentication is delegated to a provider (bank) who is better positioned to provide it. Credential subscribers are willing to pay providers for the service, making them more “sticky” and less likely to change banks. Providers earn greater trust and loyalty from their credential-subscribing customers. And because the end user opts in and consents, consent directives and privacy are core to the user experience. Subscriber sites seeking authentication services also need identity and payment services for their customers. When a bank provides users’ authentication contracts, there are upsell opportunities. Providers can create new revenue streams from selling identity services and wrapping in payments. In the previous example of setting up utility service in another country, payment is always attached to the service. By using a credit or debit card, the resident can use his Canadian bank march / April 2013

special report

account to pay for service in the U.S., as well as a bank-issued credit card. Because BYOC is provided by a bank, it simplifies risk management for cross-border transactions and actually improves security.

BYOC in action A BYOC model with a high assurance level has been running in Canada for approximately 12 months. SecureKey Concierge allows Canadians to use partner bank credentials to reach Canada eGovernment destinations. Suppose a user wishes to check the status of a tax refund with Canada Revenue Agency (CRA). By navigating to CRA’s online service, the user selects the SecureKey Concierge service. A menu of partner banks is presented—current providers include ScotiaBank, TD Bank and Bank of Montreal. The user chooses the bank with which he has a relationship and the service redirects their browser to the banking site. By authenticating with a user ID and password just as they normally do for online banking, a unique anonymous security token is produced by the bank. The security token is delivered to SecureKey Concierge, which anonymizes and delivers it based on the target destination site. CRA examines the token to provide access to the user. If this is the first time that the token has been presented, CRA conducts an online registration. In addition to strong assurance, accessibility and official language support, users gain privacy. The bank cannot see the user’s destination; CRA cannot see the users’ banking information; and SecureKey Concierge does not know the user’s identity. With this triple-blind privacy model, no transaction participant has a complete picture of the user journey.

If not now, when? Financial institutions are already trusted by their customers, they already have international verification processes in place and they currently have a window of opportunity to become the BYOC providers of choice. However, if banks do not quickly seize this opportunity, customers are likely to go to Google, Facebook, Twitter and other social sites that are moving quickly to profit from identity services. It’s time for financial institutions to act or risk losing customers to lessqualified competitors. Andre Boysen is executive vice president, digital identity and government solutions at SecureKey Technologies, where he is responsible for developing partnerships with companies that can benefit from SecureKey technology. He has a Bachelor of Science in Computer Engineering from the University of Ottawa, an MBA from the Richard Ivey School of Business, and a Bachelor of Science in Mathematics Education from the University of Maine at Presque Isle. He currently lectures at Wilfred Laurier’s Schlegel Entrepreneurship Centre.

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Key theme

Modern monetization:

the driver of new revenue streams for the aviation industry Scott Swartz

16

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T

he aviation industry has seen steady growth in volume over the last few decades. The increase in the number of passengers, deregulation of standards and growing competition present the industry with an opportunity to offer new services and realize their associated revenue streams. Airports and airlines need to partner and find newer and expanded sets

of services to offer their loyal passengers while also finding ways to attract new passengers. Although the industry can offer more flights, more destinations and some services for passengers in transit, it continues to struggle with the growing competition for landing space, gate rights and airport facilities from parking garages to fuel

march / April 2013

Key theme

farms to retail concessions. The industry infrastructure hasn’t kept pace and often is little changed from what it was designed to cope with in an era when demands were entirely different. All of these services are stretched thin. The traditional business models are too outdated to drive the new market shares. To capitalize on its growth, the industry must clear the first main hurdle to financial success: modern monetization. It’s critical that the aviation industry expand the infrastructure for offering services and it must also keep pace and invest in an IT infrastructure to support growing customer demands and increasingly complex business models. The IT challenges start with selecting and maintaining robust applications for operation and business support. Applications, while addressing

business purposes, must also integrate into one overarching system to reduce overall operating costs. Among the applications involved, there must be an integrated solution to facilitate accurate and timely billing; an integrated systems approach to billing enables reliability, enforces common processes and assures accurate data capture while also providing seamless access to information for multiple departments and airlines. The right IT infrastructure to automate processes and financial models for greater accuracy and transparency is something of a work in progress for the aviation industry, particularly airports. However, an innovative approach to monetizing relationships with customers, partners and suppliers is at the root of the airport mandate. Airport systems must be open, scalable, component-based and adaptable so they can quickly and cost-effectively be configured to support and charge for any service, no matter how diverse. Traditional simple accounting will not be enough to support the expanding aviation infrastructure. In addition, the IT infrastructure must facilitate the automation of processes and financial models while ensuring greater accuracy and transparency to fuel continued growth. Fundamental to an airport’s growth is the ability to increase and expand partnerships, enabling the service industry to flourish but also to monetize what’s being offered. A comprehensive monetization system needs to provide visibility of tariff and non-tariff charges owed to airport management and other systems. It needs to integrate directly into airline account payable systems to automate payments and provide a transparent view into invoices and uninvoiced amounts. When addressed, all of these underlying requirements help with an increased cash flow through regular and timely billing. Airports (like many other service industries, such as hospitality and courier services) must build new partnerships and move beyond getting passengers from Point A to Point B. This cannot happen without a monetization infrastructure that can represent agreements with various parties truthfully and in a timely manner. Airports need systems that can

eliminate or automate manual processes, provide auditing features to reduce risk and increase regulatory compliance. There is no magic bullet for success, but there are some great compare and contrast lessons in efficiency. Looking at two of the top five airports in the U.S, one sends out 300 invoices per year to their airline and concessions partners for the airport services provided and the other sends out 100,000 invoices covering a similar group of airlines, concessions and revenues. The right monetization system maximizes return on investment by creating meaningful differentiation in the market based on core competency and appropriate use of scarce resources, all while gaining freedom to focus on service excellence rather than billing operations. A flexible and adaptable monetization solution is critical to support the growing number of services, which tend to be non-aeronautical in nature and range from shopping and dining experiences to entertainment options such as movie theatres, gaming and many others. The solution must handle the unique agreement terms necessary to define how money flows between parties, for billing as well as settlements, which typically are on opposite sides of the spectrum. Equally important is an understanding that although the growth may be more in non-aeronautical services, the monetization solution must be equally well-suited to support key aviation services. These include landing/take-off, terminal usage, enplanement/deplanement, flight support, utilities, ground handling, passenger facility charges, airport retail leases, convention centers, parking, hotels, to name a few. Monetization platforms need to enable airports to embrace change and adapt to new business operating models. Scott Swartz is the chief marketing officer at MetraTech and has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. She is responsible for go-to-market strategy and execution, product marketing, product management, business development and partner programs at MetraTech. PAYMENTSBUSINESS

17

Securing Mobile Life.

Creating Confidence. Giesecke & Devrient offers a comprehensive range of payment products and solutions based on the latest EMV, contactless and dual interface technologies. Our smart debit, credit and prepaid products are available on a wide range of platforms based on secure and highly flexible operating systems. Alongside the comprehensive portfolio of easily configurable card products and card solutions, we offer all services related to electronic payments including m-commerce and transit. Our services include personalization, system integration, project management and technical consulting from a single source. For more information, please visit: www.gi-de.com/ca

Key theme

Beyond boundaries: payment innovations break down barriers By Catherine Johnston

O

ne of the joys of my job is working with the people who shape the payments market. Over the past few years the dialogue has become far richer as more stakeholders have been engaged. I’ve watched as this allowed them to get to market faster, save money both pre and post launch and sometimes significantly reduce staff resources, freeing them up for other projects. As we look at the concept of a North American wide market, dialogue will be the key to making profitable decisions. Let’s look at a few “hot” issues and then I’d like to invite you to join a rich stakeholder dialogue.

Mobile payment and prepaid When we think of payment, we think of global access and interoperability, but that is not always the case. As we evolve beyond the mag stripe cards that supported credit payment around the world and our ability to use ABMs, we find ourselves in an interesting position. Replacing mag with chip continues the established functionality when the chip is in the traditional piece of plastic. Move that chip into phones and things change. The magic of interoperability relies on global standards and so far we don’t have one for mobile payment, not even across North 20

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America. If you think of mobile payment in the traditional terms, the handset becomes the point of sale terminal and the chip replaces the card. EMV remains in play as the payment standard but now we need a security standard for the handset above and beyond the secure SIM. Taking it one step further – security standards change based on whether the handset is NFC enabled or not and then there is another complication. There is no standard for how consumers will authorize the payment with a NFC handset. A number of Canadian financial institutions have published a reference model but it does not have the gravitas of a standard that could become a global enabler. This is worrisome for merchants who fear that they may be faced with multiple processes at the point-of-sale, requiring more software, more cashier training and slowdowns in their lanes. Resolving this issue could go a long way towards driving merchant acceptance. With prepaid, it is simpler, at least with major branded open loop cards. The significant differences in North America are in the area of Government regulation.

EMV Let’s go back for a minute to EMV. Canadian issuers are anxious to see cross border fraud decrease, which march / April 2013

Key theme

should happen by October 2015, when the US is scheduled to come online with EMV. The question is whether US stakeholders will make it in two and a half years. There is no doubt that it is a mammoth task, or that Durbin and market scale will make this rollout different from Canada’s. On the other hand, the EMV standard needed to enable global interoperability, means that almost everything else is the same as it was in other countries. Our peers in the US have the advantage of enlisting Canadian, British and European resources to help them meet their shift dates.

Banking That’s a narrow look at payment but let’s also look at banking. TD has broken from the pack to take the lead in providing North American services, not just US branches. Their offerings to date make perfect sense for Canadians who travel to the US and we watch with great interest to see what else they will launch. Here is an area where the concept of one North American market always made sense, given the tendency of Canadians to go south. The question now is whether other Canadian financial institutions will follow suit and whether US financial institutions will venture north. In Canada, we invite you to join with other Canadian and global organizations to help shape the mobile payment and prepaid markets through ACT Canada’s Mobile Strategic Leadership Team (SLT) and/or the Prepaid SLT. And join us at Cardware 2013: Payment Insights, as more than 60 speakers and panellists tackle the controversial questions facing payment stakeholders. Catherine Johnston is the President and CEO of ACT Canada. For 25 years, ACT Canada has been the place to be to filter the truth from market noise, understand complex issues and facilitate problem resolution. Stakeholder dialogue leads to profitable decisions and the concept of one North American market needs that dialogue. march / April 2013

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Data disruption Monetizing transaction data could revolutionize Canada’s payments marketplace By Doug Macdonald and Jonathan Magder

M

obile payments and other emerging payment technologies promise to forever change how consumers pay for goods and services. There is just one problem: how to fund these new payment methods. We believe the solution is in the data. By responsibly monetizing the vast amount of data collected through new technologies (with consumer consent), industry players can overcome the funding challenge and revolutionize the payments sector. The funding challenge is especially relevant for mobile payments. At the moment, mobile network operators, trusted service managers, handset makers and digital wallet developers alike face the prospect of competing with traditional payments players for their small share of existing transaction fees. The result? Declining margins for traditional players and not enough revenue to sustain the business model for new technologies.

The revenue is in the data New sources of revenue are sorely needed. And mobile payments and other new technologies are creating opportunities to generate that much-needed revenue from a non-traditional source — transaction data. Consumer information has always been valuable, of course, and the better the information, the greater its worth. Today, advances in mobile and contactless payment, cloud and smartphone technologies enable us to capture, process and share more data more quickly and widely than ever before. Factor in the sheer 22

PAYMENTSBUSINESS

number of stakeholders contributing data points all along the payments lifecycle, and it is clear that we will soon be able to aggregate an unprecedented amount of consumer information.

Digital wallets key to unlocking data’s value At the heart of this payment revolution is the mobile or digital wallet, which enables consumers to securely store payment credentials, loyalty card information, coupons and identity cards on their smartphones. As well, mobile wallets can — again, with consumer consent — collect far more data than conventional cardbased transactions, from location to cross-card and retail spending patterns. Wallet providers could readily aggregate customer information, payment credentials and point-of-sale behaviour and use these insights to monetize the data they have collected. But that is just the start. As smartphone usage rises and acceptance of mobile payments and related technologies grow, the amount of consumer data available to be collected will also increase. In the not too distant future, mobile wallets could conceivably track data collected from smartphone GPS systems, peer-to-peer (“bumping”) payments, augmented reality apps and other sources. This aggregated wealth of data would give companies a robust, contextualized picture of their customers’ behaviour far beyond the payment transaction. And this in turn would help deliver a more targeted, sophisticated consumer experience. Needless to say, this level of business intelligence would be highly valuable — and potentially very lucrative. march / April 2013

Tech update Monetized data revenue could overtake interchange fees How lucrative? The total annual value of monetizing Canadian consumer data and information could range from $3.6 billion to $7.2 billion annually, compared to the estimated $6 billion in interchange fees collected each year. The revenue from data monetization may prove to be an incremental value for industry participants, or it may be used to offset interchange and processing fees. In fact, we foresee a future state where data sales revenue and the reallocation of transaction fees as a marketing expense would effectively offset the merchant’s acceptance cost. The revenue from data monetization could even replace interchange fees entirely, making the transaction effectively free. As consumer information becomes more valuable, the revenue from payment processing would become less necessary. This in turn would create more incentive to reduce or eliminate interchange fees and spur further adoption of electronic payments. And as the value of data overtakes the value of transaction fees, we may see the payments landscape change significantly. Already, some U.S. start-ups are offering free transaction services in exchange for data monetization, an idea that could completely disrupt the traditional payments model. Elsewhere, some merchants and banks are exploring merchant-funded offers, in which consumer transaction data is used to deliver targeted ads or offers through online banking statements.

Get ready for the revolution Mobile payments are still a developing part of the Canadian payments landscape, but the shift is underway. Stakeholders across the payments system need to understand how this change will affect their business. System participants who are able to aggregate and monetize data securely and responsibly will be well positioned to capture market share and revenue. Traditional players are at an advantage here, given their record of safely managing customer data, but they should not be complacent — they run a real risk of disintermediation in the new payment environment. Mobile network operators and other non-traditional payments players should avoid complacency as well. If they fail to find ways to capitalize on consumer data, they risk losing customers to competitors who do. Similarly, merchants should explore how investing in data analytics could help them reduce operating costs and increase revenue by improving their customer experience. The payments revolution is on its way. The time for stakeholders to prepare is now. Doug Macdonald is a Senior Manager at Deloitte. Jonathan Magder is a Manager at Deloitte. march / April 2013

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23

One on one

Facing fraud

Payments Business talks to Ellen Richey about fraud and common sense

You gave a keynote address this morning at the Visa Canada Risk Summit about responsible innovation during which you stated that fraud rates are at a historic low. What happened to bring fraud down in the first place? The most important thing was bringing the transactions online. So this would have been in the early 1990s. That was the biggest driver. In Europe, around the mid-90s, they started to gain critical mass on EMV CHIP so that helped and in this part of the world, and in the US in particular, which is the largest share of these businesses, we started using neural network detection to analyse transaction data. And by the way, when we talk about migrating fraud, it’s still only five cents per hundred dollars. So we don’t really need to be frightened. But from a payments perspective, I’d like to see another cent change down.

How does using neural network detection prevent fraud? In the online world, you actually have more information than the face to face world. You have information about the device, you have the IP address, you have other characteristics such as location. You can combine those things about the device with the transaction data that we use in our neural networks to identify suspicious transactions and eventually we hope in the age of digital wallets, to also combine the transaction data that the merchant has. The merchant knows how the cardholder shops. So combine all those three things together and you can come to very high degree of certainty that it’s really me shopping at Amazon and not Gord who has stolen my card details and wants an iPad mini. Once you have that, you just let those transactions go through. continued on page 34 24

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march / April 2013

2013

June 6th | Pantages hotel | toronto

2013 AWARDS GUIDE

EvEnt SponSoRS

2013 A word from payments eXchange Welome PX community, It has been another ground-breaking year for innovation, products and services, which continue to shape the gift, prepaid and payments industry here in Canada. We are delighted to bring everyone together to honour and celebrate these remarkable achievements, as we recognize the best of the best in their respective categories. Thanks to our sponsors, the PX advisory board members, PX members, PX award judges, PX community partners and collaborators from across the payments industry for their generosity, guidance, support and collaborative efforts. The calibre of nominations this year clearly demonstrate a shift in form factor, substantial technology convergence, growing cross channel functionality between marketing, loyalty, gifting, rewards issuance, prepaid, payments and engagement, together with unprecedented disruption to the status quo through innovative programs from industry leaders and entrepreneurs alike. Tremendous effort, love and passion are poured into everything that we do at the Payments eXchange, for and on behalf of, the PX community, so please soak it up, enjoy every moment and let’s celebrate all of our efforts today and throughout the year!

Judges We are extraordinarily proud of our judges who have brilliantly reviewed and scored this year’s Tony Chapman

Rebekka Rea

Marc Della Torre

Dave Baldwin

Founder & CEO Capital C

President & Executive Director, Retail Gift Card Association (RGCA)

VP of Business Development, Weemo, Inc.

Director of Electronic Payments, IPC President, Value Pay Services LLC

Frank Monaco

Al Shulman

Brian Dunne

Dan Horne PhD

SVP GM International, InComm

VP Marketing, Just Energy

Managing Director, SVM Europe Ltd President, IMA Europe

Professor, Providence College; Co-Founder and CKO, Global Prepaid Exchange

To see full bios of our Judges, go to PaymentseXchange.ca/Awards

nominations. We extend our sincere thanks to them for their integrity and support.

Dave Hunt Chairman, Payments eXchange; President, The Hunt Group

2013 Best Consumer Funded prepaid program CinePlex entertainment: e-gIfT CArd And MArkeTIng ProgrAM Cineplex entertainment launched an e-gift card program to increase gift card sales, increase revenue, stay current with market trends, enhance their brand and to continue to be seen as the leader in their market. They partnered with Buyatab online, to provide the e-gift card Software-as-a-Service, branded website integrations, branded and scripted bilingual support, and management reporting. Cineplex applied proactive marketing initiatives including frequently changing and seasonal e-gift card designs and banner ads, social media and specific e-gift card promotions. These efforts contributed to the program’s immediate success with Cineplex quickly surpassing their initial goal of increasing overall gift card sales by 20 per cent. They’ve embraced mobile technology as part of their e-gift card initiative. Customers can easily access mobile optimized sites as a means of purchasing and sending e-gift cards, and delivery takes only seconds. recipients of e-gift cards can store them on their phone or even in Apple Passbook. Cineplex was the first merchant in Canada (in any market sector) to enable e-gift card users to utilize Apple Passbook Cineplex e-gift card holders are realizing excellent value, by carrying the card with them on their mobile device, versus tossing it in drawer. This provides a frequent reminder to engage with the brand. redemption is as easy as scanning the bar code from the phone, or a printed version. The ease and convenience for customers is extraordinary. The results for Cineplex have been outstanding. They are the trailblazers in Canada for e-gift card programs.

RUnnER Up

CadillaC Fairview shop! Card and la Carte shoPPing

Best Corporate or Government Funded prepaid program City oF toronto instant issue: CITy ServICeS BenefITS ProgrAM The City of Toronto Instant Issue City Services Benefits Program is the first program of its kind in Canada. The program was developed to address a growing need by the City of Toronto to streamline the disbursement of social benefits to its recipients. The underlying challenge was to instantly issue an embossed card at each designated City of Toronto office. Through extensive teamwork and collaboration, SelectCore and our partners delivered a truly innovative solution. The instant issue solution involved the deployment of secure printers, well designed location security and mutual ownership of this groundbreaking initiative. MasterCard cards are embossed onsite at designated City of Toronto office locations throughout the City (“TeSS” offices). recipient Ids are verified and recipients are instantly issued a card with their benefits proceeds loaded real time. At this point, the recipient selects a PIn number and is provided face to face instruction and information about the card and its use. This personalized awareness helps facilitate the use of the card and reinforces the features and functions of the overall card program. Through the introduction and launch of this groundbreaking instant issue eMv/Chip card solution, the cardholders, City of Toronto, SelectCore and the prepaid industry in general have created tangible benefits. Cardholders enjoy a financial tool that is safe and more secure than cash. In addition, the City of Toronto enjoys the benefit of economizing costs and controls of benefits distribution. This program has leveraged innovation and delivered a leading program for the emerging government benefits distribution paradigm.

RUnnER Up

great-west liFe health solutions Plus: vISA CArd ProgrAM

for full runner Up details, please go to PaymentseXchange.ca/Awards

™

2013 Best Marketing Campaign inComm Canada - giFt Card week: AT SHoPPerS drUg MArT The Shoppers drug Mart gift Card Week campaign was targeted to Shoppers optimum members, which is the number one loyalty and reward program in Canada. The campaign promoted all prepaid products, except for longdistance and wireless. for every one dollar spent in the store, members received ten points. Members who spent $150 or more on two or more gift cards received 8,000 optimum points. Shoppers optimum points are traditionally not rewarded on third party gift cards, so this promotion is a onetime yearly event. The purpose of the promotion was to build awareness of the prepaid category at Shoppers drug Mart and to increase sales leading up to the holiday shopping season. The primary message was to buy gift cards and receive points as a bonus. The campaign aimed to achieve an increase in sales with its Shopper optimum members by enticing them to take advantage of the bonus points and buy their gift cards early. This particular campaign was different from other campaigns aimed at promoting the brand because it was exclusive to Shoppers drug Mart and was specific to all gift card categories (except long-distance and wireless products).

RUnnER Up

livingsoCial: $10 STArBUCkS gIfT CArd offer

Best prepaid Card Design (Business or Consumer) tim hortons roll uP the rim pREpAID MAStERCARD CARD The Tim Horton’s roll up the rim program has been a part of the Canadian landscape for years, you can find the cups in the hands of the young and old, with the simple purchase of a coffee (and Canadians are one of the largest consumers of coffee) you can have a little bit of fun by rolling up the rim to win one of the many great prizes that the Tim’s group has provided over the years. Another coffee, a delicious donut, a BBQ, a Tv, or a new car, how can you beat that offer? Imagine that $1.60 could get you any one of those great prizes and this year we have provided a prepaid card with a cash value of five thousand dollars. Any Canadian consumer would be proud to use the Tim Horton’s Prepaid card with the symbol of the cup on the card; what a great conversational piece and a clever way to continue building brand loyalty to both Tim Horton’s and MasterCard.

RUnnER Up

snaP-oFF sCene Points giFt Card

for full runner Up details, please go to PaymentseXchange.ca/Awards

2013 Best virtual program Carta nFC virtual PrePaid PlatForm The Carta nfC virutal Prepaid Platform is a turn-key product for Issuers and Mno and merchants that bring nfC mobile payments to market with a rapid and low-cost deployment model. With this product, Carta delivers an endto-end solution that includes device provisioning (personalizing phones with a MasterCard PayPass account), transaction processing, white label wallet application and turn-key issuer and Mno interfaces. By leveraging underlying technology in place, Carta reduces setup and deployment cost for nfC projects and minimizes the need to update existing systems. This groundbreaking product represents a key step in the mass-market adoption of nfC mobile payments. Mobile operators, issuers and merchants now have a low cost, low risk model that enables rapid time to market to launch an nfC mobile payments product. Consumers benefit with a product that is open to any user regardless of bank relationship, and the product keeps bank and credit details secure. Utilizing a virtual nfC prepaid account instantly personalized to the mobile phone, consumers can access immediate spending power with any nfC enabled handset. This introduces a simple and convenient experience for consumer adoption, while limiting exposure of personal banking information. The virtual prepaid product also supports dynamic top-up integration enabling virtual gift card delivery, digital coupons and mobile loyalty programs. This product not only represents a breakthrough in the commercialization of mobile payments but also the future of prepaid in the mobile world.

RUnnER Up

global emoney network

Best prepaid Innovation esso PriCe ProteCtion & exChange solutions The eSSo Price Protection product enables companies to offer a promotional fuel card to market fuel savings through a locked-in price mechanism that fixes a set cost per litre. The maximum benefit protects the exposure of the program (cost) and the minimum benefit protects the customer on the possibility of falling fuel prices. The first deployment of this program is through Hyundai Canada, which is an offer to purchase fuel at 99 cents per litre for a maximum number of litres. To support this effort, exchange Solutions enabled card activation at the individual dealer level, where the automotive dealer enters an inactive card number and vIn. This is a very simple process for the dealership. In a file feed for approved vIns, exchange Solutions activates the cards entered automatically with the correct number of maximum eligible gas litres. Consumers value the program because they have a high affinity for fuel savings and a fixed price approach is a unique, easy-to-understand benefit. eSSo values the program because the consumer must shop at eSSo branded locations in order to qualify for the low fixed price on fuel. And for Hyundai this is an excellent marketing tool to get customers into their dealerships and to sell cars. This type of prepaid innovation is not offered anywhere else in the world, as it is based on a proprietary and patent protected solution developed by exchange Solutions.

RUnnER Up

h&r bloCk advantage: PrePAId MASTerCArd速 CArd ProgrAM

2013 Best payments Innovation direCtsPend From intelisPend PrePaid solutions Prepaid cards are typically segmented into two types: open-loop cards, accepted wherever their network brand (i.e., visa, MasterCard, American express and discover Card) is accepted, and closed-loop cards, accepted only by the issuing merchant. restricted Authorization networks (rAn) are changing the traditional prepaid landscape and bridging the gap between open and closed-loop cards. In actuality, the prepaid market is just now catching up. InteliSpend patented the technology over 14 years ago, calling it directSpend. directSpend creates a sub-network on the open network rails (operated by visa, MasterCard, American express, discover and efT operators), and as a fundamental function directs spending of open-loop (network-branded) prepaid cards to only a select merchant or group of merchants. The directSpend patent is enforceable in both Canada and the United States and used to incent certain consumer behaviour, control spending and expenses and provide employee and government benefits. This level of customization offers new opportunities for prepaid card issuers, program managers and companies to create new types of programs that deliver benefits to everyone along the value chain. Utilizing the patent, InteliSpend launched the MAX visa Prepaid Card, welcomed at more than a hundred popular retailers, restaurants and ticket outlets in Canada. reward earners can spend it on just about anything they desire: sports gear, kitchen gadgets, electronics, party clothes, air travel and more. This flexibility, plus a long list of customization options, gives clients and reseller partners the power to create an incentive that inspires people of all ages, mindsets and lifestyles to take action.

RUnnER Up

Carta virtual PrePaid nFC PlatForm

Leading Gift / prepaid organization shoPPers drug mart Shoppers drug Mart has been selling PoSA prepaid products since 2005, pioneering the first true gift card mall destination in Canada. not only do they carry the largest breadth of products in the Canadian marketplace but they continually refresh their products in all categories—gift cards, content, music, financial, software, wireless and long distance. This practice ensures customers always have access to a changing assortment. InComm Canada is the sole provider of prepaid products in all Shoppers drug Mart/ Pharmaprix locations across Canada, providing multiple permanent and seasonal fixtures and displays, warehousing, distribution and promotional execution. Last year Shoppers drug Mart launched a shipper for moms, dads and grads in all stores, along with two seasonal displayers during the holiday— floor stands (in all locations) and quarter pallets strategically placed in the magazine section. These holidays initiatives resulted in higher sales lifts. In addition, last holiday season Shoppers launched key value added promotions with Cara and Petro Canada, which yielded record sales. In order to further maximize sales, they supported these promotions with ads in their weekly flyer and in national newsprint. Shoppers has also created an annual event called gift Card Week. This promotion includes its products and uses its premiere loyalty program, optimum, as the promotional driver.

RUnnER Up

PeoPle’s trust

for full runner Up details, please go to PaymentseXchange.ca/Awards

2013 Leading payments organization seleCtCore Payments SelectCore’s products and services level the playing field and ensure that all consumers, regardless of their financial situation; have fast, flexible, reliable and safe access to the funds they need, when they need them. founded in 1999, SelectCore is listed on the Toronto Stock exchange (SCg-v). We have been ranked among Canada’s fastest growing companies by Profit Magazine four times in the past six years and were included in the deloitte fast 500 list of north America’s fastest-growing technology companies and the Branham 300, celebrating Canada’s biggest tech companies. Through innovative advances in card issuance and distribution, SelectCore continues to be a leader in the payments and card sectors across Canada. Through the introduction and launch of our groundbreaking programs and instant issue eMv/Chip card solutions, SelectCore continues to forge new ground in Canada’s prepaid industry by delivering tangible benefits for stakeholders, cardholders, government agencies, banks and retailers. We pride ourselves on providing financial tools that are safer and more secure than cash. our collective programs validate our place as a leading payments organization and we look forward to continued evolution and innovation as we shift traditional payments space paradigms.

RUnnER Up

moneris solutions

Industry person of the Year – prepaid and payments JeFFrey smith, President and Ceo oF direCtCash Payments inC. Jeffrey Smith, President and Ceo of directCash Payments Inc. has contributed significantly to the growth and development of the prepaid and payments industries in Canada, as well as internationally. Smith’s vision for convenient and secure payments for his existing clients led to his development and launch of the first prepaid cash card in Canada in 2001. He continued to propel the industry forward through additional products and services, making prepaid the dynamic financial product choice for consumers that value convenience. of significance was Smith’s vision for prepaid to become a full functioning banking product. In order to make this vision a reality, he co-founded directCash Bank, a Schedule 1 Canadian federal bank under the Bank Act, in 2008. Today, directCash Bank is one of the few banks in Canada focusing exclusively on servicing the prepaid card market. In addition, Jeffrey Smith Smith has focused on offering program management, transaction President & CEO processing and card issuing to his merchants in order to provide convenient, customizable and flexible programs. This past year, he has built prepaid programs that offer under-banked northern communities in Canada the opportunity to access full function banking products via a prepaid card. Additionally, he was integral in the development of H&r Block Canada Inc.’s reloadable tax-refund card, which has been wildly successful and is the first of its kind. Smith market intuition and acknowledgement of consumer and merchant needs has and will continue to drive the prepaid and payments industries forward in the future.

for full runner Up details, please go to PaymentseXchange.ca/Awards

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see youR company name here Contact Mark Henry mark@paymentsbusiness.ca 1800-668-1838 x 223

march / April 2013

PAYMENTSBUSINESS

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One on one continued from page 24

It sounds like there’s a lot of data to analyse and interpret. It is algorithms and formulas and scores and we have a department of data analytics and they update those models twice a year. And they’re constantly refreshing. And the way they work, they refresh themselves with the transaction data. They watch the transactions coming through and they have been programmed to incorporate and see new patterns of transactions into the scoring model. So it’s not people sifting through data, of course, it’s people sifting through models.

What kind of shopping patterns do the formulas seek out? What kind of information would trigger an alert? It would be triggered if you left the country and bought something. And by the way, we don’t know your name. So in terms of the whole privacy thing, you’re a 16 digit, I’m sorry to say. We care about the people using our cards but we’re not trying to figure out who they are and what they’re doing. We’re just trying to look for fraud.

Let’s talk about social media, which is one of the things you brought up. What are your concerns? A couple of things. Let me start with the obvious. We’d like new players and new card holders and we would like to serve them and connect them to the broader world of payments. We’re hopeful that we would be partnering with these people – 34

PAYMENTSBUSINESS

we have a notion of coopetition, right?

What’s that? We may be competing in some ways but we’d like to see them cooperating, becoming, being and continuing to be a part of our payment system. So we partner with some of these entities – we purchased a company called PlaySpan that does payments, for example, in the gaming space. If you go on Facebook, you can play games. So we have a company that provides that payment service into the gaming space. The one thing is to make sure that they get integrated with our network and that they get integrated securely using all these techniques that I’ve talked about. The second interesting thing about social networks is what’s called social engineering. If they can’t steal the data by hacking into Tim Horton’s or anybody else because they’re secure, they’re going to come after the consumers. Believe it or not, it seems to be worth their time and trouble to look at what you’re saying on your social network. If your password is the name of our first pet and you have a picture of your first pet on your Facebook page, and it says under it, “My cat Pablo” they know that. It’s amazing! So our concern is that people are putting too much personal information out in the social world that criminals are able to exploit.

Typical questions like your mother’s maiden name can’t be used anymore since that information can be found on social media?

If your mom’s your Facebook friend, and she doesn’t have the same last name as you, and you’ve indicated that it’s your mom, it’s quite problematic. And they use it not only for passwords but to send you fake emails that look real. So it looks like it’s coming from your mom or from your bank. You might comment on Facebook about your bank or airline and then you get an email about the trip you’re about to take and you think, oh cool, I’m going to get a special bonus if I click on this link so you click on the link and it’s malware. So this is of concern.

If you can’t trust cardholders to come up with their own passwords and back up security questions aren’t secure, what kind of tools can be used to authenticate shoppers? We’re trying to get around this by getting rid of, in a visionary march / April 2013

way, not today or tomorrow but over time, get rid of knowledgebased authentication. It’s just driving everyone crazy.

With the proliferation of smartphones and online data being used to authenticate cardholders, are we still dealing with card not present or card present? It’s very interesting the whole convergence thing that hasn’t sorted out yet. So the question we’re looking at is now you might have all that good information making it even more secure than when the cardholder is present. How should we look at that as an industry? How do we look at it from a fraud perspective, from a pricing perspective, all the pieces of the industry that hinge off that distinction. We don’t have an answer for that but you can watch this space. Because this will emerge.

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