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May/June 2016

The Merchant’s Guide to Transactions, Cards & eCommerce

Navigating the cross-border e-commerce maze ❱ New data substantiates

open-loop prepaid market opportunity in Canada

❱ FinTech innovation

& emerging trends PM 4 0 0 5 0 8 0 3

TableKey of Contents theme COLUMNS & DEPARTMENTS May/June 2016 Volume 7 Number 3 Editor-in-Chief Steve Lloyd Managing Editor Sarah O’Connor Publisher Mark Henry Contributors Oren Levy; Ryan Stewart; Jennifer Tramontana Creative Direction Jennifer O’Neill

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Starting Points Patterns Security

8 Industry News 20 2016 Industry Events 22 Resolutions


New data substantiates open-loop prepaid market opportunity in Canada

Photographer Gary Tannyan President Steve Lloyd For subscription, circulation and change of address information, contact

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Navigating the cross-border e-commerce maze

Next issue… July/Aug Made possible with the support of the Ontario Media Development Corporation may/June 2016

Payments technology: Continuous innovation & emerging trends

Security, Fraud & Privacy. A close look at emerging payment technologies in light of the security, fraud and privacy risks they create and problems they solve. PAYMENTSBUSINESS


Starting Points

“Selfie Pay” app arrives MasterCard, BMO introduce first biometric corporate card program in Canada, U.S.

By Sarah O’Connor


MO Financial Group (BMO) and MasterCard have begun a phased launch of Identity Check, the first biometric credit card program in Canada and the U.S. that will enable cardholders to verify transactions using facial recognition and fingerprint biometrics. Quickly dubbed “Selfie Pay” by the media, Identity Check will be used to verify online purchases. If an e-commerce transaction is flagged as questionable by MasterCard, cardholders who opt in to the program will be prompted to provide their fingerprint or “selfie” via the Identity Check app on their mobile phone. That information will then be matched against an authentication signature based on previously provided biometric information that is converted into an algorithm and stored on MasterCard’s servers. Once the match is verified, cardholders can return to the merchant site to complete their purchase.

Simpler and more secure This new functionality is intended to increase the security of payments that don’t require a face-to-face interaction by reducing the likelihood of the card being used by anyone other than the cardholder. Participation is voluntary; no cardholder will be obligated to switch from using passwords to using Identity Check. At a press briefing hosted by MasterCard and BMO in Toronto, Catherine Murchie, 4


senior vice president of North America processing, enterprise security & network solutions for MasterCard, explained that customers are frustrated trying to keep track of all of their passwords. As a result people tend to make their passwords simpler but this makes them less secure. Selfie Pay offers a convenient alternative without sacrificing security. “It’s always exciting to introduce biometrics to new cardholders,” says Murchie. “They quickly realize that they don’t have to sacrifice convenience for security. By snapping a selfie or scanning a fingerprint, the person becomes the password.”

demonstration. “To make the customer experience that much better is so important to us as an institution and this is going to be a key driver for us. And we believe our customers are going to very much enjoy this capability.”

Coming to a card near you BMO and MasterCard have begun rolling out Identity Check with corporate cards issued to BMO employees in Canada and the U.S. as of late March 2016. The objectives for this first phase include establishing and improving best practices in corporate environments, developing better protection against potential fraud and continually

“By snapping a selfie or scanning a fingerprint, the person becomes the password.” “Mitigating the risk of fraud is always our top priority, and the inclusion of this technology is going to make payment authentication easier and strengthen the security of the entire payments ecosystem,” said Steve Pedersen, vice president, head, North American corporate card products, BMO, in a release. Beyond enhancing security, Pedersen also hopes that customers will enjoy using the app. “I look at this as a customer experience driver in particular,” he noted at a media

minimizing the need for customer service inquiries. While no further launch dates have been announced, more cardholders may have the chance to try Selfie Pay this summer. “I don’t characterize this as a pilot, I characterize is as a soft launch,” says Pedersen. “We are very comfortable with the tool. We are going to go through the normal shake out phases of any new product launch. But this is for Bank of Montreal a soft launch.” may/June 2016


Contactless payments take off in Canada


he value of contactless payments made by consumers in Canada more than doubled over the past year, according to a new study published by Technology Strategies International Inc. The report titled, Canadian Payments Forecast – 2016, estimates that the value of contactless payments transactions increased by about $30 billion in 2015, on the back of more than 1.2 billion transactions. “The contactless market has evolved to the point where consumers are frustrated if the merchant doesn’t accept contactless payments,” says Christie Christelis, president of Technology Strategies International. “A number of merchants have found it necessary to place signs on their POS terminals apologizing for the inability to accept contactless payments.” Contactless acceptance is, however, growing rapidly, but the report suggests that consumers expect contactless POS terminals to be ubiquitous, and in particular at grocery stores and supermarkets, the most popular category for contactless may/June 2016

payments Other barriers to contactless payments are the lack of availability of contactless debit payment cards, especially amongst BMO customers, forcing them to use credit cards or switch banks if they want to join the ‘tap’ revolution using their debit cards. “Only about one in six people who own contactless payment options do not use them,” Christelis says. “And people are using their contactless payment cards more and more frequently, approaching three times a month, on average.” Mobile payments at merchant outlets will make use of the same acceptance infrastructure as contactless payments, he says, and the rapid uptake of contactless payments amongst consumers will make the switch to mobile contactless payments fairly easy when the time is right. “At the present time the mobile payments landscape has not yet evolved to the point where it is easy for a consumer to embrace mobile payments,” says Christelis. “NFC phones still have to make their way into the market en masse, and while some mobile payment options do exist, they don’t work seamlessly for every customer, on any phone, with any payment credential, over any network.” Apple Pay’s recent announcement that it will work with major banks in Canada, rather than just American Express, to bring mobile payments to market for iPhone users will undoubtedly have an impact on the market, he says, but it will take some time before this and others like Samsung Pay and Android Pay will filter through to consumers and achieve mainstream adoption. The report predicts that the mobile

payments landscape in Canada will change dramatically within the next five years, with more than three quarters of the smartphones in Canada having NFC capability by 2020, and major financial institutions and other key players releasing mobile wallets and applications that are more in line with consumer needs than the current slew of offerings. Additional highlights from the study are: • Debit and credit card payments accounted for more than 60 per cent of personal consumption expenditure in 2015. • Debit card transactions and credit card transactions will exceed cash transactions in 2016 and 2020 respectively. • Cash usage is declining, but at a relatively low rate. • Smart phone penetration is likely to reach 90 per cent by 2020. • Online payments continue to experience high growth. • The usage of Bitcoin has doubled over the past year. The 260-page report provides a comprehensive review, analysis and forecast of consumer payments in Canada. It draws on established statistical sources as well the Canadian Consumer Payments Survey, 2016, conducted by TSI amongst more than 2,000 consumers. The report identifies high growth segments in the Canadian payments market in the context of some important recent developments in the economy, regulatory environment and the industry. Detailed forecasts are presented for credit card payments, debit card payments, cash payments, cheque payments, contactless payments, prepaid cards, gift cards, P2P payments, remittances, online payments, mobile payments, bill payments and transfers, ABM installations and POS terminals. PAYMENTSBUSINESS



Finance professionals concerned about payments fraud as more transactions become paperless TD Bank survey finds electronic payments are business critical, but years from adoption


ayments fraud presents a growing challenge for corporate treasurers and other finance professionals, according to a recent survey conducted by TD Bank, America's Most Convenient Bank, at the NACHA–-The Electronic Payments Association PAYMENTS 2016 conference in Phoenix, Arizona. Eighty-eight per cent of attendees surveyed believe that payments fraud will become a bigger threat to the financial services sector over the next two to three years. Despite this anticipated increase, just one in 10 attendees felt that an effective solution currently exists. “Even as the threat of payments fraud increases, many firms are not ready to thwart what could be an influx of cases within the next 24 months,” said Rick Burke, head of corporate products and services, TD Bank. “Corporate treasurers need to have 6


conversations with their banking partners to establish controls within their payments processing and accounts, and find better ways to implement layered defenses and detect fraudulent activity.” Increasing vigilance over payments security will be essential as more organizations shift their payment activities from paper to electronic. One in five survey respondents said their companies already have a paper-free payments system in place. Meanwhile, 32 per cent said they expect to implement this in their companies within the next one to two years, and 42 per cent believe becoming paper-free will require three or more years. Although they are several years from incorporating entirely paper-free transactions, nearly half (49 per cent) of NACHA PAYMENTS attendees said realtime payments processing is critical to their

business. An additional 47 per cent view the capability as nice to have, but not yet essential. Respondents also stated selfservice and mobile commercial finance capabilities are a priority, with 74 per cent identifying such capabilities as very important to their business. As finance professionals become more adept at using self-service and mobile banking tools in their personal lives, it is likely they will begin to expect them from their commercial banking partners. “As commercial finance professionals look to improve time and process efficiencies and manage cybersecurity threats, they should look to collaborate with their bankers,” Burke said. "The faster payments move, the riskier they become, so it will be critical for financial institutions to continue to provide both education and new solutions for many years to come." may/June 2016


Industry News

Scotiabank to offer Apple Pay to customers Further to the announcement of the arrival of Apple Pay in Canada, Scotiabank announced that the Bank will add Apple Pay to its line-up of mobile payment options in the coming months. With the addition of Apple Pay, Scotiabank will now offer customers a mobile wallet service on almost any device. “Canadians are highly mobile-engaged and are looking for secure and simple technology solutions that provide them with access to their financial information anytime, anywhere,” said Brian McCabe, vice president of day to day banking at Scotiabank. “Scotiabank is committed to delivering innovative, safe and secure mobile payment services to our customers, and we look forward to adding Apple Pay to our line-up of mobile solutions.” Scotiabank is investing heavily in technology to better serve our customers and exceed their expectations. Delivering a world-class customer experience is critical to maintaining and growing our customer base now and in the future. Mobile banking solutions are the fastest growing banking channels at Scotiabank.

Scotiabank recognized for best digital strategy Scotiabank has been recognized by Retail Banker International as the Global Bank with the Best Digital Strategy for 2016. This is the first time Scotiabank has received this recognition. “We are very proud to be recognized by Retail Banker International for our strategy to digitize and simplify banking for our customers across Latin America, Central America and the Caribbean,” said Stacey Madge, senior vice president, international banking, retail and small business. “At Scotiabank, one of our top priorities is to make it easier for customers to do business with us.” Scotiabank is in the process of launching a new online and mobile banking platform in Mexico, Panama and 21 Caribbean countries to make it easier for customers to do business with the Bank. Later this year, and into the next, Scotiabank will offer enhanced and more personalized services to customers such as online advice, tools and pre-approved solutions. These investments are part of a multi-country program to increase primary customer relationships through online and mobile channels. In addition, in January 2016, the Bank launched digital branches in Mexico City with tablets and mobile phones that enable customers to conduct their online and mobile banking, utilize tools to plan for their financial goals and provide feedback on their banking experience. Scotiabank has also introduced tablets for mobile sales officers in Colombia and Chile with select countries in the Caribbean and Central America to follow later this year. These tablets will provide customers with a full digital experience, simplifying the application process while reducing the time to acquire products. Officer productivity is expected to improve by twenty per cent. Winners were honoured at an Award Ceremony on May 19 in London, England, during the 2016 Retail Banker International Financial Innovation Conference. Scotiabank was also acknowledged as a finalist for two other categories: Best Use of Online Banking and Best Mobile Banking Strategy.



Apple Pay now available to Canadian MasterCard cardholders MasterCard has announced it will bring its cardholders Apple Pay, which is transforming mobile payments with an easy, secure and private way to pay that’s fast and convenient. MasterCard credit cardholders banking with Royal Bank of Canada (RBC), Canadian Imperial Bank of Commerce (CIBC), Canadian Tire Bank and ATB Financial can pay with Apple Pay starting in May, and cardholders who bank with BMO Financial Group (BMO) will be able to use Apple Pay in the coming weeks. “We’re excited to work with Apple to bring a new way to pay that eliminates something many of us dislike: carrying a bulky physical wallet. Apple Pay allows consumers to pay with their iPhone—an item most of us wouldn’t think to leave home without,” said Jason Davies, vice president of digital payments for MasterCard Canada. “Thanks to our contactless footprint, our cardholders can tap their Apple devices to pay across the country. This innovation is part of our commitment to offer Canadians convenient, fast and secure payment options.” Apple Pay leverages MasterCard’s safe and secure platform, MDES (MasterCard Digital Enablement Service), which uses the most advanced payment technologies— EMV, tokenization, cryptography and biometrics—to ensure the integrity of cardholder information. When you use your MasterCard with Apple Pay, the actual card numbers are not stored on the device, nor on Apple servers. Instead, a token is created when you load your MasterCard into your device. The token, an alternate 16-digit number linked to the device, will only ever be used when paying with that device. “At the heart of mobile payments is the peace of mind that comes with knowing transactions are protected with the highest level of security. Consumers want the same peace of mind when using Apple Pay that they’ve enjoyed for years with their plastic MasterCard. With the mobile security measures built into Apple Pay, cardholders can be assured that they’re fully protected,” said Davies. Apple Pay is easy to set up and users will continue to receive all of the rewards and benefits offered by credit cards. In stores, Apple Pay works with iPhone SE, iPhone 6s, iPhone 6s Plus, iPhone 6, iPhone 6 Plus and Apple Watch. When paying for goods and services in-store and in-app, Apple Pay is compatible with iPhone 6s, iPhone 6s Plus, iPhone 6, iPhone 6 Plus, iPad Air 2, iPad mini 3, iPad mini 4, iPad Pro and Apple Watch.

may/June 2016

Industry News

PayPal announces ‘Return Shipping on Us’ to help drive online retail in Canada Majority (86%) of Canadians said free return shipping services would make them more likely to shop from a website PayPal has announced the launch of a new Return Shipping on Us service in Canada. By directly addressing a concern of online shoppers, this service aims to boost consumer confidence and help drive online retail by refunding return shipping costs on eligible online purchases within Canada and around the world. A study from Ipsos reports that 40 per cent of Canadians are worried about ordering the wrong item online and not being able to return it. A further 27 per cent said they have been forced to pay for shipping back items in the past year, with the majority (65%) saying it cost them more than $10 each time. “Canadians are warming up to online shopping, but uncertainty around returns can make people think twice about clicking the buy button,” says Kerry Reynolds, head of

consumer marketing, PayPal Canada. “With our new service, we are providing people with an option to return items purchased online that don’t fit or match their expectations.” Return Shipping on Us also benefits Canadians who shop from international websites that they might not be familiar with. PayPal’s Cross-Border Consumer Research 2015 revealed that 10.7 million Canadians engage in cross-border online shopping, with 38 per cent saying that if free return shipping was offered, they would be more likely to buy online from another country. A quarter of Canadians who shop from international websites, and nearly 40 per cent who do not shop cross-border, mentioned that return shipping costs are holding them back.“ Canadian e-commerce is expected to grow by eight per cent in 2016 to $34.5 billion*. With

online retail competition heating up locally and internationally for Canadian businesses, Return Shipping on Us is a competitive differentiator,” Reynolds added. “Our investment in this service is a potential revenue driver for smaller online sellers who can’t afford to offer free returns to their customers.” PayPal now offers Return Shipping on Us in nearly 40 countries. In Canada, the service allows up to 10 refunds on eligible online purchases per calendar year. Canadian shoppers who are unsatisfied with their purchase and have opted-in to the service will now be able to request a refund on return shipping costs within two weeks of mailing the return. Return Shipping on Us is available in Canada today. PayPal users need to register for the service on: *Source: PayPal Cross-Border Consumer Research 2015

Securing Mobile Life. Creating Confidence. Giesecke & Devrient offers a comprehensive range of secure payment products and solutions based on the latest EMV, Mobile and Cloud technologies. The G&D solutions portfolio includes state-of-the-art operating systems for secure elements and payment applications for m-commerce and transit. G&D provides personalization services, system integration, project management and technical consulting from a single trusted source.

may/June 2016



Industry News

RBC wins Best Payment Innovation and Best Use of Data Analytics RBC is honoured to once again be recognized by Retail Banker International (RBI) in its annual awards competition, by winning Best Payment Innovation and Best Use of Data Analytics for 2016. “We’re proud to be recognized on the world stage for providing an exceptional experience for our clients,” said Jennifer Tory, group head, personal & commercial banking, RBC. “By developing innovative products and using technology in new and ground breaking ways, our team is focused on delivering solutions that make our customer’s lives easier and more convenient.” “RBC's focused investment in emerging payment infrastructure has allowed it to become an industry leader and set the standard for secure mobile payment solutions,” said Douglas Blakey, group editor, consumer finance titles, Timetric. “The bank has also developed leading-edge data analytics, which allows it to intuitively meet the needs of its clients.”

Best Payment Innovation Award As a market leader in the payments space, RBC is committed to providing convenient and secure payment solutions that allow clients to make payments how, when and where they want. The award recognizes RBC’s overall payment innovation strategy and highlights the 2015 launch of Host Card Emulation (HCE) technology—the first fully cloud-based payment solution offered by a North American financial institution. Leveraging the patented RBC Secure Cloud, HCE is a flexible technology that can turn any mobile device—such as smartphones or wearables—into a secure and simple-to-use payment device. It is the foundation of our mobile payment offering and the gold standard in mobile security and convenience worldwide. RBC continues to be on the leading edge of pioneering payment solutions. The launches of free e-transfer payments and Apple Pay earlier this month are recent examples of RBC’s ongoing leadership and commitment to providing innovative solutions that meet our clients’ evolving needs, especially as they integrate digital and mobile in to their lives.



FinTech study will examine innovation in the Canadian financial services sector The Competition Bureau has launched a market study into technology-led innovation in the Canadian financial services (FinTech) sector. FinTech companies are using technology to change the way that Canadians consume financial services, such as making payments or transfers, investing and borrowing funds. At the touch of a screen on your tablet or smartphone, FinTech innovation can reduce costs and facilitate direct transactions without the need for intermediaries. These innovations provide more choice by unbundling existing products and services and introducing new ones: they can result in more efficient services, lower fees and greater savings for Canadians. “The FinTech market study that I am launching today will provide guidance to the Bureau and regulators, to nurture an environment that allows Canada’s FinTech companies to innovate, grow and compete globally,” said John Pecman, commissioner of competition. The FinTech sector is evolving rapidly as new products and services are being unveiled and the number of start-ups entering the industry grows. FinTech has the potential to disrupt the financial services sector, spur innovation and generate benefits for individuals and companies across Canada. The Bureau’s market study will focus on how innovation is affecting the way consumers and businesses use financial products and services. The study will explore the competitive impact that FinTech is having on the industry, barriers to entry faced by companies, and whether there is a need for regulatory reform to promote greater competition while maintaining consumer confidence in the sector. Interested stakeholders are invited to make a submission to the Bureau.

Quick facts • In 2014, the financial services sector accounted for approximately 10 per cent of Canada’s gross domestic product. The banking sector alone employs over 280,000 Canadians. • The study will examine peer-to-peer banking, e-wallets, mobile wallets, mobile payments, crowdfunding and online-based financial advisory services. • As part of its mandate, the Bureau participates in a wide range of activities to promote and advocate the benefits of a competitive marketplace. • Greater competition leads to innovation that can result in lower prices and increased choice for consumers.

To send press announcements, please direct them to Sarah O'Connor, Managing Editor, at

may/June 2016

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Open-loop prepaid cards


New data substantiates open-loop prepaid market opportunity in Canada By Jennifer Tramontana


he mass adoption of technology has led to a digital revolution in financial services and an uptick in emerging payments solutions such as open-loop prepaid cards—all creating new financial solutions for consumers and businesses. According to MasterCard, the global prepaid market is expected to reach $822 billion USD by 2017, with mature and diverse products serving consumers, businesses and governments. A close collaboration between technology companies and banks is to thank for this boom in prepaid. Canadians are already embracing open-loop prepaid. According to a survey conducted by Leger for the Canadian Prepaid Providers Organization (CPPO) in 2015, consumers reported a higher level of satisfaction (73 per cent) with reloadable open-loop prepaid cards than Americans, where there is a 70 per cent satisfaction rate. Canadians cited their quest for secure and convenient ways to manage their finances, budget and reduce debt as benefits of openloop prepaid products. Building on its prepaid benchmarking work in the U.S., Mercator Advisory Group turned its sights north to look at the size and potential of the open-loop prepaid market in Canada. Mercator 12


worked with the CPPO to develop a survey, create a taxonomy of the Canadian open-loop prepaid market and identify the key players. The information gathered from issuers was used to create an estimate of the total market size. While the market is smaller than the U.S., as would be expected, the information gathered suggests that it holds great opportunities. Here is what the benchmark study entitled, Canadian Open-Loop Prepaid Market: 2015, found: • The open-loop prepaid card market in Canada reached $3.1 billion CAD in total dollars loaded onto cards. • The Canadian open-loop prepaid market has eight active segments compared to 17 in the U.S., showing significant growth opportunity for prepaid programs in Canada. • General purpose reloadable card loads total $1.84 billion CAD (the average load per card is $2,016 CAD). • Open-loop gift card loads total $1.03 billion CAD (the average load per card is $83 CAD). • The average load onto consumer-funded prepaid cards is $218 CAD. • The average load onto corporate-funded prepaid cards is $125 CAD. May/June 2016

open-loop Prepaid cards • The average load onto corporate-funded cards used for consumer and employee/partner incentives is $110 CAD. The data demonstrates that the open-loop prepaid market in Canada is established and has potential for growth. The Canadian market is expected to follow U.S. trends, where open-loop prepaid cards are the fastest-growing form of electronic payment. Mercator Advisory Group reported that the total load value in the U.S. reached $264 billion USD in 2014. What began as a tool to help underbanked consumers in the U.S. quickly grew into 17 segments of open-loop prepaid offerings, including: disaster relief, insurance, payroll, corporate incentives and more. Prepaid will likely continue to proliferate across Canada because it fills gaps in the current payment system by offering a more efficient and costeffective tool for a variety of situations. Young people in particular are asking for these user-friendly products that allow them to control their spending, set budgets, avoid credit card debt and participate in the economic mainstream even without a bank account. For example, Koho, launching later this year, will offer a prepaid solution that allows its users several options to manage their finances online or via a mobile app, including: direct deposits, bill payments and electronic money transfers—all for free. It utilizes built-in budgeting tools that can be particularly useful for the younger demographic that Koho is targeting. Employers are also benefiting from the business uses of prepaid cards for corporate disbursements and employee incentive programs. Benefits Canada recently revealed that 60 per cent of Canadians say their employer’s rewards program does not motivate them to do a good job and employees prefer prepaid cards 16 times more than receiving company-branded merchandise for a job well done. In addition, open-loop prepaid cards lessen company expenses by reducing the number of cheques in circulation. All in all, open-loop prepaid cards provide innovative financial solutions that are steadily being embraced by consumers and businesses. As one of the fastest-growing payment categories in Canada, prepaid is shaping up to be a major player in the Canadian payments ecosystem. Jennifer Tramontana is executive director of the Canadian Prepaid Providers Organization (CPPO). For more information about open-loop prepaid cards, visit the Canadian Prepaid Providers Organization website at May/June 2016



Key theme



May/June 2016

Cross border e-commerce

Navigating the cross-border e-commerce maze By Oren Levy


o you’ve made the strategic decision to embark on global e-commerce. Way to go. But before you start, it is best to understand a basic rule—quite a lot that you know about domestic online sales does not apply to global markets. Practically everything is different—payment methods, currency conversions, taxes, regulations, logistics, holiday seasons and that is just for starters. The way to succeed in cross-border e-commerce is to study your markets carefully and prepare the necessary groundwork. Here are a few key tips to heed when setting out for new, uncharted e-commerce territories.

Achieving effective fraud prevention Fraud prevention measures that you employ domestically are often ineffective or even detrimental in other regions. If you are launching websites for several locations, you need to gauge the risk levels at each site and adjust fraud prevention strategies accordingly. Take this scenario: Your website is successful in Europe, so you’ve decided to launch a new one in the U.S. Potential customers have been making their way through the shopping process only to abandon their shopping carts at the check-out page. What is the cause? An assessment of aggregated transaction data may indicate that your 3D security page, which is familiar to many European shoppers, is arousing fears in U.S. consumers because they are unacquainted with this particular fraud prevention tool. The solution in this case would be to use a different but equally effective fraud screening method that will not scare off buyers. In another location, you might be applying overly stringent fraud prevention strategies that are falsely flagging legitimate transactions. This is likely to happen to retailers who employ highMay/June 2016



Cross border e-commerce level fraud mitigation tools in Canada, where credit card fraud is not widespread. Adjusting the fraud prevention tool will raise transaction approval rates significantly.

Preventing inflated operational costs Whether a payment is domestic or global, each transaction involves a journey through several processing stages and a variety of financial entities, including acquirers and gateways, the banks of both the customer and the merchant (the issuing and merchant accounts, respectively), the credit card scheme and more. Often when processing domestic transactions, retailers are able to achieve optimal payments by using a single acquirer. However, limiting global transactions to one or two service providers can cause cross-border processing costs to spiral and conversion rates to plummet. When going cross-border, you need to work with local acquirers to reduce downtimes, minimize currency conversion fees and maximize acceptance rates.

Managing cross-border logistics One of your top priorities should be to make your new crossborder visitors feel comfortable and secure. In order to generate trust, make the payment aspect more familiar and less complicated by automatically converting prices into local currencies, as well as calculating taxes/duties and factoring them into the price. To streamline sales, minimize the hurdles surrounding international shipments and customs clearance, global order tracking, inventory transparency (i.e. enabling customers to see up-to-date information about what’s in stock and what’s sold out in real-time) and international returns. Add to your potential buyers’ feeling of security by clearly advertising which security measures you are using on your website.

Offering local payment methods Another way to help your potential customers feel at home is to offer regionally preferred payment methods to make them more comfortable about paying on your websites. Just because credit cards are the preferred method of payment in the U.S. does not mean that the same rule applies in other areas worldwide. It is very important to understand payment mentalities in different localities. For example, in the Nordic countries, real-time bank transactions account for up to 35 per cent of the market share. The most popular payment tool is Klarna, which provides payment services for online storefronts, assumes store claims and handles customer payments. In Japan, when it comes to online shopping, payment method mistrust is a big issue. Many customers prefer to pay for online goods with cash at convenience stores called Konbinis. In fact, Konbinis constitute a quarter of the Japanese payment market. In the Russian Federation, due to a deep-seated distrust for the banking system, buyers prefer to use mobile wallets like QIWI for payments. This payment method is similar to a debit card, enabling client self-service and payment via QIWI terminals. Another Russian favorite is Yandex.Money, which performs financial transactions in real time in Russian rubles, enabling online payments and money transfers. 16


IT considerations Every electronic form of payment that you offer requires connectivity to the relevant payment processing organizations and/or banks and needs to be implemented on checkout pages or points of sale. Each form of payment, electronic or not, ultimately needs to be integrated with financial, logistical, customer service and other applications. The IT burden and cost can quickly rise as the number of countries and methods of payment increase. When expanding, you need to consider whether you want to continue managing your payment operations from within the organization, or if it makes more sense to incorporate a comprehensive payment platform that will enable you to scale quickly and integrate easily with other third-party suppliers as you grow.

Global holiday seasons and gift exchanges In the U.S., retailers always go into high gear prior to Thanksgiving, Christmas, Valentine’s Day and other national holidays. But when you are operating websites in other geographical regions, it pays to make the effort to research local holidays and gift-giving opportunities in order to offer suitable merchandise at the right times. Here are just a few examples: For most Russians, the holiday season begins on the Western New Year’s Eve (December 31) and culminates on January 7, the Russian Orthodox Christmas. Family and friends generally exchange gifts on New Year’s Day rather than Christmas, so plan your holiday campaign accordingly. China’s Valentine’s Day is on August 20. Known as the Qixi Festival or the Double Seventh Day, it was originally a time for women to demonstrate their domestic skills. However, today it is celebrated through the gifting of flowers, chocolates and other presents to loved ones. This is a perfect opportunity for merchants to offer attractive and romantic gifts on their websites. In Brazil, Children’s Day is celebrated on October 12, coinciding with Our Lady of Aparecida’s day, which honors Brazil’s patron saint. Many children look forward to this day even more than Christmas. On this day, kids receive presents from their parents and close relatives, giving retailers another opportunity to promote children’s gifts.

The quantum leap from domestic to global Going global is a quantum leap which requires the ability to learn many new aspects about your target audiences’ needs: from taxes, laws and regulations to payment processing, payment preferences, fraud risks and local holidays. Always remember that a system that works in one region may not be acceptable in another. Each location presents a different set of challenges. By proceeding cautiously and preparing accordingly, you can avoid many of the typical cross-border obstacles that most merchants encounter. Oren Levy is an experienced professional with over 15 years' experience in payments, commerce, and global business. Prior to Zooz, Oren was an executive director at Brookline (USA) for 11 years, managing its worldwide sales efforts and strategic partnerships initiatives. Before Brookline, Oren held marketing, business development and technical positions at BATM, Fundtech and L.G.E.S.

May/June 2016

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Payments technology: Continuous innovation & emerging trends By Ryan Stewart


ccording to a recent report from Accenture, global investment in FinTech increased 67 per cent to $5.3 billion in Q1 of 2016 compared with Q1 of 2015. The overwhelming investment in FinTech has created a surge of innovation in a traditional industry. Big banks are now facing fierce competition for the first time, while consumers are getting more confident using disruptive technologies. FinTech is a diverse industry with companies specializing in everything from authentication and security to paying by selfie, through to crowd sourcing loans. While the industry has spiraled into many different directions, underlying trends have emerged that have continued to connect and drive the multiple players in payments.

1. Security & tokenization 2015 was the second highest year on record for data breaches in the U.S., according to the Identity Theft Data Center, keeping fraud prevention and security top of mind for all who handle payments. Before all else, security comes first in the payments industry and will continue to do so as more technologies become cloud based. Tokenization has helped many FinTech companies offer their 18


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Fintech customers a higher level of PCI compliance without the complexities of certification. The benefits of tokenization are strong as it mitigates any risk to the merchant. Specifically in the case of a data breach or a hack where a fraudster steals information from the merchant, as the fraudster is unable to decipher or map any of the details of the tokens, they are rendered useless. Tokenization can be taken a step further with network level tokenization. The token is translated into a credit card number only once it reaches the payment network, meaning that only the issuing bank and the payment network have information about both the cardholder and the transaction. This is inherently more secure than typical tokenization, as described above, with less points of failure in the flow. While network level tokenization is now part of the EMV payment specification and each of the three largest card schemes are supporting it, the first real-world use case was Apple Pay.

2. FinTech FinTech, once regarded as a radical industry, has now overcome consumer fears and regulatory blockers. Even as recently as a decade ago, big banks were part of an exclusive group that had enough resources to handle lengthy compliance applications and negotiate with card associations. Since the financial crisis in 2008, many consumers are looking for alternative technologies to help them handle their finances. While FinTech companies are quick to adapt and innovate, big banks are re-evaluating their strategy for innovation and trying to keep their customers close. Many banks and card associations have started accelerator programs to invest and foster startups’ innovation, while others may adopt an acquisition strategy to keep pace. Visa, the exclusive payments provider for the Olympic Games, has announced their latest push in wearables by providing Team Visa athletes in the Rio de Janeiro games with a wearable ring. Visa hopes to educate the masses by bringing an innovative payment technology into the spotlight at one of the biggest events in the year.

3. One-stop shop Although merchants and consumers are becoming more adept at using new financial tools, they are also scaling back and looking for one solution to fit all their needs. Omnichannel has been a buzzword since 2014, and while the term is ambiguous the results are not. While companies with omnichannel customer engagement strategies retain on average 89 per cent of their customers, companies with weak omnichannel customer engagement retain only 33 per cent. Merchants are looking for a single solution to handle their in-store, online and in-app payments, while consumers are now expecting an omnichannel shopping experience that fits their purchasing lifestyle. As omnichannel facilitates more value to the customer around the payment experience such as loyalty and offers, it will be this additional value that drives adoption. On the merchant side, the opportunity exists for a single point of integration for onboarding, payments and reporting across all of their sales channels. This is May/June 2016

even more important for third party software providers who serve merchants across sales channels and geographic regions.

4. Conversions In 2014 the average online conversion rate was only three per cent. Merchants are losing willing customers due to unnecessary complexities within the payment flow. FinTech, in turn, has responded by making it their personal vendetta to increase conversion rates by trying to remove any and all barriers or friction points. Do you have to tap into the next field in a mobile payment form? Customers will get frustrated. Does the pay button take them to a new page? Customers will abandon. Merchants who can increase their conversion rates by a few percentages can see hundreds if not thousands of dollars in return. As FinTech continues to expand, merchants are picking the solutions that focus heavily on improving conversions, while providing insightful analytics to back it up.

5. Flexibility One of the great things about FinTech players is their ability to innovate and adapt to the market at a speed that traditional providers have not been able to provide. The flexibility and speed of adding new payment experiences such as mobile and in-App SDKs, third party wallets or crypto currencies, can only be found in FinTech. Merchants are now looking for solutions and tools that fit their specialized needs. This means moving away from the cookie cutter solution, as well as the opposite—casting an unnecessarily wide net of providing every payment type under the sun, which only confuses the end user. Solutions that can fit one-to-many are excelling. Future proof tools that automatically update to the latest version with no hassle to the merchant are becoming more commonplace. Partners of FinTech, such as SaaS-based businesses that want to integrate a payment solution, are also looking for flexible payment processors. Payment processors need to be able to connect with multiple merchant account providers, integrate natively into their solution and help solve pain points such as automating merchant onboarding. This type of integrated partnership in particular will drive payments forward in the years to come. Merchants and consumers are expecting more than ever before and FinTech has flourished to meet the need. As big data breaches continue to make headlines, security and data protection will continue to come first. FinTech will continue to see heavy investment and growth, while innovation brings new tools that can help create an omnichannel experience and drive conversions. FinTech companies that show the most true value in the eye of the end user will see a higher return and a longer customer lifetime, while archaic solutions will lock themselves out. One thing is for sure; FinTech will continue to innovate. A new era of payment technology lies ahead—can you keep up? Ryan Stewart is head of product development, North America for Beanstream, a Bambora Company. He is passionate about payment products and also the dynamic payments industry, where he has lead the rollout and launch of many products, including Beanstream USA. Ryan has been in the payments industry for over 15 years. PAYMENTSBUSINESS


2016 Industry Events

March March 7-9 BAI BAI Payments Connect Conference San Diego, CA March 22-25 Mobile World Congress Barcelona, Spain

April April 4-7 ICMA Annual Card Manufacturing & Personalization Expo Orlando, FL April 5-7 Smart Card Alliance 9th Annual Payments Summit Orlando, FL April 6-7 9th Annual Prepaid & Payments Retreat Toronto, ON April 6-7 Payments Awards 2016 Toronto, ON April 11-14 NAPCP Commercial Card and Payment Conference Orlando, FL April 17-19 NACHA, The Electronic Payments Association, Payments 2016 Columbus, OH April 19-21 Electronic Transactions Association 2016 ETA Annual Meeting & Expo Las Vegas, NV April 27-29 NBPCA Annual Congress-The Power of Prepaid 2016 Washington, DC

April 28-30 Central 1 Credit Union Central Conference Toronto, ON

MAY May 5-7 Cartes North America 2016 Washington, DC May 10-11 Finovate Spring Conference San Jose, CA May 12-13 FC Business Intelligence Analytics for Insurance Canada Summit Toronto, ON com/canada/ May 16-17 WB Research eTail Canada 2016 Toronto, ON May 17-20 IFO Fusion 2016 Forum & Expo Reno, NV May 31 - June 2 Credit Scoring & Risk Strategy Association 22nd Annual Conference Muskoka, ON (TBD)

June June 7-10 Internet Retailer IRC&Exhibition 2016 Chicago, IL June 8-10 FEI Canada Annual Conference Montreal, QC June 14-15 ACT Canada Cardware 2016 Niagara Falls, ON

June 15-17 Canadian Payments Association Payments Panorama Calgary, AB June 17-18 ATMIA Canada Annual Canadian Conference 2016 Toronto, ON June (TBD) NBPCA Annual Congress-The Power of Prepaid 2016 National Harbor, MD (TBD) June (TBD) EMV User Meeting 2016 EMVCo Kuala Lumpur, ML (TBD)

July July 31 - August 3 Retail Solutions Providers Association RetailNOW 2016 Orlando, FL

September September 25-27 American Bankers Association Marketing & Retail Conference Nashville, TN September 26-29 Sibos Annual Conference 2016 Geneva, Switzerland September (TBD) IFO Canada 6th Annual Canadian Financial Operations Symposium Vancouver, BC September (TBD) Women in Payments™ Symposium & Women in Payments™ Awards Toronto, ON

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October October 4-6 Members Meeting Smart Card Alliance Phoenix, AZ October 13-15 BAI BAI Retail Delivery Conference 2016 Las Vegas, NV October 23-26 Money20/20 Las Vegas, NV October 23-26 Association of Financial Professionals AFP Annual Conference 2016 Orlando, FL October TBA Smartcard Alliance NFC Solutions Summit 2016 Phoenix, AZ October (TBD) Canadian Automatic Merchandising Association CAMA Expo 2016 Quebec City, QC (TBD) October TBA 2016 Global Finance Conference For Finance Executives Toronto, ON October TBA Everlink Client Conference CONNECTIONS 2016 Toronto, ON

November November TBA Comexposium CARTES & Identification Exhibition 2016 Paris, FR

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may/June 2016


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Payments Business Magazine May/June 2016  
Payments Business Magazine May/June 2016