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Cracking open payments opportunity with analytics also in this issue:
❱ Debit card fraud: What’s in store for 2014? ❱ B2C takes a page from the B2B payment security playbook
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November/December 2013 Volume 4 Number 6 Editor Amy Bostock email@example.com Publisher Mark Henry firstname.lastname@example.org Contributors Lori Bieda, Oliver Denis, Michael Grillo, Rick Ricker Creative Direction Jennifer O’Neill email@example.com Photographer Gary Tannyan Advertising Sales Reps Brent White firstname.lastname@example.org Chantal Goudreau email@example.com President Steve Lloyd firstname.lastname@example.org 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 email@example.com www.paymentsbusiness.ca Subscriptions available for $40.00 year or $60.00 two years.
COLUMNS & DEPARTMENTS 4 News 22 Industry Events FEATURES
Fraud: What’s in store for 2014 Or how I learned to stop making predictions
Security, Fraud & Privacy B2C takes a page from the B2B payment security playbook
Leveraging SEPA Why the SEPA migration is much more than a European compliance headache
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24 Association News 25 Industry Highlights
Cover story: Cracking open payments opportunity with analytics
Technology update Delivering exceptional in-store experiences Next issue…
January/February — Protecting your business from growing worldwide threats; Insider Report on ATMs & ABMs November/December 2013
Key theme News
Google Wallet adds loyalty features with app update Google has released the newest version of its Google Wallet app for Android, a Google blog post revealed. Users of the mobile platform will now be able to send money to a wider network, store loyalty cards and take advantage of offers. The new app gives users the ability to send money to anyone in the U.S. who meets certain conditions. Recipients must be 18 years old or older and have a valid email address. To receive funds, they need to use a Google Wallet, a bank account or credit or debit card. With the update, Google Wallet is now integrated with Google Offers, a move that positions Google Wallet to compete with Apple’s Passbook. Apple is expected to unveil a new Passbook update with the launch of iOS 7. Though many of the new services are not unique to Google Wallet, TechCrunch said Google Wallet’s latest app represented “a major upgrade” for the Google service, which has struggled to gain traction with consumers since its release in 2011.
70% of Canadian smartphone owners use financial apps, report finds Out of 68 percent of Canadians owning a mobile device, 70 percent are using apps to manage their finances on the go, a recent study reveals. According to the ‘Mobile Banking Survey’ released by North American financial services organization BMO Financial Group, two-thirds (69 percent) of Canadian consumers who admitted to using financial apps have added that they began using them around 2012. Of those who use mobile apps for banking-related purposes, the study shows that they use them frequently, with nearly three-quarters of Canadian respondents saying they use them on a weekly or daily basis. The most popular tasks performed by consumers using a mobile banking app include checking account balances, followed by reviewing transactions, managing bill payments and transferring money between accounts. While only one-in-five consumers currently have a financial app that provides alerts, 27 percent admit this would be one of the most useful features offered by a mobile banking app. Younger Canadians have been the quickest to embrace mobile banking technology, with seven-in-ten of those under 35 years old using mobile banking. This compares to 55 percent of those between the ages of 35-44, 40 percent of those aged 45-54 and 26 percent of those aged 55-64. While mobile banking apps have surged in popularity, concerns about privacy and security among all age groups represent the number one reason why some Canadians are avoiding using the technology.
North American Bancard fights Fraud with Fractals™ from Alaric Protecting more than $13 billion-worth of payment transactions every year Alaric, a global supplier of fraud prevention and payments solutions, has announced that North American Bancard, an industry leader in payment card processing, has selected Alaric’s Fractals™ fraud prevention and detection product, in a competitive pitch for the merchant acquirer’s fraud and risk solution. North American Bancard handles all areas of merchant payment processing, including credit, debit, EBT, check conversion and guarantee, and gift and loyalty cards, for more than 250,000 merchants. With such a diverse portfolio, North American Bancard makes use of a wide range of risk information sources. Alaric’s Fractals product enabled North
American Bancard to bring this information together in one place to make intelligent fraud and risk decisions. Aliki Liadis-Hall, director of compliance at North American Bancard said, “We had stringent criteria when it came to selecting our new fraud and risk system. We needed to be able to manage our fraud risk exposure across mobile POS, e-commerce and traditional retail channels with a single system. Fractals from Alaric met all those criteria, including the ability to customize the system and build our own rules, the management reporting and the rules engine. But perhaps more important than anything else, we had absolute confidence in the
people and Alaric’s ability to deliver the best solution.” “North American Bancard is committed to staying at the forefront of modern business thinking, prizing itself on consistently offering highlycompetitive pricing, and exceptional customer service,” said Peter Parke, General Manager, fraud solutions at Alaric. “We were confident going into this process that Fractals would stand out from the crowd, and we are delighted that the team at North American Bancard selected Alaric to help keep fraud levels as low as possible, ensuring that these savings could, in turn, be passed on to its customers.”
Fractals is an intelligent fraud detection and prevention framework suitable for PSPs, online merchants, card issuers, acquirers and payments processors. When used ‘in-flight’ illegal transactions can be detected and stopped before a transaction is completed. Proprietary mathematical models incorporate selflearning allowing the model to automatically adapt to new fraud trends and retain its effectiveness. The Fractals Rules Engine enables fraud analysts to create and deploy powerful fraud detection rules within minutes, delivering substantial reductions in fraud losses.
Key theme News
Plastiq enables Canadians to conveniently meet university and college fee deadlines via credit card Plastiq Inc., the online payment platform, is pleased to announce a successful treatment for Distracted Parent Syndrome (DPS), which often results in missed tuition and residence payments for Canadian post-secondary students nationwide. As nearly 42.5 per cent of Canadian students will fail to meet tuition deadlines this year*, Plastiq now provides an under the wire option to make these secure payments online with a preferred credit card. “Distraction is something mankind has been coping with since the beginning of time, but nowhere are the effects of DPS more pronounced today than among the parents of post-secondary students,” said Eliot Buchanan, Co-founder and Chief Executive Officer of Plastiq. “With Plastiq, parents no longer need to take time out of their day to make a frantic after-hours trip to the bank, or worse yet, risk that their child will be unable to attend their program due to missed tuition payments. With the fall tuition deadlines approaching, Canadians can now make these transactions through Plastiq using their preferred credit card, providing not only a much more convenient payment option, but also the added bonus of capitalizing on the rewards offered by the card provider.” Educational institutions provide deadline information in correspondence addressed to students, leaving the parents to rely on their children for timely updates. If these symptoms seem all too familiar, DPS may be the culprit: • Information often mentioned in passing (as the child is leaving for hockey practice, or exiting the vehicle in the front of the school) • Countless piles of receipts with information and key dates scribbled on the back • Numerous text messages in the ‘draft’ folder... with the intent of hitting SEND • Fridge family calendar full of activities and appointments • Failure to hit SAVE after setting smartphone reminders • The new season of Criminal Minds/Grey’s Anatomy/NHL As of right now, students and parents will have the option to make tuition and residence payments through Plastiq to any Canadian post-secondary institution. For a fee of 1.99 per cent per transaction, Plastiq allows transactions from anywhere in the world, 24/7 and from any internet-enabled device using any MasterCard or Visa credit card. Payment through Plastiq can substantially alleviate the effects of DPS and the company is encouraging Canadians to take note of the solutions. **All stats and figures in this press release are satirical in nature and Distracted Parent Syndrome has not been identified by Health Canada.
Moneris launches PAYD PRO, Canada’s first debit-enabled mobile payment service
Mobile app and Bluetooth® companion device turn smartphones into secure point-of-sale solutions Moneris Solutions Corporation Canada’s largest debit and credit card processor, today announced the launch of PAYD PRO, Canada’s first debit-enabled mobile payment solution using chip & PIN technology to process payments on the go. PAYD PRO expands Moneris’ small business payment offerings, giving merchants an opportunity to accept debit and credit card payments on the go through chip and PIN, magstripe or contactless technology using their smartphone device anytime, anywhere. “At Moneris, we are proud to be the first payment processor in Canada to empower small business owners with the ability to process debit card transactions anywhere they do business,” said Jeff Guthrie, Chief Sales and Marketing Officer at Moneris. “Canadians increasingly expect to have the freedom to choose any payment option they find convenient, with any type of a merchant organization, big or small. We are committed to bringing innovative, effective and secure solutions to merchants of all sizes, including smaller service providers, such as artisans, photographers, personal trainers and contractors.” In contrast to existing mobile POS solutions that plug directly into a smartphone, PAYD PRO is a mobile application that uses Bluetooth technology to connect a lightweight and portable companion device to any Apple® iOS and Google® Android™ smartphone. PAYD PRO offers a suite of mCommerce management tools to meet the growing needs of Moneris’ small business merchants, including the ability to track all transactions from their mobile device and send receipts via email. PAYD PRO, supported by the security of Moneris’ PAYD, encrypts card data at the time of transaction and allows merchants to easily access their transactions, accounts and history in a secure manner. In addition, the portable device leverages Bluetooth encryption to provide a secure connection, while prohibiting unauthorized devices from accessing the tool and the information channeled through it. Moneris’ PAYD PRO service will be available in February 2014. For more information, and to register for PAYD PRO, please visit getpayd.com/pro. PAYMENTSBUSINESS
Security, fraud & Privacy
Fraud: What’s in store for 2014?
Or How I learned to stop making predictions By Michael Grillo
t’s that time of year again. As a payments industry, we take stock of and evaluate which of our prior year’s predictions came true and which ones were really off the mark. Whether we’re talking about technology, fraud or consumer trends, everyone loves to prognosticate about what’s in our future or what’s the next big thing. Since my crystal ball is on loan at the moment, let’s start off with what we do know. According to Interac1, debit card fraud in Canada has been on a steady and sometimes dramatic decline since 2009, while the total number of debit transactions has risen equally as dramatically. Debit card fraud has dropped a whopping 73% from a high of $142.3M in 2009 to $38.5M in 2013. Conversely, the number of debit transactions has increased nearly 19% from 3.7M transactions in 2009 to almost 4.4M transactions in 2013. Even though debit transactions have grown at a slower pace than the decline of fraud
transactions, I think it’s safe to say that Canadian banks, retailers and consumers are the benefactors of smarter payments fraud prevention strategies from the institutions. The broader adoption of EMV through the national rollout in 2008, followed by the shift in liability, has prompted issuers, acquirers and merchants to get on board. National consumer awareness has also supported the decrease in debit fraud. Earlier this year, the Nilson Report2 identified that general purpose cards in Canada (Interac, Visa, MasterCard, and Amex) experienced a 7.2% increase in purchase volume and a 9.8% increase in total transactions when comparing 2011 to 2012 activity. Perhaps the economic recovery is giving people confidence to spend more? But how long will confidence last when fraud hits? I said I wasn’t going to make predictions, but if pressed I would say the following areas will
continue to keep the fraud and security departments at financial institutions or retailers awake at night in 2014: • Card-not-present fraud /e-commerce/merchant fraud – As the US draws closer to the EMV deadlines, the last bastion of traditional card fraud will move to the online/card-notpresent realm in other regions. The card-not-present approach will continue to focus on the increases in online shopping and gaming. According to Forrester3, 60% of all retail sales in the US will involve Web access by 2017. This upward trend will likely follow similarly in other mature markets. • Distributed denial of service (DDoS) – Going beyond hactivists making a point against the establishment, these incidents are proving to be distractions for more sinister activity like taking control over wire systems and making
Debit card fraud has dropped a whopping 73% from a high of $142.3M in 2009 to $38.5M in 2013. Conversely, the number of debit transactions has increased nearly 19% from 3.7M transactions in 2009 to almost 4.4M transactions in 2013. 6
Security, fraud & Privacy
fraudulent transactions. This is already happening to your neighbors to the south. Google: FBI warning Dirt Jumper. • Digital threats/cybercrime – Malware, phishing/smishing and the like will continue to be pervasive and adaptive. Mobile malware will continue to attract attention and given the fact that more than an estimated 68% of smartphone users plan to shop via mobile this holiday season4, the opportunity will only get bigger. While they may not all be headline-worthy (well, any one of them could be depending on the nature of the event), fraud by nature attracts interest of the public and private sectors. In fact, with the help of social media and the immediacy and ease of sharing information in today’s world, fraud is one of those topics that consumers and businesses are both acutely more aware of these days. Any publicized incident of fraud can cause angst, harm reputation, impact customer satisfaction, and impact the bottom line. The nature of fraud is to continue to poke at and find holes in the armor (think weakest link). Financial institutions, retailers and government entities are best served by working together, sharing information where appropriate and educating their customers and communities. Continued investment in and maintenance of authentication protocols, transaction monitoring systems, IT security and compliance solutions will continue to be required by banks and retailers to avoid
losses, negative publicity and fines. I’d love to predict that fraud rates will continue to decline across the board in 2014. But as I stated, my crystal ball is on loan, so I’ll just wish that one
for now. Either way, I’ll continue to look for the headlines like the rest of you.
http://www.interac.ca/en/stat-fraud http://www.nilsonreport.com/ 3 Forrester 4 Deloitte, 2013 Annual Holiday Survey 1 2
Michael Grillo is Senior Product Marketing Manager at ACI Worldwide
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Security, fraud & Privacy
B2C takes a page from the B2B payment security playbook N By Rick Ricker
ot a day goes by without another startup urging consumers to abandon the plastic and cash in their pockets and purses and join the “mobile wallet revolution.” But so far, concern over security is one of the biggest obstacles preventing mobile payments from catching on in the United States. Many consumers worry mobile payments open up a new frontier for fraudsters. In a recent survey of mobile device users in North America, enterprise software company SAP found that 36% of all respondents believe mobile payments aren’t safe and that their personal or financial information could be intercepted during a transaction. While securing mobile payments remains uncharted territory for many North American banks and service providers, Canada has embraced Europay-MasterCard-Visa (EMV) chip-and-PIN cards, which are embedded with a microchip and require a user to enter a PIN at the point of sale to validate the authenticity of the card and the
cardholder during a payment transaction.
and-PIN technology that could enable cloning of the cards.
NFC, EMV security risks
Tokenizing B2C mobile payments
Studies have found EMV as well as near-field communication (NFC) technologies have gaping security holes that make them risky for mobile payments. Accuvant Labs recently detailed a number of NFC vulnerabilities on mobile phones, which could allow attackers to parse images, videos, contacts, office documents, and even open up web pages in the browser, all without user interaction. In some cases, Accuvant found it was possible to completely take control of the phone via NFC, including stealing photos, contacts, even sending text messages and making phone calls. The presumed iron-clad security of EMV cards, which are widely used today throughout Canada and Europe and touted as a means of preventing payment fraud, was also debunked last year by Cambridge University researchers who discovered a vulnerability in chipNovember/December 2013
So, if NFC and EMV don’t provide durable security for consumer mobile payments, what’s the alternative? Visa, MasterCard and American Express recently borrowed a page from the B2B payment security playbook by recommending a global standard for the B2C market that would replace traditional credit card numbers with a token for online and mobile transactions. The card brands propose that the token replace the card’s 16-digit primary account number (PAN) found on the front of debit and credit cards whenever consumers use their cards to make a purchase using their mobile phones in a brick-and-mortar store or over the Internet. “Once standards are agreed to and implemented, merchants, issuers and digital wallet providers would be able to request a token in place of a
Security, fraud & Privacy
shopper’s account number,” the card brands stated in their press release. “The token would be used to process, authorize, clear and settle the transaction in the same way account numbers are used today. Tokens could also be restricted to use with a specific merchant, device, transaction or category of transactions.” Besides tokenizing consumer mobile payments, the card brands are also proposing to capture new data fields about each purchase transaction to help “improve fraud detection and expedite the approval process” as well as apply “consistent methods to identify and verify a consumer before replacing the card number with a token; and a common standard to simplify the process for merchants to offer contactless, online or other digital transactions.”
How B2B tokenization works Payment tokenization is not a new idea. For thousands of enterprises in the United States, tokenizing credit card data has proven to be affordable, easy to use and highly secure for the past 10 years – ever since 3Delta Systems pioneered this technology in 2003. The concept behind tokenization is remarkably simple: cyber criminals can’t steal data that isn’t there. Tokenization replaces original card PANs with a unique, randomly generated token value. This process completely removes actual cardholder account information from a merchant’s environment, much like emptying a warehouse so a thief has nothing to steal. The original credit card data is then
stored at a highly secure, offsite location. Properly implemented, tokens have no meaning by themselves and are worthless to criminals if a company’s system is breached. For example, if someone’s real credit card number was 2123 3456 5678 6789, it might become EGHV234AUD54367 when a token is generated. Because the token is produced by a token generator that is independent of the card account number, there’s no algorithm to regain the original card number, so crooks can’t reverse-engineer or decrypt the actual credit card number, even if they were to grab the tokens off a server. Using tokens doesn’t change a merchant’s payment processing experience with their customers. Just like real credit cards, tokens can be used for customer sales, refunds, voids and credits. Merchants use only the token to securely retrieve, access or maintain their customers’ credit card information. Tokenization is well-suited for card-not-present transactions, particularly where merchants have repeat billing, such as card-on-file and e-commerce situations. Since EMV is already used throughout Canada for all card-present transactions, tokenization solutions for cardon-file processing would make the most sense for Canadian businesses seeking to improve their security posture.
Payment data security standards today Established payment card industry security standards don’t allow merchants either in the U.S. or Canada to retain customer credit card data on November/December 2013
their point-of-sale terminals, internal databases or network systems. Like their U.S. counterparts, all Canadian merchants who accept, transmit, process or store credit card data online, in a store, by phone or by mail must certify each year that their IT security and processes comply with 12 rigorous Payment Card Industry Card Data Security Standard (PCI DSS) requirements.
Devil’s in the details The global B2C tokenization standard the card brands unveiled is woefully short on details but long on promise. But the devil’s in those details, and many open questions remain. Whose “existing industry standards” would the global version be based on – the card brands’ own standards, PCI-DSS or guidelines in other countries? If the card brands issue a onetime token tied to a consumer’s
To demonstrate PCI compliance, merchants must conduct comprehensive security audits across all their systems every year. Companies that collect and keep credit card data themselves often find PCI compliance to be a huge headache with potentially significant liabilities and costs rather than a convenience for their customers. To demonstrate PCI compliance, merchants must conduct comprehensive security audits across all their systems every year. Because every point at which credit card data is handled must be secured, conforming with PCI DSS rules as well as building and defending one’s own data fortress can become extraordinarily difficult and prohibitively expensive. Many businesses instead outsource their tokenization needs to a third-party service provider. It then becomes the provider’s responsibility to keep merchant cardholder data locked down.
original card account, would they retain the original card data and be responsible for safeguarding it? Would this global tokenization approach take the wind out of the sails of EMV and NFC technologies already in place in Europe and Canada, and now heading to the U.S. market – especially since merchants who accept EMV and NFC cards already invested heavily in hardware to read the data on those cards? Who will develop, oversee and enforce this global standard? This is an ambitious yet still ambiguous plan. Now begins the arduous task of executing on the idea. Rick Ricker is Vice President of Business Development for Enterprise Payment Solutions. He is responsible for the strategic development and management of the CardVault tokenization service and sales to 3DSI’s enterprise customers that CardVault targets. PAYMENTSBUSINESS
Cracking open payments opportunity with analytics By Lori Bieda
he cards business is no stranger to analytics. Where data exists, it breeds the opportunity for deep insights, and nowhere are banks and retailers richer in client-level data than in their payments divisions.
These teams have been toiling with and monetizing big data for decades. Deep in customerlevel transaction detail, payment frequency, bureau data, and third party data, itâ€™s provided fruitful ground for client-level strategies November/December 2013
and targeted customer contact. For decades, payment groups have led the charge within their organizations becoming the preeminent analytics centres of excellence. Unshackled by the politics and structures which
impeded their line of business counterparts, they were largely afforded the freedom to operate as distinct business units – monolines even – beneath the secure umbrella of the mothership brand. With sufficient access to capital, and the ability to tap into the broader distribution network of their parent, the payments child was free to run wild. And so they did, innovating, devising new ways of targeting and facilitating hundreds of millions of direct client touch points in a year. These teams had the right recipe for innovation: focus, nimbleness, dedicated end-to-end leadership, and a highly competitive and profitable market propelling them forward. And wherever they could, they employed analytics to shape their business decisions. From campaign targeting, to risk-based pricing, to priority call centre routing based on client value, to share of wallet-driven line assignments, analytics coursed through these businesses; the very lifeblood in their veins. Yet as with all great things, continuous reinvention is essential to survive. In a cluttered and cut-throat rewards market, where loyalty companies trade dance partners, where new entrants encroach from every corner (think….telco, retail, payment and new media), where the rush to own the mobile wallet is ever-looming, and where suffocating legislation squeezes once rich margins into thin lines, how’s a payments business to thrive? Could it be that the competitive divide could trace back to one thing: he who uses
data better and faster than the next guy wins? Could the already rich analytics talent resident in these cards teams be broadened to cut across not only cards, but all payment instruments and bank products? Could this same penchant for client-level analytics extend beyond analytics for marketing, and into better integrated analytics between marketing, risk, fraud, collections and operations? And could payments lead this charge? The client experience has been heralded as the strategy and differentiator in the largely parity market which traditional payments companies play in. Rich customer data and client-level analytics is the key to what makes that strategy possible. Cards analytics teams, already highly adept at mining data in most top banks around the world, might well broaden their focus to overall payments for a fuller view of what people buy, what income they take in, bills they pay, and overall cash flows. The credit card provides one piece of the puzzle, the debit card, another. Where credit provides clues to creditworthiness, spend patterns, where people shop (via payment association MCC codes), and overall credit behaviour, debit data is a rich source of income flows, bill payments, and even life stage and preferences if mined well. Moreover, the integration of online data with offline data provides distinct clues into not only what the customer is searching for, but embedded in the click-stream data, indications of where they are in their buy cycle. Recent SAS research suggests that 39% of Canadian financial services firms November/December 2013
will invest in obtaining more online data in the next two years. That’s on top of the 52% who’ve already invested. And increasingly that online data is sourced through a mobile device. By 2015, according to IDC, the mobile device is poised to overtake the desktop as the primary means by which the consumer gets online. So, getting a full picture of consumer behaviour will mean the inclusion of the mobile device in the multi-channel data and analytics strategy for payments firms. As the mobile device transforms itself into a mobile wallet, it births yet another rich data source for those in the payments business. Each of the big five Canadian banks knows the value of the payments business and has felt the P&L pressure over the last five years. Beyond that, mid-size banks, credit unions and the virtual bank players are all seeking card and payment share as a means to bolster their book. Consumers, flooded with choice in this market – from rewards cards, to low fee cards, to cash back perks, to high interest deposit accounts will seek more from their payments providers than they have historically. Demands on service, flexibility, ease of connectivity between channels, and value based rewards and pricing commiserate with aggregate client value will be table stakes to earn share of wallet and payments. He who connects the dots with the ever-evolving, non-stop consumer with rich data and solid predictive analytics stands to gain sustainable share. While Canadians are overrun with payments offers, the data indeed shows that payments
providers can increase brand loyalty by effectively using customer information to create tailored offerings. The question becomes how payments companies set themselves up to take advantage of the customer opportunity before them. The massive amounts of customer insights available to them through the cards and deposits businesses alone (never mind the added benefit retail banks have when factoring in the assets and insurance insight they have at their fingertips), is massive. Taking a clientlevel view across all payments products, and investing in the on and offline data integration to culminate in a connected view of the customer becomes essential. With that data in place, the predictive analytics payments firms will be capable of doing off that rich data bed will allow them to create the kinds of personalized interactions, customized offers and location-relevant messaging that will resonate with Canadians and gain sustainable share of wallet it the payments business.
Lori Bieda is Executive Lead for Customer Intelligence at SAS Americas. Having spent 13 years in the Canadian financial services business and ten of them in the payments business, she has helped transform organizational profitability through the strategic use of analytics. She currently consults for banks across the Americas on how to better leverage their customer information and create best in class customer analytics and decision engines to improve profits and the client experience.
Leveraging SEPA for Euro payments optimization outside Europe The single euro payments area (SEPA) migration is much more than a European compliance headache. From a strategic perspective, SEPA offers opportunities to Banks and Corporates outside Europe to achieve greater benefits by rationalising EURO payments practices with European counterparts, enhancing processing quality and reducing cost and risk of EURO payments By Olivier Denis
he fundamental change that the single euro payments area (SEPA) brings from an operational perspective is the standardization of EURO payments through the ISO20022 XML messaging standard and the payment schemes harmonizing service conditions for credit transfer and direct debit execution across Europe. Although SEPA was initially launched in 2008, since 2012, the European Commission has issued a SEPA migration roadmap with legal deadlines accelerating the migration of all payment market infrastructures in Europe to the new SEPA standards. The EURO zone, group of 17 countries in the Europe using EURO as domestic currency has to complete the migration by February 2014. The rest of SEPA zone grouping 15 countries that are either part of the European Union or committed on voluntary base to adhere to the SEPA schemes has to migrate by February 2016 latest. All together, the SEPA
market unifies more than 500 Millions citizens in 33 countries served by a community of more than 5000+ Banks processing roughly more than 90 billion electronic EURO payments per year (European Central Bank figures 2012). The great benefit of the SEPA payments schemes is that all businesses that make euro payments, including EURO businesses outside Europe, can do it using a single euro account processing all SEPA compliant payments with the EURO zone by 1 February 2014 and with the rest of the SEPA zone by 1 February 2016.
SEPA migration: a strategic opportunity for banks outside Europe At first view, the Financial Institutions and the Corporates headquartered outside Europe and with operations in Europe may simply view SEPA migration as an European compliance issue with limited relevance to them, November/December 2013
leaving it up to the European affiliate to deal with the compliance deadlines. Nevertheless, from a more strategic perspective, SEPA offers an opportunity for Banks and Corporates to achieve greater benefits by rationalizing payments practices, enhancing processes and reducing cost and risk of EURO payments processing. One major reason for Financial Institutionsâ€™ ability to achieve these benefits is that SEPA will enable them to make all their euro payments out of one account, significantly reducing the number of bank accounts and simplifying the clearing and settlement structures and relationship with European counterparts. Banks and Corporates can even use a payment-on-behalf-of (POBO) model for SEPA payment model to make payments for their entire group from one single euro account and go for a SEPA cloud processing model to minimize impact on IT infrastructure and
resource, hence accelerate their readiness and business agility to comply with the tied SEPA migration deadlines. In a nutshell, compliance of EURO payments workflow with SEPA means that the euro payments and collections in the SEPA zone have to apply the SEPA operation rule books for Credit Transfer and Direct Debit, as issued by the European Payment Council (EPC http://www. europeanpaymentscouncil.eu). The SEPA operations rule books for Credit Transfer and Direct Debit are a common set of conditions and operation rules from a legal, formatting, processing and end-user service conditions point of view. Since one single account per legal entity is enough to reach and be reached by the entire SEPA financial community, Financial Institutions have the ability to simplify their account structures and operations, which means they can reduce their risk and further lower the cost of payments. Today, the SEPA migration is a reality for millions of customers and thousands of Corporates and Financial Institutions and progressing steadily. According the European Central bank monitoring on Monthly base the SEPA migration and the volume of SEPA payment processed across Europe, more than in average 35% of total volume of Credit Transfer in Europe is already SEPA compliant and some countries the total volume of Credit Transfer is approaching 100% (http://www.ecb.int/paym/sepa/ about/indicators). Banks outside Europe that have multiple EURO accounts
and multiple European Counterpart across the eurozone can gain significant assets from streamlining their EURO payments so that they use one account (per legal entity) to make and receive payments in the same manner. Several Financial Institutions and Corporates from Asia, the Middle East and North Africa, although not tied at all to the legal SEPA migration deadlines in 2014, have been joined of the SEPA schemes, implemented SEPA workflows for EURO payments and are already grabbing the operational benefits of optimized EURO payments. Using one EURO account concentrates funding and liquidity for EURO payments, thereby reducing the need for physical and or notional forms of cash pooling, which simplifies the process of managing liquidity and enables better operational risk management. Banks and Corporates outside Europe can achieve further gains by analysing the cost of payments across the SEPA zone, and re-evaluating where it will be most costeffective and efficient to make their euro payments. For instance, a Bank that has a large payments volume in a specific European country where payment processing is expensive, for example, could shift payments to a lower-cost location in Europe and take full advantage of the single SEPA competitive market. Along with replacing their current set of complex structures for EURO payments with fewer accounts, Banks and Corporates outside Europe have the opportunity to re-consider their business relationship November/December 2013
with European counterparts and potentially working with banking partners offering the best conditions for SEPA. While it is not necessary to change banking relationships for SEPA, all the Financial Institutions in the SEPA schemes will essentially have the same reach across the SEPA zone from a payment point of view and Banks and Corporates outside Europe can take advantage of a single SEPA partner to instruct and collect payments across the whole SEPA zone.
Since SEPA migration affects the market infrastructures of the 33 countries in Europe ( 17 of which using EURO as domestic currency ), Any Financial Institution or Corporate in Middle East, Asia, North Africa that initiates EURO payments in SEPA markets need to ensure that their plans include all payments in all markets that need to be SEPA-compliant. Whilst the time required to adapt EURO payment workflow to SEPA may vary depending on the back office
The cost savings, however, will usually far outweigh the cost of implementation. Rather than just leaving SEPA migration to European affiliates as a local operational and compliance issue, Banks and Corporates outside Europe with operations of any size in Europe can benefit from focusing strategically on how best to rationalise their entire payments and collections process and practices during SEPA migration.
SEPA implementation Once a Bank has decided on joining SEPA schemes and its strategy for SEPA migration, the implementation process has to be defined. The Bank will have to perform a technical analysis of their back-office and treasury systems to determine their ability to send/receive SEPA-compliant euro payments, as well as evaluate process improvements to streamline payments. They can then develop an implementation plan for any changes that are needed to rationalize bank accounts and banking relationships.
and ERP complexity and level of compliance (minimum requirements for interoperability or full schemes options implementation) typically it can take six to nine months to become compliant using internal resources. The duration of the migration can be significantly reduced when the bank outsource partially or totally that SEPA migration effort to a service provider and/or a technology provider. Going for a “SEPA POBO” or “SEPA in the cloud” service might help the reduce migration time to a couple of months. The cost of implementation and technology also varies, depending on the level of sophistication and the size of the Financial Institution or Corporate. The cost savings, however, will usually far outweigh the cost of implementation. Many Financial Institutions and Corporates operating globally beyond PAYMENTSBUSINESS
Europe, being early adopters of SEPA since 2010 have already today exceeded the original break-even point of their business case to invest in SEPA compliant infrastructure. The European Payment Council has published case studies
and success stories of SEPA migration in many countries. Financial Institutions and Corporates outside Europe processing EURO payments should challenge their existing banking partner at a strategic level to use SEPA as a key driver
to assess their current structure of euro accounts in multiple countries and determine how best to rationalize their euro payments operations. Their banking partner of choice for SEPA migration should be able to provide them
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The risks of non-compliance Following the SEPA migration deadline of 1 February 2014, legacy systems that the EU affiliates in the EURO zone use for instructing and collecting EURO payments may no longer be usable. From an operational perspective, the risks of not meeting the deadline for SEPA compliance could range from simply not being in compliance with the rules and risk sanctions from National Financial authorities in the EU country monitoring SEPA migration and compliance, until payment service disruption/decline/ rejection for some customers. The operational cost of an increasing volume of rejection/ return/exception handling for Euro payments is also an important component of the business case justifying largely the migration to SEPA schemes.
Conclusion Although Banks and Corporates outside Europe often regard SEPA migration as a European operational headache the benefits go far beyond simple compliance. Banks and Corporates outside Europe processing a significant volume of Euro payments with counterparts in Europe can take competitive advantage of the SEPA migration to rationalise EURO account structures and enhance payment processing efficiency to reduce costs, complexity and risks.
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with advice at a tactical and operational level on switching EURO payment workflow and accounting practices to meet SEPA compliance requirements.
Olivier Denis is the Senior Product Manager at EastNets. 14
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HP helps retailers deliver exceptional in-store experience HP MX10 Retail Solution enables retailers to easily transition between mobile and fixed point of sale with one integrated solution
he HP MX10 Retail Solution will help retailers easily transition between a mobile and fixed point of sale solution, giving them the flexibility to meet customer needs anytime, anywhere. Designed for retail and hospitality, the HP MX10 combines the HP ElitePad Mobile POS Solution (MPOS) and the HP Retail Expansion Dock into one integrated solution.(1) This gives employees the advantage of being mobile, allowing them to better serve customers anywhere in the store while also giving them 18
access to a complete POS solution that includes receipt printing and access to a cash drawer. “The timing is right for an integrated mobile retail solution to come to market,” Leslie Hand, research Director, IDC Retail Insights. “A point-of-sale solution that continues to support the speeds and feeds retailers require while improving ease of use and portability is precisely what today’s retail environment demands.” “Consumers are drawn to businesses that consistently meet their needs and expectations November/December 2013
in satisfying ways,” said Ray Carlin, vice president and general manager, Retail Solutions Business Unit, HP. “With the HP MX10, retailers gain the advantage of a three-in-one solution that allows them to assist customers on the sales floor while still having access to a full POS solution.”
Seamless in-store experience, greater flexibility The HP MX10 enables retailers to enhance customer engagement and improve in-store operations
with key features including: Seamless integration to existing infrastructure. The HP MX10 is a Windows®based solution that seamlessly integrates into a store’s existing IT infrastructure to enable access to inventory and customer relationship management (CRM) systems. Connection to key POS peripherals. The HP MX10 provides retailers with connectivity via serial, USB and RJ-45 ports, allowing them to use the store’s existing POS peripherals. Maximum user comfort and adjustability. With the dual hinge arm, the HP MX10 supports adjustable tilt and height, providing maximum comfort for sales associates at
the register or on the shop floor. More sales opportunities with compact design. The HP MX10 features a slim design that allows retailers to free up valuable floor and counter space so they can promote more products. Dock, lock and walk away. With secured latching, a cable lock and counter security options, retailers can protect their mobile solution and the dock from theft.
Pricing and availability The HP MX10 is planned to be available worldwide in January. Pricing is available upon request.
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2014 Industry Events January 2014 January 12-15 National Retail Federation The Big Show New York, NY www.nrf.com
February February 5-7 Smart Card Alliance 7th Annual Payments Summit Salt Lake City ,UT www.smartcardalliance.org February 11-13 ATMIA ATMIA Annual Conference Orlando, FL www.atmiaconferences.com February 20-21 InfoTech Canadian Financing Forum 2014 Vancouver, BC www.financingforum.com
March March 10-12 BAI BAI Payments Connect Conference Las Vegas, NV www.BAI.org
April April 6-9 NACHA, The Electronic Payments Association, Payments 2014 Orlando, CA www.nacha.org April 6-9 ICMA Annual Card Manufacturing & Personalization Expo Ft. Lauderdale, FL www.icma.com April 7-10 NAPCP 15th Annual Commercial Purchasing Card and Payments Conference Palm Springs, CA www.napcp.org April 8-10 Electronic Transactions Association 2014 ETA Annual Meeting & Expo Las Vegas, NV www.electran.org April 22-25 PaymentsSource 26th Annual Card Forum & Expo Orlando, FL www.paymentssource.com
April 28-30 Finovate Finovate Spring Conference San Jose, CA www.finovate.com
MAY May 5-7 WB Research eTail Canada 2014 Toronto, ON www.wbresearch.com May 5-8 IFO Fusion 2014 Forum & Expo Dallas, TC www.financialops.org May 13-15 Cartes North America 2014 Las Vegas, NV www.cartes-america.com/paymentsbusinessevent May 2014 (TBA) Commercial Payments International Global Commercial Cards & Payments Summit 2014 New York, NY www.commercialpayments.com
June June 1-8 Credit Scoring & Risk Strategy Association 21st Annual Conference Niagara Falls, ON www.csrsa.org June 3-4 Smartcard Alliance NFC Solutions Summit 2014 Austin, TX www.smartcardalliance.org June 4-5 ATMIA Canada Annual Canadian Conference 2014 Niagara Falls, ON www.atmiaconferences.com June 4-7 Internet Retailer IRC & Exhibition Chicago, IL www.internetretailer.com June 5-7 FEI Canada Annual Conference Lake Louise, AB www.feicanada.org June 11-13 NBPCA - Annual Congress-The Power of Prepaid 2014 National Harbor, MD www.nbpca.com
June 13-14 Payments Source International & Cross Border Payments San Francisco, CA www.paymentssource.com June 17-18 ACT Canada Cardware 2014: Payment Insights Niagara Falls, ON www.actcda.com June 25-27 Canadian Payments Association Payments Panorama Charlottetown, PE www.cdnpay.ca June TBA 7th Annual Prepaid & Payments Retreat Toronto, ON www.paymentseXchange.ca June TBA Payments Awards 2014 Toronto, ON www.paymentseXchange.ca June TBA EMV User Meeting EMVCo Location, TBA www.emvco.com
August August 3-6 Retail Solutions Providers Association RetailNOW 2014 Orlando, FL www.gorspa.org August 18-20 tppEXPO 2014 The Pre Paid Press Expo Las Vegas, NV www.prepaidpressexpo.com
September September 14-16 IFO Canada 4th Annual Canadian Financial Operations Symposium Vancouver, BC www.financialops.org/canada2014
September TBA 3rd Women in Payments Symposium &Payments Business Magazine Awards Night Toronto, ON www.womeninpayments.ca
October October 2-4 Canadian Automatic Merchandising Association CAMA Expo 2014 Quebec City, QC www.vending-cama.com October 19-22 Sourcemedia ATM, Debit & Prepaid Forum 2014 Phoenix, AZ www.sourcemedia.com October TBA Everlink Client Conference CONNECTIONS 2014 Toronto, ON www.everlink.ca
November November 2-5 Association of Financial Professionals AFP Annual Conference 2014 Washington, DC www.afponline.org November 12-14 BAI BAI Retail Delivery Conference 2014 Chicago, IL www.BAI.org November TBA Comexposium CARTES & Identification Exhibition 2014 Paris, FR www.cartes.com
December December TBA Members Meeting Smart Card Alliance Coral Gables, FL www.smartcardalliance.org
September 29-Oct 2 Sibos Annual Conference 2014 Boston, MA www.sibos.com September TBA CUMA CUMA Ontario Annual Conference Montreal, QC www.cuma.ca
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ACT Canada Association News F
our of the key areas our payment stakeholders are working on are Customer Authentication, M-Commerce, Point-of-Sale and new possibilities for cost effective multi-app cards. They are doing this through ACT Canada’s Strategic Leadership teams and will report at Cardware 2014, June 17/18 in Niagara Falls. This year Cardware will look at payment from the viewpoint of customers, merchants and the financial sector. “365” is our main track where we will examine the 5 top challenges and opportunities for payment in the coming year. Big data, currency alternatives, loyalty, fraud, prepaid, m-commerce, card-notpresent and other subjects will be on the table for delegates to discuss. Watch our web site for more details. The biggest news of the year for ACT Canada is that we will enter into our 26th year in March. To commemorate our anniversary, we are planning a gala lunch to be held in the fall where we will celebrate successes at our annual Innovations awards ceremony.
New this year, we are working with Payments Business magazine to run a series of training workshops. Our first is planned for March. Internally, we have trained all of our staff on the roles played by each of our members related to secure payment and will do the same for digital identity in the coming months. On the merchant front, we are working with RMA, the Retail Merchants Association of Canada to provide new services for each of our memberships. We have entered into an agreement with the Merchant Advisory Group in the US to offer a joint membership package to Canadian retailers. We also plan to bring more M-commerce members onboard in 2014. Issuers, acquirers, merchants and vendor members are pursuing their goals through the Strategic Leadership teams and our ongoing Secure ID initiative. We have commissioned a report that will support the use of secure ID by all levels of government. It also provides best practices to help governments November/December 2013
move quickly and cost effectively. Sponsorship will close once the report is finalized, so please contact Catherine Johnston if you wish to be affiliated with this ground breaking work. This year…. Andrea McMullen, Vice President, enters her 16th year with ACT Canada. Britteny Blackman, our Association Co-ordinator, enters her second and we welcome Michelle Weir, our new Executive Assistant. Catherine Johnston, our president, celebrates 25 years of service. We bid a fond farewell to Eileen Cassidy, our member relations manager, who is retiring.
ACT Canada - Insights • Networking • Visibility Since 1989, ACT Canada has been internationally recognized as the stakeholder association that drives payment evolution and digital identity. Stakeholder dialogue drives profitable decisions. Join us. For information, please visit www.actcda.com.
Payfirma to provide mobile payment processing services to CIBC business banking clients
ayfirma has announced an agreement with a leading financial institution, CIBC to offer Payfirma services to CIBC business banking clients who are seeking innovative solutions for accepting payments from clients using mobile devices. Payfirma offers a range of hardware and software solutions on a single platform to help businesses accept debit and credit card payments in stores, online through their company website, or remotely using smartphones and tablets as mobile terminals. Leveraging existing assets such as smartphones and tablets lowers the cost of entry for small businesses who are seeking to expand the payment options available to their clients, and also enables businesses to collect payments anywhere with cellular service. Payfirma also provides businesses with real-time, consolidated reporting on all sales, so that businesses can use the webbased management tool PayHQ to make smarter business decisions about their customers, products and employees. This agreement comes at a time when digital payments are on the rise, particularly mobile and eCommerce payments.
and significant decrease in operational cost. We are here to help people build their dream companies.”
Sources 1 Juniper Research (June 2011) 2 Source: Nielson Holdings via Wall Street Journal Oct. 14, 2013 3 Visa. http://visa.ca/merchant/accepting-visa-cards/business-tobusiness.js
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