Digital money

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Fight or flight / Page 5

Happy shopper

Can NFC ever live up to its expectations?

Retailers are keeping their punters in store with mobile payments

Crime pays

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‘Wherever money goes, criminals often follow’

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The power behind decisions

DECEMBER 2012

Money goes mobile How digital payment innovations are changing the way we see and use cash forever

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by Lyonsdown which takes sole responsibility for the contents

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Business Technology

December 2012

an independent report from lyonsdown, distributed with the sunday telegraph

Who would have thought a bank’s biggest threat would be a Search Engine?

We did.

Google Wallet, PayPal, Amazon Payments. The names dominating the press when it comes to mobile payments and commerce are not banks.

Monitise helps financial institutions defend and extend their role in Mobile Money.

To find out more, download our latest white paper. www.monitise.com/insight

Scan here

to download

www.monitise.com

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Best of the blogs

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December 2012

Who? Talking Payments blog What? The Talking Payments blog focuses on online and contactless payments, talking about the future of contactless payments in public transport and retail but also focusing on innovation and NFC (near field communication) technology.

It says: Retailers of course love that

there is so much innovation going on; while some may complain about the burden it places on their resources, and others worry that they may back a loser, most can see that the many choices are all focused on one thing – trying to make payments easier, faster, more pleasurable and in some cases, cheaper.

Where? www.talkingpayments.com/ blogs Who? Payments Cards and Mobile What? The Payments Cards and Mobile blog broaches the digital payments situation over the world and shares opinions and thought leadership pieces from digital money industry professionals.

It says: The current mobile payments systems are around 40m spread across the globe. A recent research says that mobile payments system will generate more than 1 trillion transaction value by 2015.

Where? www.paymentscardsand mobile.com/blog/

What’s inside?

about it. No more fumbling around trying to dig the correct change from your pockets or waiting for a card reader to do its thing. All you need is a smartphone.

Where? blog.judopayments.com/

FREE

£6.99

Sound bytes “Physical currency is a bulky, germ-smeared, carbon-intensive, expensive medium of exchange. Let’s dump it.”

David Wolman

“As we move toward being a cashless society, we must defend consumers’ privacy and limit the power of government and businesses.”

Jerry Brito

Steve Perry

David Wolman

Jerry Brito

Back in the office: reading list

“Cash is expensive. We need to be using it less.”

Steve Perry, executive vice president, Visa Europe

UK retailers are buying into digital payment innovations Page 6 How to keep your data – and bank balance – safe from hackers Page 8 Digital money is benefiting many developing countries Page 11

a payment reader in retail outlets.

We’ve already mentioned Gemalto but this video is too good to miss!

Where? www.youtube.com/ watch?v=IRwl9nbqYrk

PICK OF THE APPS mSecure Password Manager This app – which runs on iPhones, iPads and the iPod touch – helps to safeguard website logins, bank accounts and credit cards if the user’s phone is stolen.

Can near field communication live up to its hype?

Page 5

Who? Parkour and NFC services What? This YouTube video is a dynamic illustration of how mobile payments can take place in our lives.

With your NFC mobile you can quickly and securely pay for goods by simply holding your NFC mobile phone over

Who? Judo Payments Blog What? This is a blog about mobile and contactless payments. News is divided into two categories: industry news and a second category is composed by articles on mobile payments asking the reader if people are ready to use mobile payments.

It says: The contactless payment method is pretty awesome. Think

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Digital money

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Who? Gemalto blog What? Focusing on digital security with Gemalto, a world leader in digital security, this blog covers the main issues within digital security but also analyses mobile and contactless payments. Above all, you can follow their contactless challenge, where bloggers experiment with contactless payments in the reality of everyday life.

It says: After being forced to go contactless when he forgot his wallet, Jon has similarly suggested on his blog that, in the short term at least, mobile payments may not be an ample replacement for your wallet.

Where? blog.gemalto.com

Mastercard PayPass Locator This Android app finds outlets that accept Mastercard’s PayPass technology so users can find the best places to shop using their digital wallet.

Business Technology

FREE

Lemon Wallet This lets you photograph the contents of your wallet and create a digital copy of your cards, as well as giving the user real time bank balance updates and transaction details.

The Digital Money Reader 2011: A Selection of Posts from the Digital Money Blog from 2010/2011

by David Birch £9.20, Amazon, 77p (Kindle) Digital Money: The New Era of Internet Commerce

by Daniel C. Lynch and Leslie Lundquist Amazon, £18.20 Bitcoin Step

by Step

by Michael Caughey Amazon, £2.55 (Kindle)

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Editor Ellen Bennett ellen@lyonsdown.co.uk Production Editor Amy Dickson amy@lyonsdown.co.uk Production Assistant Fleur Hollett production@lyonsdown.co.uk

For more information on any of our supplements please contact us: Telephone 020 8349 4363 Email info@lyonsdown.co.uk

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December 2012

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All payment providers promise single-source solutions. But how many of them have their own bank?

Wirecard AG is one of the leading payment companies, and its positioning is very clear: a combination of payment processing and bank services. We have our own banking license, which allows us to offer all international credit card acceptances and all of the relevant eCash applications – using a single platform. A real one-stop shop.

Portfolio Payment

www.wirecard.com

Risk management Banking services

Key facts 2011 A transaction volume of EUR 15.5 billion 85 payment methods 13,000 customers

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NFC: near and yet so far The potential behind contactless technology is huge – but the rewards of implementing it may be minor compared to the costs and possible security drawbacks

By Dave Baxter

What is London’s underground all about?

As well as getting from A to B, the transport network is associated with a number of things: it was used as a giant bomb shelter during the second world war, fell victim to devastating terrorist attacks in 2005 and makes thousands of passengers feel like sardines each day as they squeeze into packed trains at peak hours.

As well as this, it hosts a technology which could have huge significance for business: near field communication (NFC) – which is used for the Oyster system – allows smartphones and tablets to connect with other devices, leading to big expectations around future uses and market growth.

There were two Oyster crashes in 2008. It was later revealed by TfL that in 2008 there were 28,000 unusable Oyster cards, due to technical failure

68% 2011 from 2011 to 2016 the NFC market will have grown by 68.8 per cent

Hammer blow But while NFC could be a big deal for companies and consumers, not everyone is convinced: its reputation has been dealt some blows because of past Oyster breakdowns and a number of big names failing to embrace it, and some argue other technologies can deliver the same services with less trouble and cost.

Its uses have already made waves: NFC has been taken up, at least in some products, by big names in the mobile industry including Nokia, Sony, Samsung and HTC, and can be used for a range of different things: as long as NFC devices are present, you could use an equipped smartphone or tablet to download information from a service kiosk, unlock security doors or exchange data.

And NFC is making its mark in digital money, too: Mastercard and Visa have taken up the idea of contactless bank cards, which makes for speedy transactions (to pay small amounts, up to around £15) at a gaggle of retailers taking part so far.

Predicted growth This means that by swiping your bank card across an NFC terminal you can pay for an item in seconds, and functions are being developed to let smartphones do similar things; one example is Vodafone and Visa’s joint SmartPass app, which involves a prepaid card system similar to that used by Oyster.

When it comes to the numbers, NFC has a bright future: industry body GBI Research predicts that from 2011 to 2016 the NFC

The London underground hosts NFC technology, used for its Oyster card system

market will have grown by 68.8 per cent, while researcher Juniper forecasts that, by 2014, as many as one in five smartphones will be equipped with the technology.

It also has a crowd of high-profile cheerleaders: recent apps open to the technology include Microsoft Tag and Google Wallet, and the NFC Forum – which was set up by Nokia, Philips and Sony in 2004 and works on both refining and promoting the technology – now has around 200 members consisting of manufacturers, software companies, mobile giants and others.

Other advocates include Isis – a US-based consortium of wireless carriers AT&T, Verizon

Technology in action Recent NFC applications range from grave tags, telling the story of the deceased when accessed, to an app allowing equipped smartphones to exchange business cards when held close together.

And more innovation is expected – but there are already more established examples of NFC in action.

Unwittingly enough, Londoners will be familiar with NFC – the Oyster card, which was introduced in 2003 and lets passengers top up travel credit

2016

at set terminals, is a key example.

This sees information exchanged between smart cards and terminals across the system to cover the city’s gargantuan network.

Another major application is in smartphones: Apple has failed to embrace this but stands out as a notable exception.

Makers including HTC, Huawei, Nokia and Motorola have all been kept busy making NFC-equipped phones, which

can swap information with other devices in a similar way to Bluetooth technology.

NFC can do a number of tricks for smartphones, but more importantly it provides one way of using the phone as a “digital wallet” in store by exchanging information between your bank and a retailer.

But the success of this relies on infrastructure, and retailers first need to be persuaded to spend time and money on installing NFC devices.

“NFC has high-profile cheerleaders: Microsoft Tag and Google Wallet, and the NFC Forum set up by Nokia, Philips and Sony” Wireless and T-Mobile USA – which hopes to launch a mobile payment system based around NFC in America.

So is this likely to take off? NFC is proving controversial, because while many in the technology world sing its praises, it has some serious detractors: Apple recently caused a fuss by defying industry gossip and failing to include NFC in its iPhone 5 or iPad 2.

Costly barrier And Apple is not alone: Rob Skinner, of e-commerce giant Paypal, argues that NFC is a clumsy way to enable digital payments

because it requires costly equipment to be installed – such as NFC terminals and new SIM cards for phones – unlike alternatives, which include sending payment information via barcode scanning, something used by both Apple and Starbucks, and Wi-Fi payment.

He says: “NFC is a payment and technology industry obsession – it’s a solution in search of a problem.

“There’s absolutely no reason it can’t be part of a mixture, but there are other parts.”

Gartner, an influential technology research firm, also weighed in last year when it introduced NFC to its annual Hype Cycle – a chart tracking what it deems to be the natural progress of a technological innovation.

In 2011 it rated NFC as being at the “peak of inflated expectations” – meaning it should expect to suffer at the hands of technical mishaps and excessive hype – and likely to take between five and ten years to reach what Gartner dubs a “plateau of productivity” and the technology’s refinement.

To make matters worse, the Oyster system – a real life example of NFC used on a large scale – is open criticism after past system collapses.

Network failure The year 2008 saw two separate Oyster network crashes, affecting tens of thousands of people, and a freedom of information request to Transport for London revealed that in that year, around 28,000 Oyster cards were reported to the body as unable to be used because of a technical failure.

So NFC has laudable potential – but the rewards of implementing it may be minor compared to the costs and possible drawbacks, especially when decent alternatives for what it can deliver are in play.

For millions of busy Tube-goers, NFC could remain vital for getting across London – but whether it gets much further than the Tube is questionable.

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an independent report from lyonsdown, distributed with the sunday telegraph

December 2012

Digital money

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How are the UK’s biggest retailers adapting to join the mobile revolution?

By Dave Baxter

From supermarkets that literally bus people to the shops to clever adverts and cheeky bargains, retailers do all sorts to get the punters in.

But as people leave high streets for the digital world, retailers are being forced to embrace change. Deloitte Digital estimates direct purchases made through mobiles in the UK in 2012 will be worth around £1 billion, and says that, with more than 80 per cent of people expected to own a smartphone by 2016, this will only rise.

Compared to their American cousins, British retailers have been slow to take up digital money schemes, but a number of smartphone-friendly experiments herald a new era: these range from making services and goods easier to access via smartphones to letting customers pay for items, both in store and remotely, through their devices.

David Honey, director of Fujifilm UK We have had a very successful photography printing business for a number of years – there are self-operated kiosks used by retailers, and

Pay as F you grow

INDUSTRY VIEW

One global payment solutions firm is giving e-commerce businesses the tools it needs to grow

or entrepreneurs attempting to start a business in today’s economic climate, the forecast is not so great.

Banks aren’t willing to loan, consumers aren’t willing to spend, and the proper guidelines for success have been blurred.

However, Andy Khawaja (below), CEO of multibillion-dollar Allied Wallet, has demonstrated how businesses can thrive, just as his has, by going online and opening up their products and services to the rest of the world.

Success stories Allied Wallet is providing business owners with a multitude of features that will help them flourish. The expansive reach of global online business has produced incredible success stories for those who need alternative financing options, while the burgeoning e-commerce industry has been dominated by Allied Wallet and its global payment solutions, renowned for its flexibility, high quality service and top-notch security.

“E-commerce is an open market; it’s not just a boutique on the side of the street where you rely on

“E-commerce is not a boutique on the side of the street where you rely on walk-in custom. The internet has unlimited traffic” – Andy Khawaja walk-in custom. The internet has unlimited traffic,” says Khawaja.

“You’ve got billions of people using the internet on a daily basis, and we want to make sure that we’re not just bringing the business alive, but making sure that our merchants are fully benefiting from our services.”

Education and strategy Allied Wallet not only offers a means of growth, but also guides businesses through the requirements of success. Strategic business planning means educating the merchant on rules and regulations, keeping track of cash flow, and accommodating consumers with simple and secure payment options, faster shipping and reliable postage.

“There are a lot of rules and point of sale as a face-to-face regulations by card schemes activity,” he says. “We understand and local governments, so we the international traffic and have to be fully educated what potential it can bring; Process to understand how to we know the good from payments in conduct the business the bad because we’ve in certain regions,” seen it, we’ve studied it explains Khawaja. and we understand it.”

“That’s how we currencies eliminate risk and keep Future plans the merchants in business.

From processing They make money, we make transactions that put money money, the customer in your account within gets good service and hours rather than days, There are everybody is happy.” to protecting your more than Working with banks accounts with state-ofto build a business the-art internet fraud can be catastrophic, prevention technology.

Allied Wallet sometimes taking up Allied Wallet’s global users to two or three months to financial processing open a new business account packages have been so – and many financial successful that many big institutions names including Visa, Businesses are still quite MasterCard and live in paranoid American Express about online have jumped on credit card board, as well as 164 different currencies transactions. hours worldwide.

Khawaja With plans to move into warns that often India by 2013 – successfully with online business, banks opening its doors to Brazil, are doing more to worsen the and recently finalising a major economy than strengthen it. deal with China Union Pay – “Banks will literally put you Khawaja wants your business out of business because they to grow alongside his. don’t understand e-commerce, 0207 872 5409 they only www.alliedwallet.com understand

164

41m

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Like us: facebook.com/biztech Honey: It costs £200 to upgrade a unit, so when we have thousands of machines it does become quite expensive

December 2012

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Digital money

Find us online: biztechreport.co.uk sent to your phone and the code is scanned to redeem the gift amount at the till.

The code then becomes invalid, and if there is money left over you are sent a new code for that amount.

This is done through secure payment methods, and can also be used for refund transactions.

We also started using a system with Paypal this year – this is an app on the Apple platform called PayPal instore, and whether you use Paypal itself or a bank account, you can attach it to that account to pay through your phone.

The app generates a unique code for each transaction, and then Paypal will withdraw the funds for the transaction from the account.

you can shove in a memory card or disk and print things out.

In the UK market there are around 6,000 kiosks – Fujifilm owns about half of those.

But we had a specific issue about getting the pictures on to the kiosk so consumers can buy the print-outs.

Smartphone pictures are so popular that we get a huge uptake of people printing from them.

If you do want to get your pictures on to a kiosk with digital cameras or smartphones, you have to take the memory card out and shove it in – but cards get smaller and smaller, and some are now smaller than a thumbnail.

On the side of the kiosk you have at least a dozen different slots – and it’s a job There are different approaches to digital expecting people to find the right one. money: there’s near field communication There’s all sorts of back-end problems with (NFC), but that does require some people shoving their cards in the wrong slots. investment in terms of technology.

You can use Bluetooth to download your Also, with NFC technology such as paypictures on your phone, but the problem is by-touch or pay-by-wave, they have it starts getting complicated when we ask relatively low spend limits of £5, £10 people to put passwords and codes in. or £20, so if you are coming in and Purchases So one of the things we were looking at buying a dress at one of made through trying to do was to find a more our stores, it’s going to cost more mobiles worth simple way to get the pictures than that so it won’t work. from the digital device and With the system we are using, provide this service. Then it was it relies on consumers’ own in 2012 suggested we should use near field devices, and the code technology communication (NFC) to get it into we use was already developed kiosks. for our mobile gift cards.

It’s very simple – you download an app, We are one of the first to implement and then can choose which pictures you this, but it’s not about being first – it’s want to print; then you just tap it on the about choice. You will see that over time, side of the kiosk or hold the smartphone there and the pictures will be automatically “We are one of the first to printed and your order will go through.

We are waiting for some feedback from implement this, but it’s the market and the customers because it’s quite new for us. not about being first – it’s There are usually two things which can be about choice” – Patel problematic: the retailer doesn’t want to pay for an upgrade or sometimes older equipment won’t be able to be upgraded, because there consumers have greater choice and variety isn’t enough RAM or as to where they can pay using this method. processing power.

It will probably become a disadvantage It costs about £200 to for businesses not to have it in future, and upgrade a unit, so when may be similar to the situation with credit we have thousands of cards when they were introduced – Marks & machines it does become Spencer avoided implementing it for a long quite expensive. time but eventually gave in.

We have had the There are two or three things driving NFC capability in some the move to payment innovations, such as of our kiosks for about digital wallets. six months or so. They Firstly there’s the prevalence of mobile are still in a testing phase phones and smartphones – people are now for the functionality, clamouring to get the latest devices, and, of but it’s something we course, we also have tablets now. will put in the new Second, your phone is suited to be used kiosks from now on. as a wallet because it’s one of the things that’s always with you – you may carry multiple credit cards, but you tend to have Ish Patel, group omnichannel just one phone.

The key for us is to try to understand how director for Aurora fashions behaviour will develop and ensure What we have been doing since 2009 is mobile we are not investing all of our future gift vouchers. A message with a unique code is down one route.

£1bn

7

Is cash heading for the attic?

Fast and easy mobile payments are becoming integral to daily life, eradicating the need for money in our pockets INDUSTRY VIEW

C

onsumer trends specialist The Future Foundation has been tracking the path to a cashless future for some years – and believe that 2013 will be a pivotal year in the adoption of cashless payments.

The vast amount of technological innovation over the past decade, combined with the ubiquity of smartphones and the drive towards more efficient lifestyles by demanding, time-pressured consumers has combined to create a market that is ripe for innovation.

Mobile movement The biggest player in the shift from niche to mainstream is mobile – our phones are becoming capable of organising every aspect of our lives, so it seems a natural process that they also become the all-in-one device for handling all facets of our retail transactions.

Today virtually any purchase can be accelerated to the point where delay is potentially eliminated altogether – and for the savvy consumer, who is interested in instant gratification and ultra simplicity, this shift to a more streamlined experience will be welcome.

With 80 per cent of Generation Y consumers now owning a smartphone, together with the UK’s push towards a 4G world, this experience can only improve.

Mobile payment is still in its infancy but maturing rapidly. This is a global picture – data from our proprietary nVision tool shows that almost half

(45 per cent) of UK consumers would be happy to pay for goods and services via mobile if it were safe and easy to do so. And this rises exponentially in emerging markets – 81 per cent of Chinese consumers, 79 per cent in India, 76 per cent in South Korea and 68 per cent in Russia.

The market is already prime with examples.

Google Wallet stores credit and debit card details in a phone or computer, allowing consumers to simply tap their phone against an NFC terminal to make a payment.

In September 2012, EU regulators cleared the way for O2, Vodafone and EE to form a new cross-carrier mobile payments platform.

Of course, as this trend goes forward, the issue of trust and security protection will be increasingly important for consumers, especially in this postbanking-crisis era.

Trust at a low However, it is this very trust issue that may give cashless payment a boost into the mainstream. While trust in financial institutions is at all-time low, consumers show high levels of trust both in technology and in the technology that banks and payment providers use.

And not all of the value in a transaction is monetary – much of it is to do with consumer data. As brands gain an increasing amount of customer information, consumers recognising the importance

Who wants mobile pay?

China – 81% India – 79% S Korea – 76% Russia – 68% UK – 45% of their data. A report from The Future Foundation, a leading global trends and insight specialist, it is predicted that data will increasingly be used as a bargaining device, with consumers seeking an exchange for handing over useful data about themselves.

New tactics needed Moving forward, locationbased software has the potential to encourage a more spontaneous approach to leisure and retail, inviting shops to adopt new tactics to lure shoppers in-store.

For example, tailored promotions delivered direct to the consumer’s phone.

It is our contention that over this decade, mobile payment will become totally integral to our way of life and we will be dramatically less tied to cash. Simply put, cash will be less useful.

Josie Watson is the marketing manager josiew@future foundation.net www.futurefoundation.net

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December 2012

Digital money

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Evolving international payments Payment services for businesses and consumers are changing – and they’re quicker and cheaper 4 per cent or more of the amount being transferred.

The existing industryith all the operating model is innovation antiquated, rooted in the in payments, 1970s, rife with inefficiency, businesses and consumers high in cost and burgeoning now see simple, efficient with business risk. Managing and low cost payment international payments and services as the norm. receipts is, at best, a headache There is one major for the majority of firms. exception: we continue to So it’s new finance to the accept ludicrously expensive, rescue. A tribe of technologyinefficient and unreliable savvy firms are seizing on the international cross-currency opportunities presented payment services. in this lumbering Luckily for industry. customers, there Over Technology is a raft of “new enabled finance” firms of cross-border services – addressing currency transfers are usually cloudthe glaring conducted through based – are inadequacies a bank significantly of this £25 improving the trillion market. customer experience It is easier than by lowering costs, ever for a business to “go delivering transparency global”. €5.4 trillion of and increasing automation goods and services were to reduce customer imported into the EU in overheads and risks.

2011; a 59 per cent increase Regulated solutions that over 2002. Exports grew by easily integrate into the 57 per cent over the same workflow of trade, such as period – €5.5 trillion in 2011. into accounting, e-invoicing There is an increasing need and ERP solutions are for businesses to manage bringing international multi-currency payrolls payment services into the correlating with the growth 21st century. International of the remittance market, payments are evolving; it is fuelled by migrant workers. time to embrace the benefits More than 90 per cent by voting with your feet. of cross-border currency transfers are still conducted through a bank, where Nasir Zubairi is Director implicit (bid/offer spread) of Marketing and explicit (payment fees) 020 3326 8173 charges can easily reach www.thecurrencycloud.com

INDUSTRY VIEW

W

90%

New digital finance networks have attracted a following of tech-savvy and money-hungry thieves

By Bonnie Gardiner

Day-to-day security involves a lot of common sense – before you go to bed at night, you wouldn’t leave the front door unlocked.

Likewise, when heading out and about, you wouldn’t leave your valuables lying in plain view. Yet when it comes to digital valuables, security is not so black and white.

Wherever money goes, crime often follows.

Digital finance networks – whether hosted by traditional providers, decentralised online currency, or via a mobile device – are creating a new wave of security challenges where sensitive details are accessed at the click of a button. Storing this data online seems harmless when it’s on the PC in our living room. But the web is a playground for techsavvy criminals – and they are well and truly logged on.

Changing traditional networks Over the past two decades cybercrime has evolved from the odd hacker into a fully fledged industry of organised criminals. As a result, traditional financial services have taken significant steps to combat the risk of cybercrime. The Payment Card Industry (PCI) Association has developed very stringent standards over the years to enforce security best practice, and they are being applied

with relative success to traditional networks.

However, with the influx of newly developing technologies, such as apps on mobile devices to access banking services and make payments, hackers are expected to move away from traditional networks into the new and largely insecure mobile networks.

“Part of the challenge we are going to face is that innovation introduces new risks,” says William Beer, director of information and cyber security practice at PWC. “Innovation tends to almost counteract information security. The IT community must get the balance right between promoting innovation while also being the people who say no.”

Security solutions are now being produced for mobile devices to ensure that cyber criminals can’t apply malware on to them and use it to access banking details and intercept payments.

However, further measures must be considered – with a completely new set of responsible parties to be held accountable.

James Lyne, director of technology strategy at Sophos says: “If I’m using a payment app on my phone, which links the transaction back to another provider or bank, and on top of that there are the places I can walk into and pay with this technology, there are a number of different providers and processors involved who risk getting it wrong or being attacked, with credit cards

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“The scale of malicious code out there is astronomical – you find plenty of people who haven’t installed antivirus software; they haven’t even got secure passwords” – Lyne savings to be used in online transactions, which creates a very transferrable and mostly unverified form of currency.

“If I were to try and stick my hand in your pocket and steal a tenner, you would probably notice,” says Lyne. “But with Bitcoins or a digital wallet, if I use malware to get into your digital wallet and start transferring these funds, you probably wouldn’t notice.”

The third attack is against the exchanges directly. At some point Bitcoins will be traded in various exchanges for goods or money.

Hackers can reach into an exchange and steal massive numbers of Bitcoins, which has the impact similar to that of a large bank robbery, causing the value of the currency overall to face a massive drop.

Is the technology strong enough?

where there’s a much smaller chain.”

Online models The next challenge lies in the complete digital currency models. A well-known example is Bitcoin, which presents an appealing option for cyber-criminals dealing in theft and forgery. Bitcoins are bought and held in a personal digital wallet like traditional money

With processors or providers, much concentration lies in the PCI standards and cryptographic protocol. However, despite a strong level of encryption, any cracks in the grid will not be visible until after Lyne: People implementation are still very into the real world often failing to – and incredibly cover the basics robust encryption to protect their systems can fast PCs and become obsolete devices and easy to hack into.

“A lot of people default to encryption as a silver bullet, but unfortunately as we’ve seen in many situations, encryption is not always the answer,” insists Beer. “There are problems in terms of inter-compatibility, latency, and even just applying

it and managing it.”

As soon as new technology is developed, hackers will be pulling it apart to find out how it can be used to their advantage, so organisations must also put on their criminalfighting thinking caps and consider how new technology could be used maliciously.

Simple computer security, such as antivirus software, should also play a huge role. The wide availability of such programs means that we can take action against e-crime now, but for the industry that also means trying to convince the world to do so.

“That’s something we’ve been trying to do for over 25 years, people are still very often failing to cover the basics to protect their PCs and devices,” says Lyne. “The scale of malicious code out there is astronomical.

You still find plenty of people who haven’t installed antivirus software; they haven’t even got secure passwords. These things are not rocket science – and they will protect your digital wallet.”

Are the public ready for it?

We are yet to see the wide scale adoption of mobile payment solutions, however Beer feels the public would be willing to switch once a more transparent and seamless security solution is developed. Meanwhile the problem of user awareness prevails.

“People are inherently going to handle their mobile phone very differently to how they handle their credit card,” says Beer.

With efforts by the industry to promote widespread campaigns to help raise awareness of online risks, their focus must also shift to the mobile market and find ways to show that, although we can’t see them, digital currencies are still highly valuable and must be protected.

Despite the cracks, Lyne still believes digital money’s popularity will continue to grow, along with extended or even entirely new networks.

“We have a lot of work to do, but it wouldn’t surprise me if more versions of digital money crept in and grew to have widespread use,” he says. “We may run before we can walk.”

Banking customers hacked off In June 2011, US computer hackers breached Citigroup’s network and accessed the data of about 360,000 credit-card holders, causing 3,400 customers to lose a total of $2.7m (£1.6m).

A simple automated script allowed the hackers to alter the bank’s URL and hop between accounts to collect sensitive information. Citigroup was left red-faced as the incident was revealed to be a very simple breach through a common security hole that was not only preventable, but also easily detectable.

Invest in analytics Guidance from the Federal Financial Institutions Examinations Council urged banks to create layered security programs, employing changing controls at different points of an online transaction. Banks were also encouraged to invest in analytical systems to monitor customer transaction patterns, where alerts are sent to providers and customers when something seems off.

Lastly, the financial services sector saw the value of performing on-going risk assessments in response to growing internal and external threats.

The mobile revolution When it comes to managing your money, the future is mobile INDUSTRY VIEW

A

lmost every day sees the launch of a new mobile app to manage bank accounts, book tickets, reserve taxis or shop online. Each one has the objective of making the user experience for a specific service both easy and appealing.

But to enable all of that, each newly downloaded app requires a new registration and the repeated disclosure of reams of personal and financial data in order to facilitate payments. The reach of each service is often limited, meaning that the consumer quickly becomes disappointed and forgets the app because the opportunity

9

to use it is so infrequent.

The splintered nature of these services has led to a rather limited success, despite the investment of many millions of pounds into mobile commerce.

To simplify things, a Payments Council initiative aims to deliver a central database that links customers’ mobile phone numbers to individual banking details. This central utility infrastructure will securely link different bank and mobile payment services into a coherent, interoperable service centred on users’ existing bank accounts, without requiring consumers to repeatedly give personal or bank details.

As the UK’s central payments hub, VocaLink is building this as an extension to the Faster Payments Service. This

will enable mobile consumers to make secure, instant payments direct from their bank account to any other registered user’s bank account.

With more than 50 per cent of the UK population already owning a smartphone, the reach of the service will be immense. The ability for anyone, anywhere to use their phone to pay bills, buy services, split a restaurant bill or send money to someone special will finally be just around the corner.

Attention, mobile commerce innovators: the “national grid” for mobile payments is upon us!

David Yates, above, is CEO of VocaLink www.vocalink.com

10

Business Technology

an independent report from lyonsdown, distributed with the sunday telegraph

December 2012

Digital money

Find us online: biztechreport.co.uk

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Stronger than ever INDUSTRY VIEW

T

he payments landscape has moved faster over the past decade than it had previously for centuries. Internet banking, faster payments, contactless cards, mobile wallets and apps are all relatively new kids on the payments block.

But, while all of this high profile innovation has been taking place, the original digital payment – Direct Debit, introduced more than 40 years ago – has continued to grow quietly in the background.

Direct Debit was the very first automated digital payment option available to UK bill-payers and billing companies.

Today, it is more relevant, more popular

and more convenient than ever before.

More than three billion Direct Debits are processed every year and three quarters of the UK adult population have at least one Direct Debit commitment. Most are for regular bills – in fact, research shows that 72 per cent of household bills are paid

by Direct Debit. And it’s the way most consumers want to pay; 64 per cent of people prefer to pay most bills

by Direct Debit while 39 per cent would like to pay all of their bills this way. On top of that, the Direct Debit Guarantee provides unrivalled protection for the bill-payer.

For billers, payments land on time, cash flow can be properly forecast, and the administrative

72% of household bills paid by Direct Debit

The original digital payment – direct debit – continues to hold its own among the high profile innovations coming into the market

Bank

burden – and therefore cost – of chasing unpaid bills is reduced, all of which are vital in today’s challenging economy.

As someone who has been involved in the payments industry for many years, I can see – and look forward to – more changes, more technological advancements coming into everyday use. But let’s not lose sight of the value of the original digital payment as it continues to effectively fulfil the needs of millions of UK consumers and thousands of the nation’s businesses.

Direct Debit

User

Michael Chambers, left, is the managing director of Bacs Payment Schemes Ltd www.bacs.co.uk

Technology that pays Forget digital payments – some businesses can’t even accept card payments. But help is at hand...

INDUSTRY VIEW

T

he mobile payments revolution may be in its infancy, but it’s already one of the most exciting developments in the history of digital money.

That excitement is due to the sheer diversity of the companies driving the revolution: they include technology giants, major consumer brands, prominent banks, mobile operators, and innovative startups.

All of the big players are vying to create mobile payment technologies

that win over consumers and/ or merchants, and net them a lucrative share of a high volume of transactions. All of these companies know that the easiest way to do this is to create their own mobile payments ecosystem in which all of the participants gain from the introduction of the new technology.

Merchants are charged just 2.75 per cent per transaction

However, to create such an ecosystem, a mobile payments provider needs to have more than technological wizardry – it needs to solve an existing payments problem.

Merchant problem One such problem hampers the business efforts of vast numbers of small merchants across Europe. These merchants cannot accept credit and debit card payments because they cannot afford the high costs and long lock-in agreements that come with renting terminals from traditional banks.

SumUp enables all merchants to accept card payments using their own mobile device, a free app and a free card reader.

Merchants are charged just 2.75 per cent per transaction.

There are no other fees; it is a fully transparent business model. The

merchant signs up on the website or through the mobile app.

Flexible and free This solution turns any smartphone or tablet into a card terminal and leverages the rapidly expanding smartphone user-base. The beauty of SumUp is that the card-holder does not need to do anything differently.

They can use their card to pay as they always have done – and use it in more places than ever before.

That’s why the mobile payments revolution is hugely exciting for consumers – and not for just those of us in digital money. www.sumup.co.uk

an independent report from lyonsdown, distributed with the sunday telegraph

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Digital money

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Banking on mobile technology Digital money isn’t just about innovation – it’s helping developing countries manage their economy As you read this, a New York businessman is buying up good food and neat gadgets in preparation for a lavish Christmas break.

More than 7,000 miles away, a labourer in Nairobi needs to send half his $2 daily wage to a neighbouring village so his children can go to school.

The connection? These distant worlds are both good examples of where digital money is being put into play.

While smartphones from makers including Sony, HTC and Nokia are tooled up, apps such as Google Wallet are written and

large- scale projects such as Isis work towards infrastructure for digital money in the affluent West, mobile technology has been helping those in the poorest parts of the world.

This has already had its share of wins: M-Pesa, a mobile money system set up by communications firm Safaricom in Kenya four years ago, had been adopted by nearly 70 per cent of the country’s adult population as of April 2011. And according to an MIT report, Risk sharing and transactions costs: evidence from Kenya’s mobile money revolution, Kenya’s 28,000 M-Pesa “agents” outnumber the country’s 850 bank branches.

And other firms are extending this: French company Tagattitude uses a phone’s sound channel to move money and is set to be picked up by some African banks, while Indian outfit A Little World has worked on a system combining different technologies to let people in isolated locations withdraw cash.

> Sudan money services Telecom provider Zain, which services countries throughout Africa and the Middle East, has rolled out its own mobile money services in South Sudan.

By providing rural communities with access to financial services it aims to transform the economy, allowing payments to be carried out with transparency and more efficiency.

Zain paired up with Ericsson to help fight poverty in Nigeria in 2009, while its Jordan branch was recognised by the Telecoms World Middle East Awards 2012 supporting micro-finance initiatives in the Middle East.

Poverty control

> Cash boost in Brazil Bolsa Familia in Brazil provides financial aid to poor Brazilian families to ensure their children are vaccinated and that they attend school.

With payments of around 22 reais (approximately £6.50) per child each month, recipients are issued a card by the bank Caixa Econômica Federal, which operates like a debit card used to withdraw welfare funds.

Since 2003, 12 million families have joined the scheme, and the poverty rate has fallen from 42.7 per cent to 28.8 per cent.

While companies in Europe and America fight it out to make shopping and banking as convenient as possible, digital money is giving those in poverty a way to control their finances.

As Ignacio Mas, a mobile money consultant, argued in a 2009 report, those on low incomes find themselves “disconnected from the rest of the world” financially, because many banks will refuse to give them an account based on factors such as lack of regular funds.

But rather than resorting to stashing money or joining a communal savings group, people in a number of developing countries can engage in “branchless banking” using basic mobile phones.

This is simple: in the case of M-Pesa, a customer must have a mobile phone with a particular SIM card, and can then go to a local agent – the service is available at places including local retailers – where they buy prepaid e-money.

A new era for digital money In the fast-moving world of digital money, expert help you can bank on is needed to maximise the opportunities on offer INDUSTRY VIEW

W

e are at a watershed moment in the evolution of digital money in the UK. As cash becomes increasingly digitalised, businesses – including banks, retailers, social networks, mobile operators and more – are jostling to own the consumer relationship.

As people are offered more choice, they develop the influence and power to pick the winners and losers in the digital money space, and in particular mobile money. Power is moving from institutions to individuals.

How businesses react is crucial – will they create compelling consumer propositions that win plaudits and traffic? Or will they lag behind the competition, and risk being

cut out from the consumer relationship?

Banks, which already have the trust of their customer base plus existing traffic, have a significant advantage, but the potential of new market entrants should not be underestimated. Market players are already fighting for market share and mobile wallets will be the next battleground.

Monitise lies at the heart of the mobile money sector, helping banks and other businesses to defend their position and extend their role in this new form of payments and commerce.

It has the proven technology and expertise to offer a wide range of services to its customers in markets across the globe. In fact, it’s already helping more than 300 financial institutions worldwide.

Via the Monitise Enterprise Platform, Monitise supports more than 17m registered customers, handling 1.6 billion transactions, and payments and transfers worth $20 billion (£12.6 billion) on an annualised basis.

Monitise powers bank-grade solutions that are delivered via on-premise or cloud services. With its partners – including businesses such as Visa Europe, Visa Inc and FIS – it is working to extend trusted and secure mbanking, mpayment and mcommerce solutions in territories worldwide. www.monitise.com/insight

Users can then move this e-money by sending an SMS. M-Pesa can be used for savings but also for paying bills and transferring funds to other people.

Apart from letting users without bank accounts manage their funds there are other advantages: a key strength of the M-Pesa system is that it makes personal remittances quicker, more efficient and safer.

So rather than taking a five-mile trip to another Kenyan village to give money to your family – where you run the risk of having it stolen – you can send it by text. The recipient can then go to an M-Pesa agent and withdraw the cash.

As schemes pop up across Europe and America, digital money is likely to make your banking and services more convenient – but the real revolution is taking place elsewhere.

12

Business Technology

an independent report from lyonsdown, distributed with the sunday telegraph

December 2012

Digital money

Find us online: biztechreport.co.uk

Follow us on Twitter: @biztechreport

Safety in numbers Industry players must unite to ensure security concerns surrounding m-commerce are met card fraud losses at UK retailers (Face-to-face transactions 2001-2011) Tinted figures show percentage change on previous year’s total 250

+23%

218.8

Source: Financial Fraud Action UK, Fraud the Facts, p25

0

-6% -36%

43.2

67.4

-27%

71.8

+35%

+1%

50

73.0

72.1

-47%

100

95.5

-38%

135.9

-5%

-1%

177.9

150

186.9

+36%

200

188.9

W

ith personal computing rapidly moving from the desktop to smartphones and tablets, mobile commerce is set to overtake online commerce in the near future. However, research shows that there are still deep concerns when it comes to payment security. A report conducted in 2012 by The Global Online Shopper report found that 39 per cent of consumers are concerned about fraud and the security of their personal and financial information when using a mobile device to shop.

Mobile commerce (m-commerce) comes in many different forms.

Consumers can now pay by card within their app or on a mobilised website, use their smartphone as a wallet or pay contactless with a NFC-enabled phone. At the same time, businesses on the go can use mobile card acceptance solutions for their smartphone or tablet often in combination with a dongle or card reader.

Since the introduction of Chip

and PIN in 2005, fraud losses on UK cards are at the lowest level since 2000. According to the Financial Fraud Action UK, which works in partnership with the UK Cards Association, card fraud losses on UK high streets have declined by 80 per cent since peaking at £218.8m in 2004.

Today’s fraudsters are targeting unsecure environments that do not use Chip and PIN, also known as card-not-present transaction such as phone, online and mail order – consequently m-commerce.

Card-not-present fraud accounts for 65 per cent of all UK card fraud, with online taking the biggest share of 63 per cent of card-not-present losses in 2011, up from 59 per cent in 2010.

If we are not careful, m-commerce could be a step backwards for payments security.

With so many innovative mobile payment solutions flooding the market, regulators and card schemes are struggling to keep up.

The government has recognised this issue and stepped in to help counter the threat of theft and

£ millions

INDUSTRY VIEW

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

fraud by supporting m-commerce products and services that demonstrate secure attributes and reduce the probability of fraud.

Visa Europe has just recently

published its guidelines for mobile point-of-sale solutions, insisting they have to provide the same user experience and security as in the retail sector that uses Chip and PIN

for face-to-face card authentication.

Jeremy Gumbley, CTO of CreditCall says: “Security is a major concern for everybody; consumer, acquirers, card companies, businesses and merchants. It is our role as industry experts to help provide knowledge to all. The card industry has shown great foresight to reduce fraud and we must stay on the right track to keep improving consumer confidence.

“As a leading provider, we and other industry suppliers must meet all UK industry objectives for security. We must keep driving fraud down by making it harder, not easier, to enter the market. Just because a solution is innovative, it doesn’t mean that we should bend the rules where safety is concerned.”

CreditCall develops EMV software and offers mobile payment solutions for in-app payments, mobilised websites and mobile point-of-sale credit and debit card acceptance. www.creditcall.com www.cardeasemobile.com

an independent report from lyonsdown, distributed with the sunday telegraph

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December 2012

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Digital money

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The small print From EU rights to EMI authorisation, we tell you everything you need to know about electronic money

By Bonnie Gardiner

Since 2000 there has been much regulation introduced and amended to dictate appropriate use and issuance of electronic money. Applied by both UK legislation and the European Commission, these regulations cover the conduct requirements for all electronic money issuers and their customers, including who qualifies to be authorised by the Financial Services Association (FSA), the holding and redeeming of digital money, and how this applies to member states.

Here we provide a summary of the key points and procedures…

1

E-money: a definition

For the purposes of understanding legislation and who it affects, the definition of digital money or electronic money (e-money) is electronically (including magnetically) stored monetary value, accepted by others as a means of payment.

It derives its value, not from any intrinsic worth, but from the expectation that it can be exchanged for its underlying value.

Types of e-money include pre-paid cards and electronic pre-paid accounts for use online.

2

What is an EMI?

Organisations looking to provide e-money services, that are neither a bank nor a building society, will need to become a registered and authorised e-money issuer (EMI). This includes those who use card schemes such as travel and gift cards in which the goods or services may be provided to someone other than the issuer.

Small EMIs – those whose e-money liabilities do not exceed €5m (£4m) or equivalent – cannot acquire passport rights into other European economic area states.

EMIs can now provide payment services that are unrelated to the issuing of e-money and engage in other business activities without any additional authorisation or registration.

To allow this, those responsible for running the business must be clear of any convictions relating to money laundering or terrorist financing offences.

3

Financial institutions

If a payment institution wishes to also issue e-money, it will cease to be a specific-purpose instrument and develop into a general-purpose instrument. As such, EMI: those responsible for running the business must be clear of any convictions relating to money laundering or terrorist financing offences

Electronic money issuers are not permitted to make risky loans or investments with the funds they accept from customers

an institution should apply to be an EMI and cancel its authorisation as a payment institution, as e-money authorisation/ registration is granted under separate legislation with different conditions.

The conditions for granting and maintaining authorisation of EMIs will include prudential requirements that are proportionate to the operational and financial risks that occur during the course of any specific business.

4

E-money in funds

When holding e-money for a customer, EMIs are subject to special rules for safeguarding and repaying that money which differentiates them from segregated from any other funds that it general financial institutions. holds, and must safeguard funds in the event The issuing of e-money does not constitute of insolvency so that the e-money issued deposit-taking activity, as e-money is a will be protected from any creditors’ way to make payments rather than to claims and be repaid to customers. save. Issuers are not permitted to The e-money must be held in EMIs must make risky loans or investments secure, liquid low-risk assets redeem e-money, with the funds they accept from held by a custodian or placed in even if it is worth customers, and must provide a segregated account controlled less than payment services themselves only by the EMI. The firm may rather than issue electronic hold an insurance policy or money via agents. bank guarantee to safeguard EMIs are not allowed to grant the funds. credit or interest on funds held and With the nature of e-money being issued, unless those benefits are not related online and transferable, EMIs must take to the length of time during which the steps in order to ensure online security to money is held. protect valuable funds and sensitive data that can be exploited by cybercriminals and Rules for redemption hackers for monetary gain. EMIs are now Under the new regulations, subject to effective anti-money laundering EMIs must issue e-money to and anti-terrorist financing rules. customers on receipt of funds at face value Exemptions to regulations and without delay. They must also refund Reference to the issuer of any outstanding balance at any time if the electronic money in the regulations customer requests it. They are also not is a reference to the originator of e-money allowed to refuse to redeem e-money if it is schemes, rather than the distributor. worth less than €10 (£8).

However, any electronic money institution EMIs are no longer allowed to set a time limit on the e-money holder’s right to redeem, that is acting as a principal to a distributor should notify the FSA. though a fee may be charged in certain Banks, credit unions, building societies circumstances, such as redemption prior to, and Post Office giro institutions are regulated or over a year following, the end of a signed differently to non-bank e-money issuers, contract. EMIs will not be obliged to provide thus the authorisation and registration a refund if over six years have passed since requirements do not fully apply to them. the date the contract terminated. All of this However, if they wish to issue electronic information must be clearly stated upfront in money they must ensure they have the in the firm’s terms and conditions. relevant permission, while also being subject Security of e-money to the safeguarding requirements and the Given the crucial importance of redemption provisions. e-money protection, the use of Regulations also do not apply to monetary safeguard funds, insurance policies and value that is used to purchase digital goods security measures must be put in place. or services where the operator simply adds An EMI must keep relevant funds intrinsic value to it, for example when a

€10

5

7

6

Electronic money (e-money) is money ‘stored’ electronically to spend later. This includes pre-paid cards, such as travel money cards and some gift cards, and online accounts used instead of credit or debit cards

l

For more information, visit: fsa.gov.uk

mobile phone subscriber pays the network operator directly, with no direct payment or debtor-creditor relationship with any thirdparty suppliers.

8

Member state rules

The rules governing EMIs which have their head office outside the UK are expected to be analogous in all member states to incur suitable harmonisation.

Member states of the EU are potentially allowed to waive the application of certain provisions if an institution is only issuing only a limited amount of electronic money, though they are not necessarily entitled to exercise freedom of establishment.

The replication of the same regulations throughout the member states is so far only desired, with the inherent difficulty of applying many different rules to separate existing legal systems, but compliance on a national level is mandatory.

14

Business Technology

an independent report from lyonsdown, distributed with the sunday telegraph

December 2012

Digital money

Find us online: biztechreport.co.uk

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What are the biggest obstacles to the adoption of digital money?

INDUSTRY VIEW Andrew McClelland is chief operations and policy officer, IMRG The industry certainly has a huge challenge on its hands to persuade consumers on a national scale that digital methods for conducting transactions are completely safe and secure. The issue with any activity going virtual is the associations it brings: malware, phishing, identity theft and viruses are particularly alarming when it is a consumer’s bank account that could end up being compromised.

So the biggest obstacle is likely to be around communication. Digital money will need to be accepted as a ‘natural’ progression for the increasingly digital society in which we live, if it is to be truly embraced by consumers. This communication task falls to all stakeholders – payment processors, tech-enablers, retailers, regulators, government and general businesses alike. www.imrg.org

Miles Quitmann is managing director of Proxama Consumer education is probably the most important issue to address. Near field communication (NFC) will be the driving force behind digital money, but its widespread adoption will not be achieved while the average consumer has a limited understanding of how it works, or that it even exists! ABI Research predicts that 285m NFC-enabled devices will be shipped in 2013. Handset manufacturers, as well as banks, have a responsibility to put their advertising weight behind NFC to get it on consumers’ radars. The growing use of NFC in interactive consumer mobile marketing campaigns will help drive awareness and initial usage, so that the move to digital payments becomes less of a leap of faith and more of a natural evolutionary step. www.proxama.com

Do you agree or disagree with our experts? Tweet us your views @biztechreport

Mike Bowman is the Payments Council’s head of policy and markets Some of the challenges for digital money in the UK are to leverage the opportunities to integrate digital payments with other services. For instance, using mobile marketing to enhance revenue and deepen customer relationships, and for providers across different sectors such as the banking, card and mobile phone industries to work together to develop the standards that ensure the security, enhance the efficiency and enable continued innovation in digital payment services. The UK has a very mature payments market with widespread acceptance and use of debit cards and other electronic payment methods. This may limit the market opportunities for new digital money solutions, such as pre-paid cards, and result in them being less widely adopted than we’ve seen in some other countries.

Donal Mc Guinness is managing director of Escher Interactive The barriers to deliver a sustainable digital economy, and digital money, are not technological – they’re manmade and self-imposed.

The convergence of cloud computing, mobile and social networking has made the digitisation of money inevitable. But change takes time and we as consumers are cautious in embracing new financial service delivery models.

Trust and security is fundamental to the success of any digital system and this is not easily won, but is very easily lost.

There are too many competing interests impeding the ability to create sustainable digital money acceptance and common standards.

It is my view that the emergence of an independent trusted entity would dilute the stranglehold of these parties and at the same time build the trust, security and consistency of experience that consumers demand.

paymentscouncil.org.uk

www.eschergroup.com

an independent report from lyonsdown, distributed with the sunday telegraph

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December 2012

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Digital money

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Rob Skinner, PayPal UK

Future is more than mobile For consumers to truly buy into digital money, NFC alone won’t cut the mustard

Britain has just completed the switch to digital television. Money is going the same way – by 2016, PayPal predicts that you won’t need a leather wallet to shop on the British high street. Money’s digital switchover is under way.

But this revolution won’t rely on NFC – near field communication.

This technology is just one way to make payments using devices such as smartphones. Yet many in the technology and financial services industries regard it as a sure way to make paying by mobile phone as common as using a credit card.

Not everyone thinks that NFC is so compelling. Contrary to speculation, Apple chose not to add NFC to the iPhone 5. Consumers barely noticed – it definitely wasn’t a talking point in the Dog & Duck that evening.

No to NFC Another sceptic is PayPal. We believe in the power of mobile; we just don’t think NFC is the answer. Very few consumers have NFC phones.

Retailers have to spend a lot of money on new in-store systems to take NFC payments. They need convincing that consumers are going to use the system before making the commitment.

Consumers don’t change the way

they pay unless they’re shown a better way that’s faster, simpler or safer. Many think the future of money means replacing a leather wallet with a mobile phone that does the same thing. To gain mass adoption it has to be better, not just different, from what we do today. And your mobile phone alone just won’t cut it.

PayPal’s approach is very different. We’re evolving the wallet from a physical thing, whether a traditional wallet or a phone, to a connected experience that follows you wherever you go and works with whatever device you’re using.

Your wallet, wherever This is a true digital wallet, which safely stores your financial information, your credit cards, and airline and retailer loyalty points. It means never forgetting a discount coupon because it will already be in your wallet and available no matter what device you’re using.

This flexibility is key as the mobile phone is just one of the devices we use to buy things online. Cisco predicts that there will be 50 billion connected devices globally by 2020. Your mobile phone won’t be the only device that banishes your wallet or purse to the back of a drawer.

The other drawback of NFC is that it assumes that the consumer will be standing in front of a traditional till.

Retail is changing at an amazing pace – and the old-style counter won’t be the heart of the action in the future.

Imagine ordering and paying for your morning latteto-go when you’re minutes away from your regular coffee shop – sparing you

precious time when you’re running late. That’s the kind of experience we’ll come to expect – and which a digital wallet can make happen.

Money’s digital switchover is under way. In many ways, it will be more far reaching than television’s. But we need to remember this revolution isn’t about the technology itself, but about technology working behind the scenes to make shopping and paying easier and more enjoyable.

6

Business Technology

an independent report from lyonsdown, distributed with the sunday telegraph

December 2012

Digital money

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How are the UK’s biggest retailers adapting to join the mobile revolution?

By Dave Baxter

From supermarkets that literally bus people to the shops to clever adverts and cheeky bargains, retailers do all sorts to get the punters in.

But as people leave high streets for the digital world, retailers are being forced to embrace change. Deloitte Digital estimates direct purchases made through mobiles in the UK in 2012 will be worth around £1 billion, and says that, with more than 80 per cent of people expected to own a smartphone by 2016, this will only rise.

Compared to their American cousins, British retailers have been slow to take up digital money schemes, but a number of smartphone-friendly experiments herald a new era: these range from making services and goods easier to access via smartphones to letting customers pay for items, both in store and remotely, through their devices.

David Honey, director of Fujifilm UK We have had a very successful photography printing business for a number of years – there are self-operated kiosks used by retailers, and

Pay as F you grow

INDUSTRY VIEW

One global payment solutions firm is giving e-commerce businesses the tools it needs to grow

or entrepreneurs attempting to start a business in today’s economic climate, the forecast is not so great.

Banks aren’t willing to loan, consumers aren’t willing to spend, and the proper guidelines for success have been blurred.

However, Andy Khawaja (below), CEO of multibillion-dollar Allied Wallet, has demonstrated how businesses can thrive, just as his has, by going online and opening up their products and services to the rest of the world.

Success stories Allied Wallet is providing business owners with a multitude of features that will help them flourish. The expansive reach of global online business has produced incredible success stories for those who need alternative financing options, while the burgeoning e-commerce industry has been dominated by Allied Wallet and its global payment solutions, renowned for its flexibility, high quality service and top-notch security.

“E-commerce is an open market; it’s not just a boutique on the side of the street where you rely on

“E-commerce is not a boutique on the side of the street where you rely on walk-in custom. The internet has unlimited traffic” – Andy Khawaja walk-in custom. The internet has unlimited traffic,” says Khawaja.

“You’ve got billions of people using the internet on a daily basis, and we want to make sure that we’re not just bringing the business alive, but making sure that our merchants are fully benefiting from our services.”

Education and strategy Allied Wallet not only offers a means of growth, but also guides businesses through the requirements of success. Strategic business planning means educating the merchant on rules and regulations, keeping track of cash flow, and accommodating consumers with simple and secure payment options, faster shipping and reliable postage.

“There are a lot of rules and point of sale as a face-to-face regulations by card schemes activity,” he says. “We understand and local governments, so we the international traffic and have to be fully educated what potential it can bring; Process to understand how to we know the good from payments in conduct the business the bad because we’ve in certain regions,” seen it, we’ve studied it explains Khawaja. and we understand it.”

“That’s how we currencies eliminate risk and keep Future plans the merchants in business.

From processing They make money, we make transactions that put money money, the customer in your account within gets good service and hours rather than days, There are everybody is happy.” to protecting your more than Working with banks accounts with state-ofto build a business the-art internet fraud can be catastrophic, prevention technology.

Allied Wallet sometimes taking up Allied Wallet’s global users to two or three months to financial processing open a new business account packages have been so – and many financial successful that many big institutions names including Visa, Businesses are still quite MasterCard and live in paranoid American Express about online have jumped on credit card board, as well as 164 different currencies transactions. hours worldwide.

Khawaja With plans to move into warns that often India by 2013 – successfully with online business, banks opening its doors to Brazil, are doing more to worsen the and recently finalising a major economy than strengthen it. deal with China Union Pay – “Banks will literally put you Khawaja wants your business out of business because they to grow alongside his. don’t understand e-commerce, 0207 872 5409 they only www.alliedwallet.com understand

164

41m

24

Over US$12 trillion processed every day.

100 billion consumer transactions each year.

22 of the world’s 25 largest banks.

At the core of payments processing, all the time, without fail.

ACI payment systems.

www.aciworldwide.com

ACI_Telegraph_262x338_AW.indd 1

3/12/12 11:56:22