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Expert view

Just the ticket‌

Shane Richmond gets into his time machine to check on the future of cash | Page 2

Joanne Frearson on the next stop for Oyster cards | Pages 8-9

Future of

payments

The power behind decisions

MAY 2014

The Body Bank

business-technology.co.uk

Special report on the future of payments

When shaking hands means the deal really is done


an independent report from lyonsdown, distributed with the daily telegraph

Business Technology May 2014

2 | Future of payments

Opening shots Shane Richmond

G

IVEN a time machine and the desire to surprise an unsuspecting Briton from 1964, contactless payment wouldn’t really do the trick. The concept of a credit card has been around since the early 20th century at least, so the ability to tap a card against a machine on a shop counter and thus pay for something would probably be impressive but not astounding. Better would be to pay with your smartphone, but it would be the device itself, a pocket-sized telephone that isn’t attached to the wall, that would be the really amazing thing there. You’d still be taking something out of your pocket and using it to buy goods and services. In fact, if you are in the business of selling goods and services face-to-face, then your basic transactions are probably similar to those of 50 years ago. However, if we were to use our time machine to go forward to 2064 then it’s possible that we won’t even be able to figure out where the moment of purchase is. In recent years we’ve begun to learn that the chip in a smartphone will do just as well as the chip in a card when it comes to payments. The next thing to do is to consolidate those chips – one in each credit or debit card plus those in travelcards and so on – so that one device can replace them all. Over the next five years, as wearable technology expands, we’ll find that the relevant chip could just as easily be in the customer’s

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Any technology that makes payments faster and smoother should appeal to business watch, jewellery or glasses. That removes the need to reach into a pocket or rummage in a bag. But watches and jewellery can be lost or forgotten. That’s why biometric payment methods are appealing. Paying with a fingerprint is simpler than paying with a device. However, there are risks, particularly from fraud. If the credit card system is hacked the card can be replaced. If a customer’s fingerprint is “stolen” they can’t get a new one. That highlights one key risk that businesses should keep in mind as payment technology progresses: customers have to be confident that the system is safe. New technologies often bring uncertainties that can feed fear. Nevertheless, any technology that makes payments faster and smoother should appeal to businesses. Queues will move faster, which could mean that fewer staff are needed, and less cash will be held in the shop, making robberies Twitter: @ less likely. And, according to a 2001 MIT study, shanerichmond

cashless customers spend more money – up to twice as much, in fact. The biggest obstacle is that customers are unwilling to try new payment methods if they can’t be sure they will be widely adopted, and businesses won’t adopt them unless they are sure that customers will use them. That can be a stalemate but history suggests that phase will pass. Rival credit card issuers gradually combined under umbrella associations, most of which are now accepted everywhere, while competing ATM networks eventually opened up, making it possible to get cash from any machine. Eventually, the payment process will be so smoothed that there will be no specific point at which a customer pays for something. Imagine a shop that knows the customer has arrived, knows what they put in their bag and hears them say “I’m buying this”. That’s possible today using Bluetooth beacons and wearable devices, which means that by 2064 it will probably seem quaint.


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By Joanne Frearson EVERY year, payment systems in the UK process more than seven billion transactions, worth more than £75trillion. A new payment regulator in the UK is set to increase competition in the field, as well as create innovation for the development of products. Jerry Norton, managing director of financial services at information technology consulting firm CGI (inset, below), says: “There is a huge change, which just started in the UK, in the creation of a regulator for payments. This is quite profound, as payments have not been regulated formally before in the UK. It is also fairly unique globally to create such an entity.” The Payment Systems Regulator, which is due to be fully operational by April 1, 2015, will sit within the Financial Conduct Authority (FCA) and will focus on three main areas – promoting competition, encouraging innovation and ensuring payment systems operate in the interests of customers. Norton says: “It is meant to be an economic regulator – you can see a model where it starts setting certain types of tariffs, which then are open for others to use. The idea being that it would potentially stimulate innovation and competition. The UK has been extremely good at payment innovation.” The Payment Council has just launched PayM, a mobile payment service which will be available through nine banks and building societies. Nortn adds: “PayM, which just came out, is a person-to-person mobile payment mechanism for low-value purchases and is pretty unique globally. There are other mechanisms for doing it, but there aren’t many people who have got them live at the moment. “PayM is the start. The key thing about PayM is that it is moving money from a personal current account to another or a charity and there is no card or anything else involved. To do that, it uses faster payments as the underlying transfer mechanism, which you initiate through your mobile phone. “It is a simple mechanism. You do not have to key in some complicated sort code and account numbers you can never remember. It is a simple mechanism in terms of consumer acceptance – you get the money instantly. “The reason why it is important is because it is easy

May 2014

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The

£75tn business How a new UK payment regulator to be launched next year will stimulate the industry

to use, it is secure and it is not attracting fees. Mobile payments are often card-based and use some sort of credit and debit card, in which case they are picking up the fees associated with card payments, and those fees could be very high. “PayM is using a different mechanism and using a lower cost. It is not one bank doing it, it is across the industry. Sweden has something similar, but there aren’t many other places that have got something. Again, we are ahead of the curve.”

Norton believes PayM is merely the first of many new products being developed for the payment industry, which will offer huge benefits. He says: “In a card world there are all sorts of things that go on behind the scenes that most consumers do not know. The retailer might have to wait two or three days until it’s finalised and the cardholder can dispute the transaction.” Through PayM the retailer gets the money immediately. “I think the future is in things like PayM,” Norton says. “The trend will be obviously mobile, obviously wallet, but effectively not a card-based thing; it will be account-based things.”

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Business Technology

Future of payments | 3

Retailers support combined loyalty and payments CUSTOMER loyalty schemes and being able to use the data generated from transactions are of prime importance when retailers decide what payment methods to adopt. Retailers also want to be able to keep customer data, rather than it going to a third party. According to Samee Zafar, director at Edgar, Dunn & Company, retailers are worried about not being able to use their loyalty schemes with the different terminals being launched to cater for new payment methods, and want payments integrated with loyalty schemes. He says: “Retailers are now installing contactless terminals, so they will be able to take contactless card and mobile payments when the market is ready, and banks and mobile providers have started issuing near field communication (NFC) devices.” A recent white paper by Edgar, Dunn said NFC technology, for example, is versatile and offers significant opportunities in payments, advertising, marketing and loyalty. One company combining a new payment mechanism with its loyalty scheme is Tesco. Mark Beresford, director at Edgar, Dunn & Company, says: “The big companies such as Tesco would appreciate it if they had more control of the payment mechanism and a closer relationship with the consumer. That is where the value is in the future. “Tesco is launching a digital wallet integrated with its Clubcard. The retailer has 18 million Clubcard holders in the UK, which is quite a formidable force.” Other retailers are looking to make payments more mobile as a way to give customers a better sales experience. Beresford says: “Several retailers, including luxury fashion brands such as Louis Vuitton, Prada and Hermès, are all looking at mobile point-of-sale.”


Business Technology May 2014

ExpertInsight

4 | Future of payments

an independent report from lyonsdown, distributed with the daily telegraph

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The future of payments is here – are you part of the payment revolution? INDUSTRY VIEW

R

ecent developments in how people pay are helping to make cash something you are more likely to find in a museum than a wallet, but what is driving this trend? The speed with which we adopt new technology is changing the way we shop forever. A great example of this is the enormous rise in the number of contactless transactions, which has more than tripled across Europe. It is not just the number of transactions and the volume spent on them increasing four times year-on-year. What it shows us is how people everywhere are embracing the speed and convenience of contactless – a new way to pay that is available in 63 countries worldwide. Alongside contactless, MasterCard is also at the leading edge of the move to mobile. Here in the UK, MasterCard has recently joined forces with EE, O2 and Vodafone’s joint venture Weve to bring contactless payments via mobile phones to 80 per cent of UK consumers. Across Europe we have already signed partnerships with 20 operators to bring mobile payments to more than 200 million Europeans. Paying with a mobile phone or a contactless card are only two examples of how everyday payments are getting simpler and smarter. All of us are becoming more accustomed to convenience and connectivity and are demanding easier and faster payments. Technology has changed payment behaviour and patterns to such an extent that the point of sale is no longer a fixed point at a checkout in a supermarket or clothes shop. The point of sale is everywhere. It is in jacket pockets or handbags, at a desk or on a mobile phone on the way to the office. Music festival wristbands have been turned into contactless payment devices, providing a safe and secure alternative to carrying cash. The introduction of the open loop on London buses allows passengers to tap to pay, rather than buying a bus ticket. Technology has transformed the London bus into a point of sale terminal on wheels. As the UK moves rapidly and very visibly towards a cash-free and paperless world, payments are becoming less of a necessity and more a part of the overall shopping experience. In the future, the way in which we pay will be embedded even further: imagine the applications that will control payments through household appliances – for electricity or water or even when we’re running low on milk, not to speak of car insurance purchased through vehicle telematics. This is the just the start; in the

future any device will be a commerce device. But it is not just speed and convenience that is driving this payments revolution. Safety and security has long been the number one concern amongst shoppers around the world. And thanks to technology, electronic payments have undoubtedly become the safest way to pay – for consumers and businesses alike, whether they are making a purchase or concluding a transaction at home or abroad, in person or online. All the safety, security, speed and convenience of electronic payments is made possible thanks to the developments by technology companies such as MasterCard, and the close partnership with retailers, mobile phone network and internet providers, utilities, event organisers, banks, airlines, local transport authorities and many others. While we know that there is no silver bullet to completely stop fraud, our experience in keeping payments secure has shown us that a multilayer approach that is co-ordinated across the industry helps reduce fraud risk significantly. You can see the technology at work every time you make a payment. Chip-and-pin technology alone helped reduce fraud by up to 80 per cent. But transactions are also kept very visibly safe and

secure when shopping online. The SecureCode screen that pops up when checking out online protects 1.4 billion transactions every year. The multi-layer approach also applies to the technology working invisibly in the background. There are the thousands of algorithms and calculations designed to keep payments safe and secure anytime, anywhere. MasterCard’s network is working around the clock to monitor transactions across the globe. We process an amazing 108 transactions in the blink of an eye, and to detect and eliminate fraud we screen 1.8 billion every month. It’s this data and insight into payment patterns that are driving increased security across any device anywhere and at any time. As the payment revolution pushes on and new shopping experiences come to the fore, we need to be one step ahead so that we can secure them. We are relentless in creating the technology that will protect payments wherever they are made in the future, through whichever device, or machine. Fingerprint, voice and facial recognition for payments, and incorporating geo-location approval for payments abroad are already being tested to keep payments safe. Safety and security is, and will continue to be, our number one priority so that cardholders can benefit from purchase guarantees and protection against unauthorised payments. The global payments revolution is well underway. MasterCard and our partners are working hard to ensure this is a revolution everyone benefits from: whether doing the weekly grocery shop, buying an airline ticket or taking a simple trip on the bus. Together we can make sure we not only deliver the latest way to pay but we also ensure you are confident it is the safest way to pay. If as an industry we are to be successful in relegating cash to the history books, we must work together to demonstrate that the safety, security, speed and convenience of making an electronic payment makes it the smarter way to pay. Ajay Bhalla is president, enterprise safety and security, MasterCard www.mastercard.com


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May 2014

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Business Technology

Future of payments | 5

Going global: the alternative payments that cross borders The emerging markets are embracing more radical forms of payment – and the traditional providers need to up their game… By Joanne Frearson

A

LTERNATIVE payment methods are set to grow over the next five years, as companies need to use the systems already popular in the countries they are expanding into to gain new customers. Kevin Dallas, chief product and marketing officer at WorldPay, says: “A little more than 40 per cent of the world’s e-commerce traffic is what we call alternative payments – everything from e-wallets and e-invoices to online and offline bank transfers. In different countries there are trends and patterns you can identify.” In recent research by WorldPay the more popular mature markets such as the UK and the US are card countries and in North America 71 per cent of people use cards. “If you head through to Eastern Europe and Russia what you see is that, because of particular security concerns, e-wallets are emerging as a significant form of payment,” says Dallas. “That is similar to what you see in Asia as well, and it is predominantly regulation driven.” In China, e-wallets account for the largest proportion of the e-commerce market, dominating 44 per cent of the market. Elsewhere, in countries such as India, online direct debit has really taken off. Dallas explains that this is because the payments landscape in India is regulated and tightly controlled, and that a lot of the more novel or entrepreneurial forms of payment are not allowed there. Dallas says: “Mobile phones in particular are taking off in the African region. This is predominantly because a significant proportion of the population [do not have banking services available for them], but they have mobile phones.” As companies wish to expand into these markets it is likely they will use alternative payment methods to help gain a foothold in the country.

The inner geek

Moz & Bradders

Main image: mobile payment mechanism M-Pesa has proved hugely popular in remote parts of Africa; below: Kevin Dallas of WorldPay

Wo r l d P a y estimates that alternative payments will account for 59 per cent of all online transactions in 2017, up from 43 per cent in 2012. The value of mobile transactions is expected to increase to $117billion by 2017 from $18billion in 2012, while card-based wallets are seen as accounting for 25 per cent of the card market by 2017. “Many Western companies that enter Africa with a card are radically curtailing their consumer reach,” says Dallas. “The real advantage of adopting alternatives in Africa is faster top-line growth. If you enter Nigeria only taking card payments, you are actually reaching only the minority of the population. If you are a business trying to reach a broader consumer base in Nigeria you need to be looking at alternatives. “China is similar to Nigeria – you can only reach a small base of high-value consumers who are making big purchases with cards if you go with those schemes, but to actually reach the vast majority of Chinese consumers you need one of their e-wallets.” As alternative payments grow, the products people use to pay for goods and services will also rise in number. Traditional card providers are already recognising this opportunity, and are developing card-based e-wallets for their own brands. Visa has recently launched a pan-European wallet service, V.me, in the UK, France, Spain and Poland to capitalise on this expected shift. E-wallet transactions are expected to be used much more in purchasing digital content, such as downloadable books, films and TV programmes and videogames, while e-commerce payment will grow as emerging markets become more online savvy. But Dallas does not expect all the payment mechanisms that will come on the market from these

different providers will be popular. “There are a lot of products out there, some of which will make it, some of which will not,” he says. “It is a matter of how it evolves over the next couple of years. I do think things like mobile payments, digital invoices and real-time bank transfers will continue to grow. “The big question will be which ones – which of the many payments methods and emerging brands in that space will become widely adopted and known by consumers? What we can probably agree on is things like cash on delivery and paper-based invoicing will continue to decline.” Although there will be growth in alternative payments, Dallas warns that businesses and consumers need to bear in mind that they often do not have the same level of customer protection as credit cards do. “Generally speaking, alternative payments do not tend to offer the same level of consumer protection that the schemes offer,” he says. “Consumers are often surprised to discover that alternative payment methods do not always have a refund mechanism.” Dallas gives the example of a hotel going bust and angry customers complaining on TripAdvisor, because they could not get their money back as payment was through alternative means. If an alternative payment method is used, quite often a consumer has no recourse. Alternative payments also tend to be only for smaller transactions rather than highvalue purchases, and might not suitable for certain markets. Whatever risks there may be for alternative payments though, it looks likely that they will continue to rise, as global growth develops and businesses look at entering new markets.


an independent report from lyonsdown, distributed with the daily telegraph

Business Technology May 2014

6 | Future of payments

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European card fraud declining thanks to chip-and-pin security By Joanne Frearson

ExpertInsight

THE CHIP-and-pin system used in Europe is helping to protect the European credit-card system from fraud. A study of underground marketplaces used by cyber criminals by Joe Stewart, director of Malware at Dell SecureWorks, and independent researcher David Sheer, found that European credit card numbers fetched more on the marketplace than US numbers. B e n Fe i n s te i n , d i r e c tor of C o u n t e r T h r e a t U n i t (C T U ) operations and analysis at Dell SecureWorks (below), says: “We suspect that there are two factors going on here: one is the relative supply of those numbers. But it is also the adoption of the chip-and-pin technology on those credit card numbers, which tends to make it more difficult to steal in the first place.” A stolen Visa or MasterCard in the US was being sold for $4, while the same card was being sold in the EU or Asia at $15. There had also been a decrease in the selling rate for US credit cards as opposed to European cards compared to a similar

study back in 2011. Feinstein says: “The market rate for a stolen US credit card number declined by 30 to 40 per cent since our last study. A lot of what drives the prices is supply and demand. There really seems to be a glut of USbased credit card numbers that are for sale in the marketplace, which drives the market price for those numbers down.” Hackers were also selling personal details such as cardholders’ dates of birth and social security numbers, which enabled them to answer additional security questions along with a duplicate credit card. The study also revealed that personal identities for non-US residents sold more than the identities for US residents, and that online banking credentials were under threat and up for sale. The username and password for an online bank account with a balance between $70,000 and $150,000 could be purchased for $300 or less, depending on which banking institution held the account. This was substantially lower than the study in 2011, which found bank account credentials with balances of only $7,000 going for the same price. Malware used to

Contactless to expand into vending and parking

European card security is seen as harder to bypass by fraudsters

steal information from a computer could be bought for as little as $50, while infected computers where fi nancial credentials could be harvested from were sold for $20. According to Feinstein, business should apply industry bestpractice security controls, including basic methods such as firewalls, intrusion detection systems, malware protection solutions and making sure the environment is being monitored. He says: “With the financial services within a company – whoever does payroll and accounts receivable – consider applying additional security

for those systems, even going so far as to have a separate computer system to run payroll.” Dell SecureWorks recommends that people use a dedicated computer to conduct their online banking and bill paying, and avoid activities such as emailing and surfing the web on it to avoid potentially malicious malware. It also recommends that people reconcile their banking statements on a regular basis with online banking and/or credit card activity to identify potential anomalous transactions that may indicate account takeover.

VISA Europe sees the next big growth area for consumers using contactless cards to be in vending and parking machines. Mark Austin, head of contactless for Visa Europe, says: “The key objective for everyone in the payment industry is to make it easier for everyone to transact, whether it is online or face to face. “Vending machines are almost entirely a cashdominated environment, because effectively the items being sold are very low value and the cost of putting in chipand-pin is disproportionate compared to the benefit. “Contactless will be a popular move as cash is very expensive to collect. It is pretty good from a vandal-proof point of view, because you have a reader – you do not have people trying to take money out of the machines.” Another area he says where contactless will be handy is the parking environment, which is also very cash-heavy.

The future of retail calls for personalisation Establishing customer loyalty demands an integrated mobile payments service INDUSTRY VIEW

T

oday’s mobile customers are no longer satisfied with a onesize-fits-all service, but instead wish to receive offers tailored precisely to their interests. Mobile payment, and its many facets, establishes this connection with customers. The aim for retailers should therefore be to provide additional, customised preferential offers and greater service options to customers at the point of sale. Retailers can create a new shopping experience with new technologies such as Bluetooth Low Energy (BLE). These can include making product information readily available, tailoring offers to customers, in-store navigation and incorporating online ordering. The boundary between the online and offline worlds has merged, which has given rise to entirely new possibilities in the relationship between customers and retailers. The following example demonstrates how a purchasing process

might take place in future. Kate is talking to her friends about the new sports watch with an in-built heart rate monitor. She is keen to start taking her running a bit more seriously. Using her smartphone, she can find everything she needs to make a purchasing decision: test reports, price comparisons, and also user reviews. Her preferred online shop for sporting goods has her chosen watch in its range. Kate quickly uses the retailer’s service for existing customers to reserve the item in a virtual shopping bag, as she doesn’t want to disrupt the conversation with her friends too much. Once home, she can log in on her tablet and can return to the shopping bag she had previously accessed on her smartphone. She discovers that the sports watch is also available in the retailer’s high street store and sets off. As she enters the shop, she opens the retailer’s app and checks in via BLE using her smartphone. The wireless technology allows her to connect with all mobile devices within a ten-metre radius. Micro-transmitters, known as

beacons, provide access to locationrelated services and indoor navigation. If customers are within range of a beacon, retailers are able send them personalised offers such as discounts, special offers and loyalty services straight to their mobile. The BLE transfer technology has the following benefits for Kate: the checkout assistant recognises her as “existing customer, Kate” and she also receives push notifications with discount vouchers she can use immediately. As Kate approaches the watches in the shop, the retailer sends her an additional mobile

voucher inviting her to a free running group. Now Kate wants to pay quickly as she needs to get to an appointment. Using her smartphone, voucher and BLE, she pays via tap-and-go technology, thereby avoiding the long queues at the tills. Already today mobile payment experts, such as the technical enabler Wirecard, allow retailers the “future of payments” and the cross-linking to their customers – whether with future-oriented technologies like BLE, NFC or QR code. www.wirecard.com


an independent report from lyonsdown, distributed with the daily telegraph

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May 2014

Business Technology

Future of payments | 7

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Biometric payments system trialled by Swedish university

Real-time, any-to-any payments are here

CARRYING wads of cash and cards around in your wallet may soon not be necessary when you can quite easily pay for things by using your hand. Fredrik Leifland, an engineering student at Lund University in Sweden, has launched a biometric vein-scanning payment technique for stores and coffee shops in the country. The idea came to him when he was impatiently standing in line at the supermarket and wondered if he could pay for things biometrically rather than using credit cards. After talking to players involved in vein-scanning terminals, banks and stores, a system that worked was developed. There are now currently 15 stores and restaurants, mainly around the Lund University campus, that use the terminals, with 1,600 active users.

INDUSTRY VIEW

Other countries have also begun using biometrics as a payment method. Banks in Japan use vein technology, which allows customers to take money out from their accounts and helps reduce the risk of fraud. “No one is robbing your bank account because only you can access it. You have to provide your own personal details,” says Richard Gilroy, head of biometric solutions at Steria. “You do not forget your card – you have everything with you. The commercial use of biometrics is quick and easy verification. Therefore reducing the cost of security to banks or increasing the threshold of insurance they have got.” Biometrics being used for payments is still at its beginning stages – although

Tech giants to vie with banks for payments industry By Joanne Frearson

ALTHOUGH banks and card companies currently have the edge in the UK payments industry, the big technological giants such as Facebook and Apple could yet give them a run for their money. Ved Sen, mobility practice head for UK and Europe at Cognizant Technology Solutions, says: “I think the big technology majors always have a shot of taking on the banks. Apple and Facebook are of course companies that have the size and scale and the customer base to try it. It will all boil down to the level of execution and a lot of detail. “The mobile telecoms players would like to play a bigger role, and would like to take a bigger chunk of the pie.” One player in particular Sen would not be surprised to make a splash in the payment industry in the next 12 to 18 months is Apple. He says: “I think Apple has the cash balance and willingness to disrupt industries. If you sign up with iTunes, Apple has your credit card registered. You can download an Apple app on your iPhone – using that, you can walk into a physical Apple store, scan something yourself, and it will deduct the payment from your credit card folder. “At the last count, Apple had about 500 million credit cards on its records and a mechanism that allows you to use that information to make a payment. All they would theoretically have to do is to open that up for a third party, and you could use that to make any payment. You could see how that could be very easily a powerful mechanism.” Facebook is another company which many analysts believe could one day become a major player in the payment industry.

Peter Roe, research director for UK IT analyst firm TechMarketView, says: “Not many people know what Facebook is doing, but payments through Facebook could be a winner. Payments is a logical extension for Facebook, because it has the customers, it has the network, it has the activity. “People trust Facebook with a lot of personal information and use it to communicate a lot of things. So the step to trusting it with money is probably not a big step to make. If I was Facebook I would be drawing that map now – in how I could grow a more significant financial services business.”

Big-name brands like Apple are well positioned to enter the smart payments arena

Gilroy says that common practice in the industry is to use two forms of identifications, so consumers would not have to rely solely on a fingerprint. “You would rely on a fingerprint and iris. If you have two forms of identification you are reducing the possibility of spoofing it massively,” he explains. “The big game changer, I think, is the fact your biometrics are now embedded in the latest iPhone. That provides you with instant security that it is you. There are occasions now where people can order something online through their iPhone, then take their iPhone to a shop. “As the use of biometric technology and the availability through the likes of iPhone increase, so will people’s willingness to accept it.”

According to Roe, new competition is eroding the position of banks in the payment industry. And although it is too early to say who the clear winners will be, he believes the big brand firms could have a good shot at it. “The centre of gravity, of activity, is shifting away from the banks,” Roe says. “There are a lot of people bidding for attention – payments are attached to mobile phones, the point of sale has changed in a shops… it is very difficult to say which one is going to win, unless you have the brand of something behind it. “The global brands that exist, that have resonance with consumers, such as Apple and Facebook – all have credible brands and customer bases and relevance to the people out there.” But it is not quite time to say goodbye to using banks to make payments. They could also come out in a better position from these changes. “The banks still have a lot of relevance with the retailers and the payments business. If they can get their act together then there is a lot of opportunity for the banks, but they have got to wake up. “They have got to make sure they are joined up across the various channels – online, mobile and branch. They have to ensure their customer experience is very good, and that they can play to their strengths in terms of all round solidity and all round management of finance capability.”

In a world where convenience is king, imagine consumers have control over their money and are connected directly to their payment mechanism of choice no matter where they are. In this world, consumers pay anyone (shops, tradesmen, utilities, even friends) directly from their current accounts. Banks reclaim a direct relationship with consumers and retailers drive in-store and online spending. Payment stakeholders collectively benefit by driving out inefficiencies in the payments ecosystem, thereby reducing costs and protecting margins in the face of relentless change and regulation. Most importantly, consumers have the ultimate control over their money and are able to access it instantly to pay others, no matter where either party is on the globe. The world of realtime payments is becoming a reality and, along with it, the enablement of secure, fast and universal electronic payments. Imagine no longer: real-time, any-to-any payments are here today. However, current payment systems are deeply entrenched in historic consumer behaviour. Consumers will therefore have to be incentivised to adopt real-time payments if the large-scale acceptance required for its success is to be achieved. This means that payments need to be cheap, convenient, secure, reliable and available everywhere. While ubiquity sounds like an insurmountable task, the benefits for consumers and stakeholders are compelling. ACI is committed to enabling a world where real-time payments are the norm. To learn more download the real-time, any-to-any payments imagination-realised, commerce evolved whitepaper from our website at: www.aciworldwide.com/ commerce-evolved. +44(0)1923 816393 www.aciworldwide.com


an independent report from lyonsdown, distributed with the daily telegraph

Business Technology May 2014

8 | Future of payments

Mobile payments: is overtaking the networks the right manoeuvre? INDUSTRY VIEW The mobile wallet has traditionally been seen as the delivery mechanism for future payment services. By providing access to a “secure element”, it allows banks (and other service providers) to replicate the security found on contactless chip-and-pin cards. As a phone’s SIM card can be used as the “secure element”, the network operators became the natural wallet providers. One of the key reasons why deployment of these services has been slow is the complexity of integrating with wallets. Integrating with one wallet is complex but a bank would have to integrate its services into multiple providers’ wallets (three network operators have 85 per cent of the UK market) to reach most of their customers. Each provider’s wallet has different integration requirements – therein lies the crux of the problem. With the recent excitement about Beacon and HCE technologies – which do not need access to the “secure element” to deliver payment solutions – the banks and service providers see a route to bypass network operators’ wallets. Given the aim of reducing complexity, these new technologies may seem like the answer but, while they remove the need for the “secure element”, they do not provide a replacement. Security is critical for payments so if it is not being provided by the SIM, how and where will it be provided? Banks and service providers need to consider if these new technologies really will reduce, or simply shift, the complexities. But for the future of payments, rather than competing, these new technologies should be seen as complementary to current technology. The payment solution architected on the strengths of them all may ultimately be the winner. info@helixion.com www.helixion.com

By Joanne Frearson Contactless Oyster cards have already improved transport in London – now the next stage is to make payment as simple as waving a bank card…

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VERY day, around 24 million journeys are made on the Transport for London (TfL) network. This means millions of tickets need to be bought, swiped on the card gates and processed smoothly in order for the network to operate efficiently. If this doesn’t happen, lengthy queues can start to form in London stations. The morning rush hour can become an unpleasant mess of frustrated commuters, jostling for the next spot at the ticket counter. The relaxing classical music heard at some London underground stations is drowned out by shouting, as the board on which station staff scribble philosophical quotes of the day are obscured by crowds of bodies trying to get through the gates. TfL has been working on ways to improve the ticketing process for their customers for some time – the creation of the Oyster card in 2003 helped to kick-start a drop in queues around most London stations. And these figures are expected to fall further when TfL launches its new contactless payment system later this year. “Nobody says the high point of their day was buying a ticket for the Tube – they want to get to work,” says Shashi Verma, director of customer experience at Transport for London (TfL). “Buying the ticket is just one of those things that gets in the way of them getting to work. We have reduced that burden quite a lot by the Oyster card system, but there is still a long way to go. “We have been running the Oyster card for 11 years now. It was designed to make life easier for our customers and to make systems simpler for TfL to provide, and it has been hugely successful. “In the world before Oyster, the problem we had on the Tube was a rise in demand. We were unable to meet the capacity needs of stations and that meant the gates were being left open during the morning peak times, which completely defeats the purpose of having them in the first place. They are there to make sure the fares are collected properly. We needed a solution that was faster in terms of being able to open and close the gates, so we moved from day-to-day ticketing to card based ticketing.” After the introduction of Oyster, TfL noticed this also reduced the amount of tickets being bought for travel, queues reduced and buses became faster as they did not wait as long as people did not need to buy tickets. “On the Tube there has been a big change. Apart from in about a dozen stations in central London queues have practically vanished everywhere else,” Verma says. “Queues on Monday morning used to be everywhere across stations in London, but now you will find the queues where people are arriving in London from the outside.” According to Verma, the next step in reducing queues is to reduce the number of tickets being sold to zero. The way TfL plans to do this is through using contactless bank cards. “We thought we could use contactless payment cards as the mechanism for collecting payments,” he says. “In due course everyone is going to have a contactless payment card in their pocket. Most people will feel perfectly comfortable using contactless payments. “The convenience of this is it takes away the need for people to get an Oyster card at all or keep it topped up. The queues that we see, for example, at Victoria, Waterloo

Conta trans

or Heathrow are queues because people are trying to equip themselves with an Oyster card. It takes away the critical step of having to equip yourself with a ticket.” The contactless system has already been up and running on TfL buses for about 15 months. There have been about 600,000 individual cards that have been used on the bus network and 12 million individual journeys. There are between 1,000-2,000 new cards being used on the network every single day. “What is going to happen later this year is that the same cards will be used on the Tube,” Verma says. “The difference between the bus and Tube is that on the bus network it is a flat payment of £1.45. On the Tube it is not a flat payment, so it is a bit more involved in turning the transactions at the gate into payment amounts.” Transport for London is in the process of piloting the scheme to be used on London Underground with the general public, and it has already done four months of live testing with its own staff, says Verma. “We have now just opened it up to a small number of customers. The last stages of the pilot is to make sure the system can

work to scale and the system behaves exactly how we want it to. “We might discover new things when customers start using it, which is why we are doing a pilot before we do a big launch. The pilot will run for at least a few months before it launches officially.” Bugs have only been small since TfL has started testing the system, Verma explains. The only issue, Verma warns, is the possibility of interference if a user has multiple cards which they present to the card reader at the same time – or “card clash”. TfL is running a campaign to educate people to only present the contactless card they intend to pay with at the gates to avoid this. “There is a huge amount of investment in improving the transport system and expanding it,” Verma says. “There is a huge investment demand from just the growth of London. There are 100,000 new people in London every year, and they all need transport. All of it is about efficiency improvements.” Contactless cards should make the journey of the 24 million people who travel on TfL even easier, and customers will hopefully be able to glide through the barriers without being met by a sea of hostile commuters trying to buy a ticket. Buses and Tube journeys are likely to become faster and passengers will be able to have a more pleasant journey all round.


an independent report from lyonsdown, distributed with the daily telegraph

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May 2014

Why I’m never giving up on cash payments VIEW By Keil Hubert WHILE fi ling my tax the other week, I realised that I still had several years’ of old bank records and chequebook registers archived in my fi le cabinet. As I leafed through them, it struck me that I could accurately chart how my payment preferences have changed over the last 15 years in response to the widespread adoption of new payments technologies. Back in 1996, for example, more than 80 per cent of my household spending was done using paper cheques. We had no electronic payment options other than the use of a credit card. As I reviewed my old records, I could see exactly when our local grocer introduced debit card payment stations; the number of cheques we wrote dropped by 8 per cent over that first year. When pay-at-the-pump kit was installed at our local petrol stations, our monthly cash withdrawals dropped by 30 per cent. I could trace when our mortgage company started accepting DFT payments online, when our bank introduced electronic bill pay services, and when PayPal finally went mainstream. The net effect on our household budget was also interesting to chart: our envelope and postage stamp use, for example, dropped by more than 93 per cent between 2000 and 2010. Something else struck me: once the majority of our purchases were made electronically, I could reconstruct every transaction to within a second of it happening. I could also identify the exact geographical location where many of those purchases occurred. As a technologist, I found that intriguing. As a cyber-security researcher, I found it disquieting. In our emerging era of ubiquitous surveillance, it’s almost impossible to

actless payment has vastly improved the London sport experience; below left: TfL’s Shashi Verma

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he ticket

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conduct business without being tracked. Your car and mobile phone keep records of your movements throughout the day. Your bank card corroborates what you spent, and with whom, where, when, and for what. Amazon knows what you’ve read. Netflix knows what you’ve watched. Within a certain time window, CCTV systems can even capture what you were wearing. That realisation helped remind me that there will always be an irrefutable need to have a payment option that can’t be tracked or reconstructed. By which I mean cash. Setting aside the perhaps pragmatic anxiety over constant state and corporate surveillance, there are clear reasons why you’d want a purchase to be covert: for me, that’s anniversary and birthday gifts. I’ve had many surprises ruined because my darling wife discovered an entry in our chequebook, or on the joint credit card statement, or even in her Amazon wish list where an item was suddenly marked as “bought”. That frustrates me no end, and it’s why I still use cash for some purchases so I can genuinely surprise (and, hopefully, delight) my wife. To be clear, I’m very much in favour of a new digital currency standard. I just bought my first Oyster Card on my last trip to London, and I can’t wait for Near Field Communications payment tech to go mainstream. I’ll cheerfully adopt new payment types that makes my life faster, more efficient, and more secure. That being said, I am absolutely not giving up on cash. Pundits who evangelise that cash is dead are (to be charitable) overly optimistic. When it comes to those transactions that need to stay off the grid, I submit that cash is still the only practical solution.

Four payment strategies for boosting e-commerce INDUSTRY VIEW

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ith growth projected to reach £107billion in 20141 merchants simply cannot afford to be complacent with their e-commerce strategy. If the online shopping experience fails to deliver a seamless experience across every device, customers can find a competitor just a click away. So, what can merchants do to convert more visits into successful sales? A critical aspect of a customer’s experience is the checkout stage. Inconsistent payment pages, cumbersome fraud prevention methods and a restricted choice of payment options can all contribute to cart abandonment. Chase Paymentech offers four payment strategies to consider when improving the online customer experience:

1. Convert more sales

4. Going international

Providing a seamless transition from checkout to payment page is an essential part of the customer shopping experience.

Each country has its own unique mix of payment preferences. When looking at international expansion, consider offering payment in local currencies and preferred payment methods

2. Recover lost sales and avoid fraud A fraud tool that allows a merchant to assign a highly accurate risk score to every transaction can help block fraudulent transactions without losing or delaying genuine orders.

3. Let customers choose the channel Mobile devices are changing the way people shop. Before investing in the latest mobile-optimised feature or app, consider how well existing channels are working.

These four payment strategies may help increase online customer loyalty, boost e-commerce and ultimately result in greater consumer sales. 0845 399 1120 www.chasepaymentech.co.uk Chase Paymentech Europe Limited, trading as Chase Paymentech, is a subsidiary of JPMorgan Chase Bank, N.A. and is regulated by the Central Bank of Ireland. © 2014, Chase Paymentech Europe Limited. All rights reserved. The information herein does not take into account individual client circumstances, objectives or needs and is not intended as a recommendation of a particular product or strategy to particular clients and any recipient of this document shall make its own independent decision. 1. IMRG Capgemini Report, January 2014


an independent report from lyonsdown, distributed with the daily telegraph

Business Technology May 2014

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10 | Future of payments

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Connected consumers demand speed and convenience Trends enabling omnichannel commerce INDUSTRY VIEW

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here is no denying that the payment industry is changing, with previously disruptive technologies, such as mobile and the internet, now vital for retail success. This is being driven by increasingly connected consumers who are demanding speed and convenience. The uptake of contactless payments is testament to this. In the past year, the number of European countries offering contactless payments has doubled and contactless transaction volumes have nearly tripled. Almost a billion contactless cards have been issued and around 1.5 million point of sale devices are now contactless-enabled1. But it’s not just a question of speed. Shoppers want to shop for brands, not channels – expecting a seamless omni-channel relationship with their preferred retailers. This means being able to browse, select and pay for goods and services any way, place and time they want. Consequently, the mobilisation of channels and services is now a key part of retailer-engagement strategies. Within Europe, there are 790 million live mobile phone subscriptions2, 422 million of which have mobile broadband. Consumers no longer choose between physical or virtual channels. With mobile

they can browse the internet while in-store to access product information, location-based offers, vouchers, comparison sites and product reviews. Many smartphones are now NFC-enabled and can interact with existing contactless payment terminals to facilitate acceptance of “wave-and-pay” mobile payments. This offers retailers the potential to build smart applications and NFC-capable services around their payments platform. Combining NFC, mobile POS, mobile apps and integrated backend systems means payments can open the doors to a new era of targeted and personalised selling that helps retailers better acquire and retain customers. Retailers are also looking for new ways to exploit mobile smart devices – from queue-busting mobile payment solutions to mobile wallets and customerfacing service applications. For many involved

in the payment ecosystem, managing mobile wallet lifecycles more efficiently, making them simpler for consumers and establishing acceptance at existing retail outlets is a key area of focus. Meanwhile, to ensure that physical channels can co-exist within this mobile world – without relegation to showrooms – the checkout will evolve into a more engaging point of interaction. The inclusion of more memory, enhanced processing power, larger, colourful touch screens, flexible multi-connectivity and, of course, contactless and NFC, is all contributing to the evolution of a new generation of payment devices that can do more than just accept cards. Whatever the channel, protecting the customer against fraud will remain paramount. Retailers will continue to seek ways to simplify the payments process and reduce scope with encryption and tokenisation and by making use of managed transaction platforms that tie all payment channels together seamlessly. Maintaining trust is crucial as retailers continue to exploit new payment services. To help organisations understand the latest payment innovations and their impact, VeriFone has produced Payment Talk – a series of advisories that offer simple advice and guidance on complex issues for European retailers – at www.verifone.co.uk/payment-talk info-emea@verifone.com 1. Visa Europe 2. Global Mobile Statistics 2013. Published by mobiThinking

The future of the point of sale Merchants can always be at the epicentre of their business INDUSTRY VIEW

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or most merchants who operate a traditional bricks-and-mortar shop, the point of sale (POS) is the epicentre of the business. However, while a significant amount of time is spent there, owners will often preside over their business in a back room, tracking sales and cash flow, balancing the books, organising staff schedules, checking stock and even coming up with enticing offers and discounts. Whether you refer to it as the till, cash register, front of house or reception, it is often here that the challenge of owning and running your own business is realised. However, with both a lack of time and integrated alternatives a burden, small business owners are often forced to adopt disjointed methods for managing their business. For example, they might use a traditional till to track sales but require a laptop with specific software to assist with accounting and balancing the books, plus a manual spreadsheet for the staff timetable. Trusted pen and paper might be employed for stock checks and order management.

While these distinct methods serve a purpose and ultimately get the job done, they are often cumbersome, time-consuming and siloed, making it incredibly difficult for a small-business owner to establish a streamlined view of their business. With this in mind, there are undeniably lessons for merchants to take from smartphones and tablets that empower consumers with knowledge and freedom through intuitive set-up, customisable apps, clean design and crucially remote access. Sounds great, but is it easier said than done? The adoption of new technology to help manage a business doesn’t have to be time-consuming or intimidating. An all-in-one solution, such as the Clover™ Station, is designed to do for the merchant what smartphones do for the mobile consumer, while recognising the very different user environments. For example, not only should a POS look good on a countertop, but it needs to be robust in order to cope with the wear and tear of being on the frontline. Secure and reliable payment acceptance is also crucial – the ability for a merchant to accept payments

even if the internet has gone down represents the lifeblood to any business. Business owners should be considering all-in-one POS solutions that give them the opportunity to produce powerful analytics and reports from across the business, providing insight and informing decisions – from pricing and offers through to suppliers, cash flow and marketing. Freedom should also be a consideration. An open POS allows merchants to customise their software to suit their current business needs, with the ability to adapt and change as their

business grows and evolves. In turn, cloud-based technology provides an omni-channel environment bringing together their online and offline channels, streamlining processes such as stock management and inventory control across the two. The cloud also enables merchants to access their data anytime, anywhere – meaning they don’t have to be sitting at their POS or in the back room to be at the epicentre of their business. FDMSMarketing@firstdatacorp.co.uk www.firstdatams.co.uk/clover


an independent report from lyonsdown, distributed with the daily telegraph

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May 2014

Inspector Dogberry Being a suave and sophisticated hound, Dogberry will soon have the pleasure of being able to pay for things while wearing his Heritage Power Suit (when in Australia). The new “Payweave” suits allow wearers to purchase items at any Visa payWave terminal, by simply swiping their sleeve across it. Made from Australian

Merino wool and tailored in Japan by MJ Bale, the suit runs on Heritage Bank’s cutting-edge payment technology. A contactless payment chip and antenna is handstitched into the sleeve of each suit – the process works the same way as regular payWave transactions made using Near Field Communication technology. The chip links to a Heritage Bank account,

Domino’s Pizza customers who have an Android device can now pay for their online orders using Google’s digital wallet. Patrick Doyle, Domino’s Pizza president and chief executive officer, says: “This is yet another way Domino’s is using technology to improve customer experience. Google Wallet is a great technology that allows customers even more flexibility and convenience when it comes to paying for their Domino’s orders.” Technological innovation has helped Domino’s reach an estimated $3billion annually in global digital sales. In 2013, approximately 40 per cent of sales in the US were generated from digital channels, helped by the introduction of ordering apps for iPhone, Android, Windows Phone 8 and Kindle Fire. Its apps now cover nearly 95 per cent of the US smartphone market.

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allowing the wearer to check the balance and reload their suit on-the-go using Heritage mobile banking. There have been 11 prototypes made and released to customers in Australia, while a 12th suit was put up for sale on eBay, selling for AU$510. The suit is also drycleanable, and if it is lost owners can suspend or cancel the account immediately. Dogberry is certainly excited about his new threads – not just because they’re a handy new method of paying for things, but also a sharp-looking one too.

MasterCard is finding more and more small businesses around the world are setting up electronic payments to increase sales. Electronic payments are both more convenient and provide greater security as businesses do not have to carry as much cash. MasterCard is running a campaign to highlight the impact of electronic payments among businesses and consumers around the world, sharing stories from small retailers on how it has changed the way they operate. These include a story from a café on Copacabana Beach in Rio de Janeiro, which set a trend for other operators on the beach to do the same after it introduced its own electronic payment system.

Is this bit? Less than 1 per cent of online buyers have used Bitcoin, according to a Forrester/Bizrate Insights data based on a survey of 7,000 online buyers. Although awareness for the crypto-currency was high, 34 per cent of people in the survey had heard of Bitcoin and 25 per cent were curious enough to plan to give it a try. Forrester analysts Denee Carrington and Sucharita Mulpuru write: “Bitcoin as a brand may never reach mainstream consumer adoption. “However, incumbents in the global payments ecosystem should consider the emergence of Bitcoin and crypto-currencies

more broadly as an early warning siren of more innovation to come — that will completely transform today’s payments systems.”

Business Technology

By Matt Smith, web editor

u Editor’s pick Total Payments www.totalpayments.org Total Payments is a blog dedicated to the future of payments and the technologies driving innovation in the industry. The clearly laid-out site features news, features and infographics related to the latest developments and the trends businesses must pay close attention to in order to keep up with competitors.

Payments Cards & Mobile

Talking Payments

www.paymentscardsandmobile. com

www.talkingpayments.com/ blogs

This blog provides “payments industry intelligence”, with regular updates on payments technologies and how companies are using them. Its articles are divided into niche categories such as Contactless, POS Terminals, and E-Commerce, so it’s easy to find posts relevant to your own payments projects.

Online payments community Talking Payments runs a blog that features the thoughts of industry experts. Browse through the archive for customer perceptions of biometric payments, how tablet payments can boost a retail business, and the future of Near-Field Communications systems and apps.

Forrester Mobile Payments blogs.forrester.com/category/ mobile_payments

Google Wallet (FREE – Android)

EE Tap Wallet – Cash on Tap (FREE – Android)

Google’s payment service is currently US-only, but demonstrates how it can be smoothly used on the go.

We’re told NFC is the future and even the London Underground is set to accept contactless mobile payments soon. Here’s EE’s app.

The Mobile Payments category on the Forrester blog provides expert insight into the development and use of payment systems for smartphones and tablets, including analysis of McDonald’s France’s mobile ordering scheme and why some aspects of the Bitcoin phenomenon are better than others for the industry.

Bringing experience to the emerging markets Mobile point of sale boosts business INDUSTRY VIEW

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hile European countries are spoilt for choice when it comes to payment methods, life is very different in the emerging markets, where infrastructure is scarce. But the commercial potential is huge. In more developed countries, mobile point of sale (mPOS) terminals help small traders, from plumbers to computer repairmen. But mPOS can also give emerging market banks access to SMEs as well. Erik Holst-Roness, chief strategy officer at goSwiff, an innovator in mobile payment technology, says: “With the emerging markets, the smaller merchant is a headache.

A bank goes to someone who sells cigarettes in Lagos who cannot read and write to try to sort a contract. “Another aspect is, if you take Ghana which is a booming economy, there are 273 payment terminals in the entire country. When someone wants to provide to merchants in Ghana, that’s a threat to the local bank.” Holst-Roness believes goSwiff, local banks and businesses can co-operate in a lucrative way. He says: “In the US, a merchant using an mPOS device will generate about $1,000 a month on average. That equivalent person in Dubai does $20,000 a month, because you have come from smaller merchants into the SME market.” Practical potential issues exist, from a lack of rechargeable batteries in Lagos to a Kazakhstan pizza boy putting the device in his pocket and breaking it. Another concern is security. Holst-Roness says: “It’s something we are very good at. We authenticate not just the device but the user.” This allows companies to differentiate between users and note, for example, how different salespeople

perform. The devices also ensure what he calls “human” security. “The main concern of a lady selling in a Johannesburg market is how she gets home in one piece,” he says. “It’s important to have security from a human aspect – not just a technical aspect. Our strength in the emerging markets is experience.” info@goswiff.com www.goswiff.com


an independent report from lyonsdown, distributed with the daily telegraph

Business Technology May 2014

12 | Future of payments

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Brazil

Fancy a nice big payment in your bank account? A Brazilian mathematician has launched a website which could help you win the lotto. The website is based on a study by Renato Gianella, “The Geometry of Chance: Lotto Numbers Follow a Predicted Pattern”. The website www. lotorainbow.com.br aims to supply information in order to allow its users to devise rational game strategies. LotoRainbow shows that lotteries, contrarily to what many people think, follow a behaviour pattern and provides statistics to demonstrate the average number of times each number should be drawn.

France

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Cartes Secure Connexions is holding a global event for the payment, identification and mobility industry on 4-6 November 2014 at Paris Nord Villepinte in France. The comprehensive event includes a conference which explores the macro trends in the payment industry such as trends in e-government and

mobile wallets along with a world card summit which invites the leaders of the security and payment industry to debate about the development of the digital world. The event also rewards the industry’s best innovations every year through the SESAMES Awards. An exhibition which includes 450 companies gives attendees the chance to network with senior executives, generate business leads as well as give firms the opportunity to increase their brand awareness, launch new products, services and brands.

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In with

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C-Suite spot

Working with VMWare’s cloud-based IT infrastructure software, which powers betting sites such as Betfair, comes naturally to gadgetobsessed CTO Joe Baguley…

Hungary

Central Europe financial services firm Erste Bank Group has launched a branded mobile payment app in Hungary. Erste MobilePay is the first smartphone app in the country to offer a person-to-person money send function. Mobile commerce group Cellum Group developed the app and it is available to Erste Bank customers with iOS or Android-based phones. Users can securely send and receive funds on their phone and has a range of useful functions, such as bill payment and top-up, as well as GPS-based parking and highway toll payment.

I

T WAS destiny for Joe Baguley, CTO at VMWare, to work in technology. His father worked at IBM for 34 years as a product manager in VM (virtual machines), and Joe was soon to follow his dad’s footsteps into the field. Baguley says: “I always liked computers, grew up with them. I always liked technology and gadgets. I am addicted to gadgets. In this way I get to do gadgets as a job.” As CTO for Europe, Middle East and Africa, Baguley’s job involves not only building products, but also sharing the company’s strategy and planning where VMWare is going to go in the future. VMWare helps companies to streamline their IT operations by virtualising infrastructure from the data centre to the cloud to mobile devices, enabling companies to deliver IT services from any device, anytime and anywhere. In the payment space, Baguley says: “What you need is the ability

Giving small firms the help they need The way forward for start-ups and SMEs INDUSTRY VIEW

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tart-ups and SMEs are a crucial driver of growth, but many aren’t getting the access to banking services that they need. Just opening a business bank account or gaining approval for business expense cards can be a challenge. The Office of Fair Trading was concerned that banks were making it hard for their business customers to borrow from other, more amenable lenders by being slow to share information and process paperwork. What’s more, the Financial Conduct Authority (FCA) has recognised a need for a more competitive banking landscape for customers to choose from. This has led to the recent creation of the Payment Regulator. Two of its main objectives are to promote competition and innovation. The idea of offering more choice should be widely supported. After all, payment growth is and will be driven by innovators who can deliver payment and banking services in a faster and simpler “friction-free” manner. It aligns to a growing customer trend to manage payment and banking solutions in an ever-increasing digital world.

The barriers to traditional business banking have created a demand for better value, easy-to-open accounts. This has attracted the attention of emerging challengers to banks such as APS, who are happy to fill the void. So in the future, enabling and receiving payments may no longer be seen as the exclusive preserve of banks. Meanwhile, to help more businesses get off the ground, Cashplus won’t decline

anyone for an account simply because of a poor credit or a limited trading history. In fact, the Cashplus product gets businesses up and running quickly. The application takes just a couple of minutes and customers get an instant online decision. Cashplus provides customers with a sort code and account number in minutes, followed by a Cashplus Business MasterCard within four to six business days.

Once set up, customers can conveniently pay expenses, make purchases, manage funds, disburse payments, pay employees and even manage multiple currencies. As well as being short on time, it’s widely recognised that start-ups and SMEs are often also short on funds, so it’s important to make credit available, which is provided by an optional overdraft made available by invitation. By harnessing the latest technological innovations, the payments industry can use them to deliver what business customers really need: smart, fast digital and mobile solutions which make it simple to send and receive electronic and card-based payments. APS, via its Cashplus product, provides one of the better alternatives to get mainstream banking services delivered through these digital and mobile environments. That way start-ups and SMEs can simply get on with business. Rich Wagner is CEO of Advanced Payment Solutions (APS), the company behind Cashplus. APS won the Best Business Card Programme at the Card & Payments Awards 2014 and was recognised as one of London Stock Exchange’s Top 1,000 companies to inspire Britain www.apsgroup.com


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May 2014

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the in-cloud…

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for infrastructure to scale almost instantly. We have some of the mobile betting platforms using our hybrid cloud system.” Betfair, the world’s largest inter net betting exchange, uses VMWare’s platform to scale up its systems to be able to cope for an increase in payments when demand is high. This is done via the cloud. Servers can be set up in a matter of minutes, and infrastructure can be increased for an event, then decreased after the bets are settled. Baguley explains that gaming companies build for two major events. The fi rst is the Grand National in the UK, which has the biggest spike in user activity for betting platforms, while the second is the Cheltenham Gold Cup which has the largest increase in demand over a sustained period of time. He says: “If you are a betting platform and buy all of your equipment to cope with the load of one day a year, it is not exactly an efficient way to do things.” Payments for any event can be planned for by using this type of technology. “They are also now looking to take what they have learned, as you have the World Cup coming up,” explains Baguley. “They are all building for the World Cup. “If you build a platform and build it in such a way that it

Below: VMWare’s Joe Baguley; right: Demand for Betfair’s VMWare-powered software spikes during events such as the Grand National

scales out based on demand itself, then suddenly you have something you can leave alone and you become the successful payment platform.” He expects the number and speed of transactions to increase as people start to use electronic payments more for smaller transactions, and as companies need to roll out a system to cope with these. Baguley says this will be through “an increase in transactions through mobile phones and Near Field Communication (NFC)”, which can be used for contactless payments and involves the transfer of small amounts of data between two devices held a few centimetres from each other. Mobile cloud technology is something that Baguley sees as a trend. At VMWare, he isn’t only working on this in regard to the payment industry, but is also looking at “how to best deliver the user experience to any device anywhere”. VMWare is working on this especially in regard to how this applies to the bring-your-own-device craze. Baguley says: “What we are trying to do is say that, actually, what you care about is the fact you can get access to your files and data and edit them wherever you are, with whatever device you are on. You should be able to pick up on iPhone, put it down go and pick up a tablet running Android or whatever, and carry on working. “What we are doing is making sure we have loads of cool technology for virtualising machines or securing devices or whatever. Which means essentially, as a corporate, if you want to make sure all of your users have access to all of their data and applications securely on any device they

want to, that is exactly what we are enabling.” Following in the footsteps of his father, Baguley certainly seems to be living his dream of working in technology. A fascination with gadgets as a kid has not only emerged with him building technology products as an adult, but also to creating business strategies for the future.

Reinventing payments and transactions around the user experience INDUSTRY VIEW

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ith the digital revolution, consumers are not only used to paying on the internet, but expect much more. Online payment is no longer a final shopping operation on a computer at home, it has to be a natural extension of the overall consumer digital experience.

Connectivity and advanced analytics as key enablers This is made possible thanks to new technological enablers which empower companies to reinvent their customer interactions. The connectivity everywhere, at a reasonable price, leads to a consumer who is always available (and expects to be), while new analytics capabilities give companies better understanding of their customers’ behaviour and the ability to cleverly use it – while taking care of their privacy with “opt-in” requests. For example, card-linked offers, such as Cash Club, leverage the cardholders’ valuable

data owned by the issuers. In this model, cardholders receive coupons from the merchants who are targeting consumers, based on spending patterns.

The reinvention of the business process payment creates new opportunities Until now, when consumers wanted to buy a product or a service, they had two options. First, go to the store, select their product and queue (very often), before being able to pay with their plastic payment card. Second, at home in front of their computer, log in to their favourite e-commerce website to look for their product and finally execute the online purchase transaction – with additional effort needed for the after-sales process of delivery. During this process, the consumer could change their mind several times, or it could be too late to buy the product! Now, online payment is extending to the physical world and it changes everything. It enables any consumers to crystallise their decision to buy a product

by (pre)paying at the very moment they make this decision. New digital wallets will also participate in this payment reinvention, as these wallets will integrate card and non-card payment means (such as Online Banking ePayment) together with features for access control, loyalty programmes, ticketing, ID cards, and so on. This immediacy of the payment will ease, on one hand, the process for consumers who will purchase effortlessly at the time they want to engage. On the other hand, it will improve the transformation rate of the marketing effort, from an indirect action to anonymous people, to a direct and immediate impact to a well-known consumer (without counting the business potential of added-value services on top).

Worldline: tomorrow’s digital experience At Worldline, connecting and securing

payment transactions is what we do on a daily basis. We connect the worlds of electronic banking, mobile and e-commerce using 40 years of technological expertise and our global reach to provide connection services via secured networks that are available almost everywhere. In a fast-moving and mobility-driven world, Worldline’s ambition is to help retailers and financial institutions provide a seamless and innovative transactional experience to their end users and grow their revenue streams. infoWL@worldline.com www.worldline.com


an independent report from lyonsdown, distributed with the daily telegraph

Business Technology May 2014

BizTech Zone

14 | Future of payments – Industry view

John Maynard Keynes

The importance of money flows from it being a link between the present and the future

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The future Tied loyalty: how the reward schemes could really pay off

M

ore people are using bank loyalty cards when they buy goods and services, compared to loyalty cards which are not linked to a payment mechanism because of their convenience compared to other methods. Worldpay expects to see retailers tie their loyalty schemes more to bank cards to capture the benefits of combining payment with loyalty schemes as well as to help them gain data about customer purchasing behaviour and activities. James Frost, chief marketing officer for UK at Worldpay, says: “We live in a world of modern money. Modern money is electronically moved and leaves a trail of data and insights behind it. One of our goals is to see how retailers can take advantage of this and get useful insights from all of this data. “Loyalty is a really interesting place. We ran a survey looking at loyalty – specifically, there were a few interesting things that came up. An average person has five loyalty cards, with the usual suspects being Tesco Clubcard, Nectar and Boot’s Advantage card. “What is really interesting is that in the last 12 to 18 months, there has been growth in bank card loyalty programmes. If you went back two years ago, there would not really had been any of these. But if you look at what NatWest is doing, for example – it has a product called Cashback Plus, where if you pay with your NatWest card at certain participating retailers you earn cash back. “We are seeing 50 per cent of people saying they are using a bank-based loyalty card at least once a week. That is now higher than Tesco or Nectar, which are in second and third place respectively.” One of the reasons Frost suggests

people use bank loyalty cards more is because of their convenience. He says: “With other loyalty programmes you need to fish out your card. Sometimes it takes time – you are in a hurry, there is a big queue behind you – and some feel pressured not to do it. “Also, if you are not spending a

particularly large amount, you might feel it is not worth getting your loyalty card out, whereas if the loyalty is being triggered by the use of a bank card then there’s no need to worry.” 01268 500 615 www.worldpay.com

In focus: Unique crosschannel payment experience

W

hen 56 per cent of the population leave home without a purse yet only 18 per cent leave without a phone, (Source: TNS mPayment Sonar 2012, S. 8) Yapital knew there was a massive opportunity to evolve payment methods to include using a smartphone. Add to this the capability for retailers to expand their “shop window“ and they knew they were on to a winner. Yapital, the first cashless, cross-channel payment solution in Europe, takes the evolution of mobile commerce to the next level and opens up the whole world of shopping for goods and services. With Yapital, consumers are able to pay in a secure way in real-time

by scanning a QR code with the Yapital app on their smartphone, no matter whether shoppers visit a store in person or shop online using their desktop, tablet or smartphone or whether they pay at the point of sale or via invoice. And the Yapital App includes a transaction history which gives a detailed overview of expenditure at any point in time, something not offered by credit cards. Business partners also benefit from Yapital as all transactions are guaranteed and transferred in realtime. Yapital opens up new revenue potential as marketing channels can be easily converted into sales platforms by including a QR code on an advertisement poster, embedding it

in a newsletter or online advert or by simply turning the window into a shop which is open 24/7. Where payment by QR-code scan is not yet possible, consumers can use Yapital MasterCard, enabling them to pay at more than 35 million acceptance points worldwide, from a bar in London or on the beach in Thailand, which can be reloaded directly with their smartphone. Twitter: @yaptial www.yapital.com

Diversify locally to grow globally The globalisation of commerce is easy in concept but best practices are still being highly debated among the top executives at leading retailers. Although going global may increase the possibility of profitability, a business needs to take a step back and clearly understand their international consumers. The Merchant Risk Council (MRC), the leading global non-profit within the e-commerce fraud and payments ecosystem, opens the door for its 400 leading e-commerce merchant members to discuss going global. A number of MRC merchant members have already expanded to markets such as China, Russia and Brazil. Understanding the customs of a specific region is key. It is important to know the preferred purchase patterns of locals, taxation process, and the differences between choosing to conduct business cross-boarder or native/domiciled. These factors will come in to play when working on customer satisfaction and looking at fraud rates. Authorised payments are earned revenue. To cut back on declined payments, it is imperative to know the local consumers preferred purchasing patterns. For instance, Brazilians prefer to pay in installments and Russians prefer cash-ondelivery options. Starting a transaction and then opposing localised alternative forms of payment will hurt your bottom line and ultimately cause your company to fail in that market. The number one recommendation for taking a company global is to not go at it alone. Connect and learn from individuals that have already taken the plunge into these markets at MRC’s 2014 European Congress, May 14-16, in Paris. It will open the doors for conversation on globalisation as well as many other factors facing e-commerce. Nicolas Vedrenne is European managing director, MRC www.merchantrisk council.org


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May 2014

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Business Technology

Future of payments – Industry view | 15

The debate How can alternative payment platforms help businesses to grow?

Isabelle Alfano Exhibition director CARTES SECURE CONNEXIONS

Marc Overton Co-general manager, EMEA First Data

Spiros Theodossiou VP of product strategy Skrill

Tom Conlon VP, marketing and business development, VeriFone EMEA

Jason Lane Group executive, European market development, MasterCard

Nowadays, there is a large choice of alternative payment methods: eBay’s PayPal, Google’s Wallet, Visa’s V.me, and MasterCard’s MasterPass, to name but a few. As mobile commerce grows in volume, alternative methods of payment are becoming more important than ever before in capturing global online growth. Research shows alternative means of payment will account for more than half of all transaction methods by 2017. Consumers have recently become more interested in alternative payments because of security concerns. However, the credit card remains the preferred online payment method because it’s much more practical. Alternative payment options are definitely helping merchants boost online sales (the more payment options available on a website’s checkout page, the more sales it generates). However, the correct implementation of these options is still a big challenge for most e-commerce stores. If a merchant can eliminate data entry steps for mobile consumers and provide a successful checkout, he will be able to successfully break into the alternative payment market.

SMEs in the UK face a plethora of challenges and nowhere is this more apparent than on the high street. Whether it’s an independent bookshop, hairdressers or restaurant, competing with large companies with expensive marketing strategies and customer relationship management tools is no mean feat – particularly when it comes to customer loyalty. Using alternative payment platforms, independent merchants can go beyond accepting payments and begin to gain sophisticated insight into customer preference without splashing out on complex data management systems. Combining this insight with other aspects of business through cloudbased applications – for example linking online and offline inventory management – can empower independent business owners to tap into new markets or extend their reach. In short, alternative payment platforms can not only enhance the acceptance of payments and simplify the overall management of a business for an SME but also make it possible for them to operate like a larger business without costing a fortune.

International boundaries are immaterial for online businesses. Potential customers across the globe can connect with your business at the click of a button. But to convert browsers to paying customers, you need to be able to offer local payment methods as well as payment in local currencies. Around the world customers like to pay in different ways: many choose the Skrill Wallet or cash upload options like paysafecard, while others may opt for Poli, Chexx, Boleto Bancário, Sofort Banking or another local equivalent. Catering for these preferences used to be costly and complex, but payment processing platforms like Skrill’s Global Payment Suite, have broken down transactional boundaries by supporting merchants’ need to offer choice and flexibility to customers, while also providing a simplified experience that enhances conversion and encourages loyalty. Expanding into new geographies not only enables merchants to expand their customer base, but reducing dependency on a limited number of local economies also minimises risk.

Whatever your business or sales channel, payment methods should make it easy for customers to buy and also provide a consistent experience. Alternative payments can provide more choice and convenience to enable commerce. For example, contactless makes throughput faster and helps prevent walk-aways, while NFC and mobile wallets speed up payment and facilitate value-added services, such as personalised promotions that enhance the sales experience to ensure customers come back for more. Offering alternative payments can also help merchants stay competitive. Busy stores can queue-bust with mobile point-of-sale devices (MPOS), venues and ticketing outlets can process transactions quickly with contactless technology and self-service outlets, and websites can offer wider acceptance with options like PayPal and Visa’s V.me. When designing payment systems, it’s important that your platforms are not only secure and reliable but are also open, agnostic and flexible to accommodate future payment types as customer requirements and channels continue to evolve.

All of us are becoming more demanding consumers and, as technology develops, so do our expectations. Businesses don’t have a choice, they have to move with the times – adapt or die. No one looks forward to making a payment but we all benefit from the products and services we buy and the revenue these sales generate. At MasterCard we know it is the payment experience that ultimately drives loyalty and advocacy. Our technology delivers leading edge payment systems that make this experience safe and simple for everyone, allow payments across the entire spectrum of commerce – in-store, online or mobile, and reduce backend costs in transactions with suppliers and partners. Thanks to MasterCard’s payment technology, businesses can maximise connectivity, convenience, safety and efficiency. With the promise that your transaction is safe and secure, we continue working with consumers, retailers, financial institutions and governments, as true partners, delivering new payment platforms and services that allow businesses to grow, today and tomorrow.

www.firstdatams.co.uk/clover www.cartes.com

www.skrill.com

info-emea@verifone.com www.verifone.com

www.mastercard.com

Beautiful outside, Smart inside Designed in Silicon Valley, CloverTM defines next generation point of sale with power, simplicity and stunning style. CloverTM is brought to you by First Data, the world’s leader in independent electronic payments solutions. Find out more at www.firstdatams.co.uk/clover or email us at FDMSMarketing@firstdatacorp.co.uk.

First Data Europe Limited is authorised and regulated by the UK Financial Conduct Authority (FCA register No. 582703). The Clover trademark and logo are owned by Clover Network, Inc.


reinventing payment & transactions

around user experience

infoWL@worldline.com

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Future of Payments