Future of payments

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Why it’s time to move beyond cash From MasterCard to RBS: Exclusive interview with Marion King | Pages 8-9 Future of payments

The power behind decisions

OCTOBER 2014

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Plotting the best route through the crowded payments space

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Business Technology · October 2014

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Future of payments

Opening shots Shane Richmond

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HE FUTURE of payments is upon us! Apple has unveiled its plan for the wallet of the 21st century and it will change everything. Well, that’s the word from the more excitable corner of the internet. In reality Apple’s payment solution, Apple Pay, needs to pass the same challenges as every other mobile wallet system out there, and there are no guarantees that it can. First, it’s worth keeping in mind something that Apple has got right. Apple Pay looks simple to use – just tap your phone to the terminal and touch your finger to the fingerprint reader on your phone – no need to fiddle with unlocking it and opening an app. It’s also secure. Your credit card details are not transferred to the terminal, so a malicious hacker can’t intercept any meaningful data. And though Apple didn’t invent mobile payments, such is the excitement around new Apple products that the announcement of Apple Pay, at the September launch of the iPhone 6, will have introduced the concept to many people who were previously unaware of it. What’s more, Apple has picked a good moment to launch. It’s not so much that Apple Pay is going to push mobile payments into the mainstream, but more that Apple is arriving at exactly the right time. The key problem for mobile payments has always been a chicken-and-egg-style one: who adopts first, the consumer or the merchant?

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Apple Pay is a big deal, but it won’t change the mobile payments landscape overnight Consumers need to be confident that a sufficient number of merchants will support mobile payments or they won’t switch, and merchants need to believe enough customers will switch or they won’t support them. What’s likely to overcome that problem in the US is new legislation forcing retailers to update their payment terminals or be liable for any credit card fraud committed at their checkouts. Those new terminals are likely to support NFC, which will help Apple tremendously. Outside the US, availability of contactless payment terminals is patchy and, on occasion, available only to those with a specific type of card. That will change over time but Apple Pay alone won’t change it. Contactless terminal or no, many retailers won’t support Apple Pay because they see it as a competitor. In the US, where Apple Pay has already launched, supermarket giant Walmart is not on board because it is involved in a rival scheme, the Merchant Customer Exchange, which Twitter: @ works through an iOS or Android app. Meanwhile, shanerichmond

some other retailers may not embrace Apple Pay because they have their own iPhone app and want customers to use that. Consumers will hear that and make their own decision about whether to get involved with Apple Pay. If your local supermarket accepts Apple Pay, once it launches in the UK, then you might consider it worthwhile. But if it’s the supermarket in the next town over that takes it, while the local one doesn’t, then you’ll ignore it. And if your local coffee shop, petrol station and supermarket all back different mobile wallets then it’s possible you might not bother with any of them. Apple Pay is a big deal. The service itself could end up being a dud – consigned to the margins like Apple’s Passbook – but it will get the attention of businesses and consumers and move us a little closer to a wallet-free future. But don’t be fooled into thinking Apple will change the mobile payments landscape overnight. Apple makes its latest iPhone pay – page 7


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Future of payments

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Visa gets personal Company plans to use social media in ‘the biggest shake-up to the loyalty scheme market for years’ EXCLUSIVE By Tim Adler VISA IS in talks with Google and high street banks to personalise loyalty schemes using social media – and the UK’s biggest payment card system says it plans to launch hyperpersonalised loyalty schemes, possibly within 18 months. W hat it calls “ hyperindividual marketing” will be much more attractive to customers, Visa believes. Splicing spending patterns with social media activity means that retailers will offer much more targeted rewards. Rather than stand at the t i l l bei ng offered money-off

vouchers, Visa wants to make personalised offers. If you are a Coldplay fan, for instance, a retailer could offer concert tickets. Visa claims that this could be the biggest shake-up to the loyalty scheme market for years. Both Visa and MasterCard are moving into the loyalty scheme space. MasterCard is on the lookout to acquire a UK-based loyalty card operator following acquisitions in the US and Australia. Visa, meanwhile, bought a stake in data analytics firm Beyond Analysis three years ago so that it could offer retailers spending information about their customers, using data gleaned from

the 11 billion transactions made either on its cards or using contactless each year. Steve Perry (below left), chief digital officer Visa Europe, said: “Visa will start sharing its long data – we have a lot of anonymous data about your spending patterns – with retailers who know plenty about you in depth but don’t know where else you shop. Married to social media, that’s a compelling offer.” Gathering information from people splicing together their spending patterns with social media feeds is bound to cause disquiet, Visa accepts. “There are many who say this smacks of Big Brother, but we can ensure we only offer it to people who are absolutely ready for it,” says Perry.

Visa controls 94 per cent of the UK debit card market and 55 per cent of credit cards. It is the biggest card operator in Britain. One pound out of every three is spent using a Visa card. “It will enablebanks or retailers to get to the heart of what you the consumer really wants. A lot of banks are extremely interested in what we’re offering. “This is about what do I, as a consumer, really want? Some money off my next supermarket purchase or a unique life experience, salient to me as an individual?” Visa is launching a scheme in partnership with analytics company Edo Interactive, to introduce cashback offers in the UK at the end of this year. Customers who opt in and pay

Banks refusing to fund rival tech startups UK BANKS are blocking the rise of the fast-growing financial technology sector by refusing entrants standard bank accounts. Crowdfunding platforms and digital payment start-ups are being refused banking services because the big four banks fear disruptive technology, claim payment entrepreneurs. The “fintech” industry raised the issue at a meeting at 10 Downing Street, calling for banks to meet their needs. This is despite Chancellor George Osborne calling for

the UK to become a “fintech hub”. HSBC and RBS have imposed a ban on doing business with disruptive payment services such as bitcoin exchanges, because of anti moneylaundering rules and other regulatory concerns. Barclays and Lloyds take a looser approach, opening accounts on a case-by-case basis. But the real reason, says lobbyist New Finance, is because high-street banks do not want to support disruptors that could take away their business.

Ernst & Young estimates that the UK fintech sector generates about £20billion in annual revenue. Coinfloor, the London bitcoin exchange, has warned that Britain risks being left behind because no British bank will accept its business. “The [British] banks are very conservative and not very interested in something that could be very innovative and disruptive to what they do,” Coinfloor CEO Mark Lamb told the Financial Times.

with Visa cards will get offers based on spending pattern. What Visa is planning with social media feeds in a few years’ time will take this personalisation one step further. Edo already works with more than 200 banks and more than 1,000 retailers in the US providing personalised loyalty discounts tailored to each customer.

Cardholders can opt into the Edo service by downloading their bank’s mobile banking app, paying with a Visa card, after which relevant offers will become available through the banking app. To redeem the offers, cardholders can go to the appropriate merchant and have their app scanned to receive the cashback reward.


Business Technology · October 2014

Future of payments

IndustryVIEW

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We’re embedding the best technology in Apple Pay… and into all digital transactions Putting the right protections in place to keep consumers safe

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n bringing Apple Pay to consumers, Apple wanted to deliver the highest quality transactions possible. So who did they turn to? The people who built the scalable payment infrastructure that is the envy of others – MasterCard. We believe that payments should always be a simple proposition to the consumer – but once you get under the hood there’s a very sophisticated network in place that enables any of us to walk into a store and make a purchase, trusting that our cards will work as we expect them to. We realise that consumers don’t care about that, but what they do want to know is that their information and their money are secure. Through the work that MasterCard did with Apple and with the active engagement of the first four issuers, we’ve delivered the most secure combination of technologies that we’ve ever deployed.

Four things to know about Apple Pay and the security of our digital payments platform Apple Pay will work just like any other MasterCard transaction: Transactions that originate from Apple Pay will work the same as any other MasterCard transaction. The consumer will see the card they wish to use in their iPhone from the issuer that they are used to doing business with, the merchant sees a MasterCard transaction – either the familiar contactless form in store or Digital Secure Remote Payment for in-app. Apple is never in the transaction path. Built with the most secure technology: In building a secure payment experience, we’ve

What is EMV? MasterCard is one of the founders of the chip card standard known as EMV. EMV chips appear on the front of your debit, credit and prepaid cards and are advanced computer chips designed to keep your payments safe and secure. EMV cards are the best way to protect your account information from fraud. Each purchase or transaction generates “dynamic” or unique data that is encoded in a safe mode. EMV helps protect you even if your card or your card data is lost or stolen. EMV technology makes it difficult for anyone but you to use your card, and protects against the creation of counterfeit cards because dynamic data is only good for a single purchase.

taken advantage of industry-standard EMV cryptology, in our digital enablement service and in Apple Pay, to ensure transactions are fully in line with the US EMV migration, and can take full advantage of the most secure payments technology in the world. We’ve taken this crown jewel of payment technology and put it at the heart of the programme. We’ve added an extra layer of protection: In order to further protect consumers we’ve added an additional layer of security to the digital payment process, through tokenisation. This means that the number stored in the secure element in a consumer’s iPhone6 is not the same as that on their card. In the (unlikely) event that someone is able to pick up the data from a transaction, what they will get is a 16-digit token number and a cryptogram (a long number unique to each transaction). If they try to use the token without a cryptogram we’ll reject the transaction. And they can’t generate a cryptogram without the EMV keys that are stored safely in the secure element on the iPhone. A lot of technical talk, but added together it simply means that we’ve put the right protections in place to keep consumers safe. Authenticating with biometrics: Until now authentication on a mobile device was always a PIN. Apple viewed touch ID as a critical asset for payments as a cardholder authentication. Within Apple Pay consumers simply confirm a transaction with one touch. Those that prefer not to use touch ID can revert to using a passcode. Apple came to MasterCard with a strong vision

for building a user-friendly, secure payments service that aligned with where we were focused as a company and allowed us to leverage the foundational technologies that we’d developed over the last ten years – EMV, contactless, tokenisation and DSRP. Apple knows how to deliver great user experiences but it also respected MasterCard’s knowledge and expertise. We were able to bring insights on how consumers view payments and what elements were going to be important to ensure they view this as a secure experience, representing the brands that they trust. Our job is to make transactions secure and make them work time and again – that’s what we put our brand behind, and that’s what makes a transaction a MasterCard transaction. James Anderson is group head and SVP, mobile and emerging payments, MasterCard To join the conversation, follow us on Twitter @MasterCardNews or @MasterCardEU


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Future of payments

The inner geek

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Wallets are an essential part of the payments journey INDUSTRY VIEW

Moz & Bradders

Blood money We could soon be ditching PINs for veinscanning technology at cashpoints and checkouts, reports Tim Adler

ATM shared network in Poland. Itcard plans to install 2,000 biometric cash dispensers by the end of 2014. It currently operates 37 per cent of Poland’s 19,000 ATMs. Turkey launched its own VeinID ATMs in early 2011 with 3,000 cash dispensers. The two biggest banks, Isbank and Ziraat Bank, both use vein recognition. Other central European countries are thinking about adopting VeinID, especially for pop-up banking cubicles in airports, railway stations and shopping centres where customers can talk to advisers via video link. Pete Jones, business manager at Hitachi Europe, says the biggest reservation people have about vein ID is the criminal association with fingerprinting.

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E’VE ALL seen the moment in a heist movie where the suave bank robber presses his hand against a scanner to enter the vault – only to peel off false fingerprints moments later. Or even worse, the moment where a poor bank manager has his finger cut off. A British start-up is in talks with banks including Deutsche Bank, RBS and Standard Chartered about going one step further: identifying customers through the blood in their fingers. Vein recognition, says Fingopay, is far more reliable than fingerprints or iris scans. Plus you have to be alive to use it. Payment security is becoming increasingly important as cards and passwords proliferate. The problem with chip-and-pin is that the bank can never be certain who it is talking to. Barclays has already signed up to vein recognition technology. It plans to offer VeinID to 30,000 business clients at the beginning of next year. VeinID uses infrared to scan blood flow under the skin. Enthusiasts claim that the chance of two people sharing the same profile is one in a million. Fingopay first trialled vein recognition at a rock festival in Wales two years ago. Festival organisers wanted a more convenient way for people to pay in the VIP bar without the hassle of cash. Festivalgoers registered their debit or credit card details. The technology was so popular that the bar processed 1,500 transactions in three days. Nick Dryden, chief executive of Fingopay, says: “People loved it. What we were offering was the ultimate mobile device. We turn your finger into a digital key. And if you lose your finger, then

Typing rhythm

Hitachi’s VeinID technology (right) is already being used in some French and Polish banks

you can’t use the technology.” This is because vein recognition needs blood flowing through the finger for it to work. Fingopay plans to launch a Kickstarter campaign before trialling vein recognition more widely later next year. It recently made a presentation to 24 banks from all over Europe, Japan and China. The technology is not new – Hitachi first developed the technology nearly a quarter of a century ago. The Japanese firm launched VeinID at ATMs in Japan in 2002 and today 80 per cent of Japanese use vein recognition at cash dispensers. Sixty per cent of Japanese log on at home the same way.

VeinID has been slower to catch on in Europe, though. French bank Natexis was the first to use it on its trading floor five years ago, followed by ATMs in Poland and Turkey. VeinID is currently used in 500 ATMs in Poland, although this will expand to 2,500 by next March. Two of the country’s largest banks, Getin and BPH, use Hitachi technology as well as 30 smaller cooperative banks. In May, Polish independent ATM operator Itcard announced that it will launch Planet Cash, the first biometric

But vein recognition is not the only new payment security technology coming onto the market. Behaviosec, a Swedish technology company, expects to be used by 10 million people by Christmas -- most of them unwittingly. Unlike VeinID, Behaviosec is a background technology that verifies you by analysing the speed of your computer keystrokes, how hard you tap your mobile phone and through your typing rhythm, in much the same way that banks ring you up if they spot unusual spending patterns. Neil Costigan, chief executive of Behaviosec, says: “What we offer is a little ahead of the curve. It’s about creating an invisible profile verifying that your behaviour now is similar to what you did in the past.” Twenty banks have already signed up to the technology and banks in Denmark, France and the UK are now testing it. Payment security may have evolved from the wax seal to the signature through to chip-and-pin, but Costigan does not believe that a single solution will ever defeat online fraud. “There’s no silver bullet when it comes to payments security,” he says.

Recent research from John Lewis showed that the UK is a nation of early-morning shoppers. E-commerce shopping peaks as early as 5am, with mobile shopping (from phones and tablets) between midnight and 6am increasing by 31 per cent over the past 12 months. Shoppers are using their downtime to take advantage of 24/7 online availability, removing the traditional barriers of shopping in business hours. With estimates of 50 billion devices being connected to the internet by 2020 (including the fridge), now is the time for the payments industry to make services as convenient, simple and secure as possible. This is a chance for banks and retailers to offer a new mix of digital products and services to reflect customers’ needs. For example, V.me by Visa (our digital wallet) allows consumers to populate a bank-issued wallet, online, with all their card details. They can then shop at tens of thousands of retailers from any device with a web browser, at any time. This is just one of many ways to ensure the purchase, payment and delivery/ collection process remain frictionless and reliable – especially important as we move towards the Christmas period. Last year, on November 29, Visa processed more than 6.6 million online transactions across Europe. This year the number may be even higher. That makes the run-up to Christmas an ideal time to accelerate the distribution of digital payment tools, enabling merchants to accept wallets and ensuring banks are offering the right services to customers. Payments need to keep up with retail developments to support the growing urge to shop more often, more seamlessly online. We believe digital wallets are an essential part of that journey. Anne Head is head of V.me by Visa, Visa Europe vision.visaeurope.com


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Future of payments

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Banking platforms: the unwelcome legacy CREATING a single point of view of the customer is crucial from a bank’s point of view, believe digital banking executives. Some high street banks struggle with piecing together a single view of the customer using myriad IT systems. Craig Donaldson, chief executive of Metro Bank, says that in one of his previous jobs he had to struggle with 29 different legacy IT systems. Donaldson previously worked at big hitters such as Barclays, HBOS and RBS. “Having a platform with a single view of the customer is key,” says Donaldson. “It makes our customers’ lives so much easier.” RBS, too, is working towards a single view of the customer, where both the call centre and account holder see the same information online. For instance, next week RBS will launch its Mortgage Application Tracker, which will allow customers to check how their application is proceeding. Chris Popple, managing director, digital at RBS, says: “One of the areas we want to spend more time on is transparency. We’re going to light a fire under that. The way you regain trust is by being transparent.” RBS boasts nearly six million digital customers, three million of which use its mobile app on average once a day. Barclays says that its five million digital customers check their accounts on average 20 times a month compared with the once-a-month branch visit they used to make. Its mobile banking app has two million users. Steven Cooper, chief executive personal banking at Barclays, sees his most important role as helping older customers overcome their anxiety about using technology. To that end, Barclays has introduced 8,000 technology support staff to help customers with tech problems in branch. Cooper says: “Technology can be quite scary for older people. It’s important to get people confident about using technology that’s already there. It’s an ongoing revolution and we don’t want to leave anybody behind.” Barclays is trialling technology that allows customers

Customers need help to migrate to more modern forms of banking, say executives

to take a photo of a cheque on their smartphone and then pay it into their account digitally. At present, legislation dictates that customers must go in branch to pay cheques in physically. And this merging of what you can do online and in the actual branch is something the public is going to see more of. If the first phase of the internet was getting people to do online what they used to do in branch, says Lloyds business banking digital director Matt Perry (right), then the next phase is bringing them together.

Metro, too, wants to create a seamless customer journey from online into its 26 London branches. Donaldson says: “The online and offline are knitting closer together. The internet and mobile are getting closer to physical delivery systems in store. That’s where we’re going.” Perry also thinks that review-led websites such as Yelp – where people comment on services – will seep into banking sites. “We still seek peer recognition of the group, and a greater degree of transparency is always good, especially for banking,” he says.

Brother, can you spare a tweet? TWITTER users in France can now send each other money via the social network. France’s second largest banking group BPCE has launched the groundbreaking Twitter service. Being able to send money via social networks could revolutionise the way people pay for things. Facebook has been in talks with London-based start-ups about doing the same thing. David Marcus, former chief executive of PayPal, joined Facebook in June in a move many saw as heading up its nascent payments division. Now Twitter has jumped ahead of it. French Twitter users can send a maximum of €250 to individuals and €500 to organisations involved in fundraising campaigns. Tweets can be seen publicly. France is the eighth-heaviest user of Twitter in the world. Twitter has 271 million active monthly users compared with Facebook’s billon accounts. BPCE, based in Paris, operates 8,000 branches and currently serves more than 36 million clients. Last month Twitter launched its own “buy” button, to allow people to purchase products directly from a tweet.


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Future of payments

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Apple makes its latest iPhone pay By Tim Adler

APPLE WILL bring its Apple Pay contactless mobile payment system to Europe imminently, experts agree. The technology giant unveiled Apple Pay in California last week. The service – which launched last Monday – will enable users of its latest iPhone and tablet computers to pay for goods at tills using their Apple devices. Tim Cook, chief executive of Apple, announced that 500 banks have signed up to Apple Pay within the last month. The 11 biggest card issuers, representing 83 per cent of the market – including Bank of America, Wells Fargo and Citigroup – have joined the service. They are all keen to ensure that it is their cards that are registered as the default account used on Apple devices. McDonalds, Walgreens, Whole Foods and Disney theme parks are also on board. Payments experts hope that Apple Pay will be the service that finally makes contactless payment an everyday event throughout America. Each day, around $12billion is spent on cards in the US alone. Previous attempts to launch a “digital wallet” service with American consumers have not taken off, partly because banks and technology companies have offered competing services, say observers. Scott Galit, chief executive of Payoneer, a cross-border payments system whose clients include Getty Images, blames what he calls “the Balkanisation of contactless payments with clashes of vision”. Apple may revolutionise mobile payments in a similar way that it has previously kickstarted online music via iTunes, and tablet computers with the iPad – neither of which it invented, but refined and popularised. The hope is that Apple will disrupt mobile payments just as it did music and home computing. Galit says: “Apple is helping cut through the noise and clutter that’s hampered mobile payments over the years. It’s the first chance for mass adoption of mobile payments.” Jason Oxman, chief executive of the Electronic Payment Association, agrees: “A rising tide benefits all ships. This is a great development for the payments industry. Apple is brilliant at design, marketing, implementation and mobile technology. In every market that

Many in the industry are pinning their colours to the Apple Pay mast. Below, inset: Apple CEO Tim Cook

Other contactless payment options Apple Pay and contactless cards are not the only ways to pay using mobile technology. Business Technology takes a snapshot of other mobile ways to pay. Cash On Tap is EE’s contactless payment service, enabling customers to pay for anything under the value of £20 by tapping their phone on a contactless phone reader. Pay monthly customers who own compatible phones from HTC, Samsung and Sony can download the Cash On Tap app from the Google Play store. Payband is a free rubber wristband created by Barclaycard containing a

contactless chip linked to your debit or credit card. The rubber band will become available next year. Its main advantage is that avoids having to rummage in your purse or wallet for a separate card. Paym is another mobile payment service that allows bank customers to text money to friends. So far 1.4 million UK customers have signed up for Paym. Banks including Bank of Scotland, HSBC, Lloyds Bank and TSB offer Paym to a combined 30 million customer accounts. PayTag is another contactless payment method offered by

Apple has entered, they have done a super job of encouraging consumers to use technology in an elegantly designed way.” “When Apple speaks, the market listens,” says Steve Perry, chief digital officer at Visa Europe. “Apple’s move shows that contactless is here to stay. I liken the payments industry to a jigsaw, and now with Apple the final piece has slotted into place.” The question remains how much marketing Apple is going to put behind Apple Pay. “It’s helped catalyse the whole industry,” says Galit. “It all comes down to whether Apple can

Barclaycard. A small sticker attached to your mobile phone facilitates touchfree transactions. Pingit launched in 2012 by Barclays as a way to send money via text message. Around seven million people use Pingit each week to send a code that can then be redeemed at an ATM. Weve is a mobile payments joint venture between EE, O2, Vodafone and MasterCard, bringing contactless payments to mobile phones

persuade customers to use it – and for that marketing is key.” The impact of Apple Pay on Europe may be more muted. Mobile phone payment has not yet made a breakthrough on either side of the Atlantic, but in Europe there is wider circulation of contactless cards that use the same near-field communication technology as Apple Pay. There are 1.5 million contactless terminals across Europe, a rapid growth since Visa started to roll them out in 2007. More than £1billion has already been spent using contactless payment in the UK alone, with 16 million transactions within the last two months. Visa has already said it is in talks with Apple and its member banks about Apple Pay. Apple has an 18.5 per cent share of the smartphone market

via banks’ existing apps. Mobile operators say Weve will bring digital wallet technology to 80 per cent of UK consumers when it goes live early next year. Zapp, another service enabling shoppers to pay for goods via mobile phone, will launch in 2015. Retailers including Asda, Sainsbury’s and House of Fraser will offer payments via smartphone at tills. Zapp says it currently has a potential user base of more than 35 million customers.

in Europe and a one-third share of the British market alone. Far from fearing the arrival of the Apple behemoth, US technology vendors have embraced it. This is because most US retailers use a legacy card-swipe system at cash tills. There are eight million merchants in America but only 200,000 of them are equipped with NFC terminals. Retailers in America will have to upgrade terminals if Apple Pay becomes widespread. Perry says: “Cards will disappear at some point and everybody will use their phone. Think of a phone as your digital wallet. The mobile phone will become your lifeline.” Galit says: “What you’ve got to remember is that Apple has had more hits than misses when it comes to them taking on something big.”


Business Technology · October 2014

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Future of payments

Tim Adler In her final interview as UK head of MasterCard, Marion King , the new group payments director at RBS, shares her vision of a world without cash

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’M GAZING down over the magisterial bu i ld i ngs of Ca na r y W ha r f from MasterCard’s eyrie, where half of the tiny figures walking below are carrying a MasterCard. Marion King, 56, turns from the 19th-floor window and says: “The focus here is on the future. The UK is a very good country to look at for the future of payments. There are various reasons for that. First, the UK is the biggest digital economy outside North America – and obviously that’s to do with the scale of the US. Plus we have a very tech-savvy population in the UK. We’ve seen online payments grow at twice the rate of offline physical ones.” Giving her final interview as president of MasterCard UK and Ireland before joining RBS as group director of payments after Christmas, King envisages a future where everybody uses their mobile phone to make payments. And people will have the choice either to pay directly from their current account or put what they’re buying on credit. Credit cards will be phased out – walking around with multiple cards in your wallet, as are the people below us, will become an anachronism, she says. King says she is “passionate” about moving beyond cash: “It’s a vision of a world beyond cash, where consumers and businesses can transact safely and simply by electronic means. Cash is costly to transport, and it isn’t that safe either.” The next step towards this cashless world is contactless payment – just tapping your card against a till point. Last month MasterCard and Visa launched contactless payment across the entire London transport system. People love this contactless technology: more than one million contactless journeys were made within the first 10 days of Transport for London launching this new way to pay, with more than 4.9 million contactless payment journeys made across rail, bus and tram. “It’s very important when you introduce a new technology that there’s got to be a purpose with using it,” says King. “We’re starting to see that with contactless, driven largely by transit. People have become used to tapping through a turnstile. We’ve introduced it on buses. People don’t use cash on buses any more, they use their bank card. People are seeing the real benefit of contactless and that’s driven up usage. We’re now seeing it in coffee shops, in department stores, and in sandwich bars at lunchtime when you need to pay for things quickly. Contactless provides a real benefit. There’s no use in having a technology if people can’t see the benefit.” Consumers in other countries are even more used to contactless than we are. That is because the UK is saddled with legacy IT systems and upgrading point-of-sale terminals with contactless is expensive. Because of the speed with which people have to get on

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The big interview Marion King

There’s n use in havin a technolo people ca the ben and off buses, the actual level of security on a contactless card is low. Passengers peering into iris recognition systems would be too timeconsuming, although biometric identification is something that MasterCard is trialling in the UK. One MasterCard initiative King is especially proud of is helping women in South Africa collect their social security payments. Criminal gangs had been cloning women’s identities and using fake payment booklets to steal benefits. MasterCard helped introduce pre-paid cards that could only be used with fingerprint and voice recognition. “MasterCard is a technology company that’s in the payments industry. Here’s an example where technology has helped financial inclusion and stopped the persecution of women. By making sure the card is attached to a fingerprint and voice, you can’t create multiple identities. Biometric is the future.” Something that MasterCard has is a tremendous amount of “long” data. It may not know what you bought but it knows where you bought it and how much you spent. Just as Tesco owns Dunnhumby, the data-mining empire behind its Clubcard loyalty scheme, so MasterCard either wants to acquire or develop its own UK loyalty arm. MasterCard bought Australia’s leading provider of loyalty and rewards services, Pinpoint, in July. Last month it acquired US payment data start-up Truaxis. King says that MasterCard is now looking to expand its data business in the UK, possibly buying an existing loyalty scheme operator. Dunnhumby


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Keil Hubert

A Portraits: Andras Rac

Marion King (left and above) believes cash will make way for contactless payments (below), and eventually become cardless altogether

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Why we need people to buy into tighter security rules

no ng ogy if an’t see nefit is currently up for sale, with a mooted £2billion price tag on its vast servers. “We can’t build everything from scratch ourselves. We could either partner or acquire. It might be both or it could be either,” King says carefully. “MasterCard never knows who’s made the payment. We don’t hold that information and we don’t want that information. It’s a number. But what we can do is see trends. We can see if certain product categories are moving in a certain direction. We can show a merchant considering opening a new branch a product category. Or their particular share of wallet for a product in that geographical area. We can slice that data with customers to help them make better business decisions based on what’s happening in real-time. Our data is pretty much real time. We can use that to help economists, governments and merchants to help them make better decisions about their business.” King’s depar ture came weeks after MasterCard suffered a major setback. Last month, the European Court of Justice upheld a ruling that fees charged by MasterCard were anticompetitive. The court said the EU’s competition watchdog was right when it ruled that fees charged on cards were exorbitant. MasterCard lost its appeal, and now retailers, including supermarkets Asda and Morrison, are seeking to add as much as £1billion to the amount they are seeking in compensation. They argue they were overpaying MasterCard credit card processing fees for years. Mark Barnett, former global head of consulting

Future of payments

services, will replace King as the British boss of the second-largest credit and debit card company after Visa. One of the things most admirable about King is the way she has hard-scrabbled her way to the top. Not for her the route of private school and then Oxbridge. She attended a comprehensive school in Luton and did her A-levels at a local sixth-form college. Never one to let the grass grow under her feet, King studied accountancy at the West London Institute of Higher Education while working for Luton Borough Council in the mid-Seventies. She then joined Lloyds and Scottish Finance, part of Lloyds Bank. King then joined Reuters in 1986, where she spent 14 years in Europe and Asia, latterly as managing director of global transactions. She became chief executive of BACS, the company that handled the electronic payment systems between bank accounts, between 2002 and 2011. BACS evolved, changing its name to VocaLink. It is still the core electronic plumbing between retail banks and now includes the Link ATM network. So what advice would RBS’s new group director of payments have for any young woman entering the industry? “My advice to my younger self – or to any young woman coming into the industry – would be to think big, think global and don’t allow the boundaries to constrain you. Tear down the barriers and constraints that exist in banking and in payments, and think about what the global consumer really wants.”

PPLE rolled out its newest iPhone last month to great fanfare. For me, the most intriguing part of Apple’s announcement was the rollout of its new electronics payment solution, dubbed Apple Pay. Yes, Apple’s new watch is shiny and intriguing, and it was nice to get the rock band U2’s new album for free, but I felt that those segments of the programme were mildly aggravating distractions; I wanted to hear a lot more about the security controls for the contactless point-ofsale transactions system. The first thing that appealed to me about the Apple Pay solution was the way I could apply it inside an enterprise to solve a vexing access control problem. Several years ago, I needed to find a way to keep people out of my data centres. We’d had incidents involving tool and parts theft, unauthorised server modifications and so on, we needed to restrict access to sensitive areas to the bare minimum of trusted employees – and we needed a log of who went in and out, when, so that we could correlate incidents to suspects. Recalling physical keys didn’t do enough to solve our problem, so (being the IT department) we tried leveraging technology. We investigated installing computerised door locks that authenticated employees with their smart ID card. The combination of an RFID chip and stored PKI certificate should have significantly deterred misconduct, since each attempt to unlock the data centre doors would result in an incontrovertible log entry. Our experiments worked… somewhat. We discovered that users were dutiful about swiping their way in to the data centre, but they wouldn’t bother swiping out when they were done. It was faster and easier for them to tap the emergency egress bar and saunter out. So, we might have a record showing that 12 different techs entering the

complex on a day where something suspicious occurred… but the logging system showed that none of them ever left. This is where I think the Apple Pay technology might come to our rescue, assuming we can apply the science of behavioural economics to slowly change employee behaviour. It shouldn’t be difficult to build a smart lock assembly that incorporates an NFC sensor from a point-of-sale terminal. When an authorised user approaches a restricted-access door, he or she authenticates their entry with a £1 transaction (like putting a coin into a pay toilet stall, but authenticated with user biometrics as well as petty cash); when the user leaves the restricted area, they authenticate the lock again from the other side, and the door lock assembly returns their deposit so that they’re not actually out of any money. If they hit the panic bar to leave, they’re out by a quid. It’s a very small amount of economic pressure, but that pressure builds up over time. Every person has a different pain threshold; that point where a drain of cash from their pay packet transitions from being immaterial to annoying. The act of holding back deposits slowly conditions users to authenticate the restricted access door again on their way out because they want to get their money back. By conditioning users to interact with every door both ways, every time, we can gradually (but significantly!) increase the accuracy of entry and egress logging. I realise that using paid access to a workspace might be considered crass, but the key to the initiative is to compel employees to change their behaviour in order to consistently comply with important security protocols. Voluntary compliance actually costs the employee nothing. You could even incentivise compliance with double refunds every 100th consecutive validated exit. keil.hubert@gmail.com


Business Technology · October 2014

Future of payments

IndustryVIEW

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Banking has never been so easy How new technologies are revolutionising the industry

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echnology has always played a fundamental role in transforming the banking industry. ATMs revolutionised consumer banking in the 20th century, letting customers get cash without visiting their branch. Digital and mobile banking now give customers easy and instant access to their accounts from the comfort of their homes and on the go. The emergence of wearables, such as the world’s first smartwatch banking app, which Intelligent Environments developed, means banking customers can now access their accounts at a glance of the wrist. New technology such as this enables customers to get a better and quicker view of their finances. It’s also improving security.

Death of the password One of the most exciting recent innovations is biometric authentication, which verifies an individual through the unique characteristics of

the human body. Our recently released Future Password Index revealed eight in ten Britons (79 per cent ) would ditch passwords for more innovative security measures like biometrics. Fingerprint verification topped the list – 53 per cent of banking customers said they wanted fingerprint scanners to be integrated into their digital banking services. Voice verification, however, was least popular, with just over a quarter (27 per cent) of banking customers favouring the technology. It’s no surprise that fingerprint scanners are popular. Consumers have become familiar with them through mobile devices like the newest iPhones and their intuitive Touch ID fingerprint sensors. Internationally, banks are responding to this increasing consumer acceptance by introducing ATMs with built-in fingerprint scanners in Japan, Mexico and Poland. This trend is likely to spread as banks continue to look at how biometric authentication can make customers’ lives easier and their finances safer.

The future of digital financial services Technology is not just improving user experience around security. As the first software vendor to develop an online application for credit cards, Intelligent Environments knows digital

innovation can transform a wide range of financial management practices. This includes debt collection. Rather than embarrassing customers by making them explain themselves to strangers on the phone, digital systems can provide self-servicing through websites and mobile apps. That way, lenders give control over repayments back to customers, improving both customer experiences and financial returns. Providing customers with more control is what’s driving banking technology innovation. This trend for customer-led innovation is most evident in the rise of personal finance management (PFM) tools. These digital tools enable customers to track all their accounts in one place and set budgets on spending. The more advanced versions send alerts when approaching

a set budget limit and give visual representations of spending habits. Gone are the days of paper deposit slips and long queues. New banking technologies are changing how customers and banks interact with each other, with the demand for inperson transactions disappearing. People now want control over their finances, with access to their accounts whenever and however they want. Financial services providers are revolutionising the industry by giving customers exactly what they want – digital systems that let them interact with their finances on their own terms. David Webber (left) is managing director at Intelligent Environments +44 (0)20 8614 9800 www.intelligentenvironments.com


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Future of payments

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Inspector Dogberry Mobile proximity payments – using your mobile phone to pay for goods at the point of sale – will be worth $118billion in the US alone by 2018, according to analyst eMarketer. Nearly $4bn will be spent in the States using mobile phones for payment this year. The boom in mobile proximity payments is partly the reason why eBay plans to spin

off its PayPal online payments system into a separate publicly traded company next year. In a note, eMarketer says the split would lend PayPal more autonomy to compete with Apple’s system Apple Pay and other emerging digital wallet providers. eBay bought PayPal for $1.5billion in 2002, and PayPal’s founders and employees include

IndustryVIEW

US retailers have until Friday if they want to take advantage of Amazon’s low introductory offer for its $10 card reader. Amazon Local Register clips onto a tablet computer or smartphone, enabling easy swiped card payments. Amazon is offering early takers a “promotional rate”, charging 1.75 per cent per transaction. Retailers will pay 2.5 per cent after the promotion. Amazon Local Register puts the online behemoth in competition with Square, which charges 2.75 per cent for each swipe. Visa offers its own clip-on card payment dongle in the UK that sells for £50 in John Lewis. The technology give any independent shop or trader the ability to take card payments with a tablet or mobile phone.

some of the most colourful figures in technology, including venture capitalist Peter Thiel – whose ambition is to live forever – and Elon Musk, boss of Tesla Motors and space exploration company SpaceX. And speaking of PayPal, it is estimated that nine of its founders, who cashed in when eBay bought the company, are now worth £126billion between them. Dogberry is a big fan of paying for things with his mobile phone. But it’s difficult when you’ve only got paws.

The mobile phone payment market in Kenya is heating up. Equity Bank, Kenya’s second largest bank, is launching its own mobile phone service to compete with M-Pesa, a service that allows people to pay each other using a (non-smart) mobile phone without the need of a bank account. The Equity Bank move is the first challenge to M-Pesa since its launch in 2007. Crucially, the Equity Bank rival service offers Kenyans loans. M-Pesa may have been a runaway success, but its success is with the unbanked, not with those who can afford to have bank accounts.

Robots will be running the City within 10 years, rendering investment bankers, analysts and even quants redundant, according to one futurologist. David Coplin, Microsoft’s UK-based “chief envisioning officer” says that artificial intelligence is about to outpace human ability. Computers will not only be able to undertake complex mathematical equations but draw logical nuanced conclusions, he said. Algorithms already govern high-frequency

By Caroline Mortimer, web assistant

Money Saving Expert www.moneysavingexpert.com Founded by former BBC journalist Martin Lewis, MoneySavingExpert is the market leader in offering practical and impartial advice for nearly every financial dilemma and product the consumer may be faced with. It is editorially independent and will always give honest advice – as well as tons of offers to help your money go further.

PAY.ON’s blog

Money Advice Service

http://blog.payon.com

www.moneyadviceservice.org.uk

Rise of the robots trading, reducing the need for human interference. But people will no longer be required to manage these algorithms. “What we think is easy, robots find really hard, and what we think is really hard, robots find easy … the City could be run by robots,” Coplin told The Daily Telegraph.

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The Money Advice Service has been set up by the government to educate people about managing their money more responsibly in the wake of the financial crisis. It offers beginners advice about how to draw up a budget and how to deal with getting out of debt – as well as how to avoid it in the first place.

This blog has charted the growth of alternative payments since its launch in April 2012, as more and more companies adopt the technology around the world. A mixture of news and analysis, it explains the risks and the rewards of embracing new technologies to generate higher turnover.

Practical E-commerce www.practicalecommerce.com

Track My Budget (Android – Free)

This handy app helps you manage your income and outgoings with a simple design which can track and calculate regular transactions.

Barclays PingIt (iOS, Android – Free)

Ideal for splitting a meal between friends, this app is ideal for anyone wanting a quick and simple way to pay someone.

Although the blog focuses on e-commerce more generally, it covers the world of mobile and digital payments with depth and accuracy. It combines news and analysis of the latest trends of the growing industry with tips and tricks on how to make your business ready for this new technology.

Keeping up with the multi-channel consumer M obile devices have become the foundation on which multi-channel retail is based, providing greater customer convenience at every stage of the shopping journey. Indeed, today’s consumers are more digitally savvy and sophisticated than ever before – making their shopping journeys more complex and therefore more difficult for retailers to understand and interpret. The collection, integration and use of different types of data can offer a better understanding of multi-channel customers and their purchasing

decisions. However, before investing in the latest mobile-optimised website feature or app, it is worth considering how well existing online and physical channels work together to make life easier for your customers.

Engage

Integrate

Enhance

Bring the online and in-store worlds together. For example, your website might encourage visitors to take advantage of a special event or link to social media comments, while sales staff equipped with tablets can help customers with online demonstrations, or check stock availability.

Keep mandatory checkout information required from mobile shoppers to a minimum, and shorten the process for returning customers by storing their payment details and other information.

Today’s multichannel shoppers may frequently want to seek the opinion of friends or family outside the store before they buy – one compelling reason for offering free in-store Wi-Fi.

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. This document and the information provided herein may not be copied, published, or used, in whole or in part, for any purpose other than expressly authorised by Chase Paymentech Europe Limited.


IndustryVIEW

12 · Business Reporter · October 2014

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INSIDE TRACK When retreat can represent a winning strategy “Inflict injury on oneself to win the enemy’s trust.” Sun Tzu, The Art of War.

What does innovation mean for banks? Collaboration is the key to making digital payments a reality

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ver the last decade we’ve seen many industries fundamentally altered by the digital revolution. The media, print and entertainment industries are unrecognisable from a decade ago; the music industry, too, has seen an enormous shift in creation, consumption and usage. Are banks at risk of meeting the same fate as the high street record store? I would say not – but that’s a long way from a call to complacency. People still trust that their money is safest with banks. If there is a risk, this is where it lies: that bank services may become commoditised and limited to deposits and clearing. No bank would state this as its desired position, and so of course there is a need to innovate. But innovation is not one-size-fits-all. There is the question of where and how to innovate. What is the real value of innovation, what can we learn from the digital success stories, and what should we be doing with those lessons? The most common success factor for the new entrants who’ve become digital superpowers is their relentless focus on

improving the customer experience. New use cases emerge every week: the one-click payment is becoming increasingly commonplace (and popular) and customer expectations are changing accordingly. Much of our thinking today is driven by this focus on customer experience. How do we ensure that the user experience in each and every payment environment is as seamless as possible? We live in a world of ever-growing convenience and personalisation. That can make life challenging for organisations with legacy systems, regulatory scrutiny and a low-risk appetite. Large banks suffer from huge regulatory expectations of service consistency, coupled with a press that pounces on any technical hitches that occur in the delivery of those services. Is it really any surprise that this environment is not conducive to innovation? Any digital savant will tell you that no innovation works straight out of the gate. It requires the ability to get product out quickly and iterate in response to market learnings and feedback. This needs time, patience, and the chance to work through the kinks until a product is ready to roll out to a wider base. All of these factors conspire to make it very challenging for large organisations to be the best innovators. That, in turn, suggests that it may be best

to leave it to the smaller organisations to lead the innovation charge. There are clear signs that small, innovative organisations and larger banks can do more than simply co-exist: they can significantly complement each other. A smaller company can take products out under a much smaller microscope, allowing them to test, learn, adapt and iterate as they perfect their propositions. What they will probably struggle to do is scale that proposition to deliver mass adoption – and this is where the banks, with their large customer bases, can really deliver. Visa, as the world’s largest and most trusted acceptance brand, can play a critical role in facilitating the necessary ubiquity for any digital payment proposition. We’ve faced similar circumstances driving EMV adoption and delivering contactless payments across Europe. We believe in and share the idea of large organisations (like ours) working with smaller companies to enable their ideas and provide the necessary support to help them find their feet and prove themselves. For us, collaboration is the key to making digital payments a reality. Jonathan Vaux is executive director, Visa Europe 020 7937 8111 vision.visaeurope.com

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he scale and scope of the retail financial service sector has expanded significantly since its “modern” birth in Florence under the Medicis. In response, banks have evolved. They invested as required to keep pace with new requirements and have maintained their complete mastery of the sector. That dominance is now in question. Encouraged by regulators, the possibilities presented by new technology, ever more demanding and promiscuous customers and the injection of significant investment capital, there has been a proliferation of new entrants to the retail financial services space. Saddled with legacy systems not designed for this new world alongside a scarcity of investment capital, banks can no longer assume their historic position of primacy. The battle for customer attention via new digital channels is intense. In a crowdsourcing environment, customers vote with their feet – today’s winner may be consigned to the rubbish the minute a more compelling offering is launched. How should banks respond? An attempt to compete head-on with the new entrants and their vast pool of non-banking investment capital could prove costly, especially to bank shareholders. Alternatively, intentionally deciding not to compete

in the digital front line and investing heavily in their own infrastructure and platforms that are foundational to the whole sector, including payments, for example, might secure a long-term winning position. Offering open-API, fair priced access to this ecosystem for any new entrant who wanted to chance their arm in the digital customer battlefield could potentially retain the banks’ long-term sector supremacy, albeit slightly redefined. BBVA in Mexico is already on this path, and Ffrees, in the UK, is a great example of what a new entrant front-end could be – plugged into the incumbent bank ecosystem. It sounds like a retreat – and in many respects it is. But aiming for a secure, long-term position, albeit with potentially reduced returns, might be something bank shareholders would vote for with their own feet! Jonathan Rose is a partner at Capco jonathan.rose@capco.com www.capco.com


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THE LANDSCAPE of payment is undergoing an exciting transformation. The offline-online-mobile-multichannel era is on its way. The recent launch of Apple Pay is clearly an industry shaker, as it represents a huge step towards the widespread adoption of mobile payments. The volumes of mobile payments and commerce are

growing exponentially, and with Apple entering the NFC M-payment arena, the market is expected to grow even faster. While the disruptive innovation in payments and commerce creates new great opportunities, new threats also appear. Join the world’s leading conference for secure solutions for payment, identification and mobility, which takes place on November 4-6

in Paris. This Cartes conference will explore the latest developments and assess the challenges and opportunities in the market. Register at http://badge.cartes.com and benefit from a 20 per cent discount using the special code FPARIS14 www.cartes.com/Conference/ 2014-Conference-Programme

IndustryVIEW

All eyes on Paris secure connections conference

Three steps to picking the winners in payments

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The Bitcoin protocol: An innovative tour de force D on’t take this the wrong way, but what you know about Bitcoin is probably wrong. My experience over the last few months has taught me that what people have heard about Bitcoin doesn’t always correspond with a fair and accurate understanding of the promise this technological innovation holds. Let me set the record straight. The Bitcoin protocol, introduced to the world in 2009 by the enigmatically anonymous Satoshi Nakamoto, is an innovative tour de force. For the first time, it enables any type of digital property to be transferred between two parties without relying on a third party, such as a government or bank. The key to this is a public ledger known as the blockchain, which uses group consensus and effort (not to mention the beauty of mathematics) to verify the validity of transactions and provide an indisputable record of events. The digital currency bitcoin (always a lower-case b when talking about the currency) is just one application of the Bitcoin protocol (always an

upper-case B when talking about the underlying protocol). Thousands of online merchants around the world now accept bitcoin. Want to book a hotel with bitcoin? Go to Expedia. Want to buy a laptop with bitcoin? Go to Dell. Want to give bitcoin to charity? Donate to the RNLI. These merchants – and many more – have been quick to see the benefits of accepting payments in bitcoin. First, it is typically cheaper than accepting a payment by card, hence merchants lose less in fees and boost their profit margin. Second, the costly headaches of card fraud go away with bitcoin, as there is no chargeback mechanism and all consumer payments are final. Third, accepting card payments across country borders is still a costly process, whereas bitcoin is borderless and enables a payment from anyone, anywhere. Finally, it is not lost on merchants that accepting bitcoin is a boost to their brand. It is seen as forward-thinking and innovative, it generates buzz and it appeals to all the cool kids.

More than £50million of transactions are typically made every day using bitcoin – not bad for a payment scheme that is only a few years old and that no one owns or controls. The team at Bitnet previously built the world’s largest card payment gateway, CyberSource, which was sold to the world’s largest card scheme, Visa, for $2 billion. We know how to process payments safely and securely. We also understand what enterprise merchants want, and have made it joyously simple: set a price in local currency, let the consumer pay in bitcoin, and Bitnet will fund in local currency. We also guarantee the payment, so there is no price volatility or risk. At Bitnet, we recognise that digital currencies are the future. Come and speak to us so your business can take advantage of that digital future today. Akif Khan is VP Solution Strategy at Bitnet akif.khan@bitnet.io www.bitnet.io

he payments space has never been more crowded – or more exciting. New entrants are popping up almost every day, and the industry only feels hotter now that Apple has entered the arena. But all this activity comes at a price. Payments are now more confusing than ever – for consumers, merchants and payment providers. At Barclaycard, we think about this constantly as we look to become the go-to bank for payments. What will decide the winners and losers in payments? We use our win-win-win framework. It’s a simple way to discern the signal from the noise. First, you need a win for consumers. Does this innovation make things better, faster, easier, cheaper? Do people want or need it? Next, the merchants. Will they benefit? Will it help them sell more and become more successful? Finally, payment providers need a win as well. No innovation will take root unless it profits everyone. You can see immediately how win-win-win works. If an innovation works for consumers and providers, but not merchants, it won’t gain traction. If it doesn’t work for consumers, it won’t scale. And if it’s not profitable for providers, it simply isn’t a sustainable model. Win-winwin has become the lens we

hold up to competitors, partners – and to our own business. Whether it’s recent products like Barclaycard Anywhere, which lets sellers take payments through a smartphone app and mobile reader; or bFlex, which lets buyers finance a purchase at the point of sale on flexible terms they decide; or an innovation like our wearable bPay band, a wristband which lets consumers make contactless payments, we always stop to ask: Does this help consumers pay the way they want? Does it help merchants take payments the way they want? And are we connecting them in a way that adds value for both? If the answer is yes in each case then the product or innovation is more likely to succeed. Philip McHugh (below) is CEO, Barclaycard Business Solutions www.barclaycard.com


IndustryVIEW

Business Zone

14 · Business Reporter · October 2014

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The future

UK firms due huge savings from EU commitments T he year 2015 sees the dawning of a new era for British retailers as the commitments made by Visa to the EU come into effect on January 1. In short, the cost of accepting card payments will come down substantially as average interchange rates, the primary component of a retailer’s cost of accepting cards, are reduced. With the UK card payments market amounting to more than £500bn*, and long-term growth driven by the longterm move from cash and cheques to electronic payments, the savings opportunity from regulatory change will amount to hundreds of millions. Savvy businesses across Britain are already assessing their options and are building these substantial savings into their 2015 business plans. There is a particular nuance to the structure of the changes coming through. In order to promote competition across the EU, it is now possible for crossborder merchant service providers to offer attractive discounts that translate into significant savings to everyone from governments to high street retailers. Large and mid-sized corporates that accept significant volumes of card payments are poised to benefit most. One merchant services provider that is well positioned to deliver these savings to retailers in Britain is AIB Merchant Services or AIBMS. “We are already a substantial player in the European market,” says David Courtney, general manager at AIBMS. “This year we were named MPE Acquirer of the Year in recognition of our marketleading corporate service model. We’ll process almost €30bn of card payments

in 2014 and over half of that comes from retailers in the UK and Europe. We have a particularly strong presence in the e-commerce market and we believe that the forthcoming regulatory changes in our industry represent a substantial growth opportunity for us.” AIBMS is a joint venture between Ireland’s largest retail bank Allied Irish Bank and First Data. AIB is Ireland’s leading business bank and has invested

significantly in delivering digital innovation to its customers. First Data is a global technology leader with 24,000 employee-owners in 35 countries, serving six million merchants in 70 countries. First Data processes more than 2,000 financial transactions per second, totalling $1.8 trillion a year. corporate@aibms.com *The UK Card Association, Card Expenditure Statistics December 2013

In focus: New channels, new players, new technologies Video special

Expert-led debates featuring the latest business innovations, filmed at The Telegraph. http://businessreporter.co.uk/videos/ category/cloud

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here has never been so many ways to pay – probably because there has never been so many ways to shop. In these new channels, particularly mobile, new technologies and new players are creating a dynamic landscape. For Helixion, whose focus is on moving card services onto mobile devices, it is one new technology – HCE – and one new player – Apple – that have brought the market alive. HCE (Host Card Emulation) and Apple have energised the market because they make it easier for banks to deploy their payment cards onto mobile phones.

Interestingly, they take two very different approaches. Apple, with a little help from American Express, MasterCard and Visa, takes care of the complexities for banks; effectively handing control of the customer’s experience to

Apple. Considering the banks have spent the last five years resisting handing control to mobile network operators, it is testament to Apple that 500 US banks have reportedly signed up to Apple Pay. Will the European banks be as willing to sign up

when it crosses the pond? HCE, on the other hand, puts the banks in control. The technology means they no longer have to rely on a third party, such as a mobile network operator, to deliver their cards on mobile handsets. This opens up exciting opportunities for the bank to reach their customers more directly. What these new technologies mean is that mobile contactless payments are fast becoming a reality and those banks that do not act will be left behind. +44 (0)131 225 2020 www.helixion.com

Co-operation is crucial in making mobile wallets mainstream We are living the revolutionary era of mobile payments – consumers and retailers have almost countless ways to send and receive payments via smartphones. But we also live in a world of confusion, since all these options give both parties a headache. Customers are lost in the overwhelming amount of applications and functions, while merchants are having trouble finding the winning means of payment. However, mobile wallets can do more than just serve us with cosy payment methods – there is a visible demand to have all sorts of coupon discounts, loyalty programmes, personalised offers as well as ticketing and IDs in our pockets. At Cellum, we share this vision of creating interoperable and modular solutions. We believe that in order to prevent the market from staying deeply fragmented and to solve actual consumer and retailer needs, its players need to invest more in co-operation than trying to make the big shot by themselves. There is no single killer app coming in the foreseeable future – the industry has to concentrate on creating secure and interoperable wallet services. This is why Cellum released the first MasterPass compliant wallet in Europe and, among the earliest, prepared the integration of its platform with Apple Pay. The key to making mobile wallets mainstream is to offer value-added services across all major platforms, integrate multiple technoligies such as BLE or NFC, and offer comsumers an ergonomic, user-friendly experience. contact@cellum.com www.cellum.com


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The debate How is technology transforming finance and transactions?

Robert Doherty

Head of product AIB Merchant Services

VP solution strategy Bitnet

Akif Khan

Philip Schoch

Jonathan Rose Partner Capco

Head of global products and solutions MasterCard Europe

The latest innovations in payment processing are making a massive difference in areas such as speed, flexibility and choice, ushering in a new era for both customer experience and business success. The power of broadband/IP service means transaction times are tumbling from 30 seconds to under five seconds, to match the increasing demands of the consumer. People expect to be able to make payments in their own currency. At AIBMS we are handling up to 200 currencies with settlement in base currency, and our Dynamic Currency Conversion (DCC) product means that the merchant can earn additional revenue while allowing their customers to pay in their own currency. Cloud-based EPOS systems enable businesses to take payments virtually anywhere. In addition, smart pay stations such as Clover offer fresh opportunities for app developers to provide solutions that enhance the retail environment. This means SMBs have new worlds to conquer, with the right business tools and the right payment solutions provider: AIBMS.

The digital currency bitcoin is still relatively young but is already starting to transform finance and transactions. The B2C space is an obvious example, with large merchants already taking advantage of the cheaper fees, lack of chargeback risk and global reach inherent in taking payments in bitcoin. That is just the start, though. Increasingly, those in the B2B payments space are investigating how moving money in a globalised market using bitcoin can reduce overheads. Cross-border remittance is another area of finance ripe for disruption – why wait days and pay fees of 8-12 per cent to send money back home to your family when it can be done cheaper and quicker using bitcoin? With more than 2.5 billion people in the world unable to access traditional banking and card services, access to bitcoin could transform lives and markets – enabling consumers in emerging markets to access the global ecommerce marketplace while providing new drivers for growth for UK online merchants.

Technology has transformed finance by empowering clients. They are demanding speed, efficiency and quality transactions on a par with their consumer services. As mobile adoption surges, an increasing number of clients are choosing self-service and paperless transactions. And they expect their financial institutions to adapt quickly to their changing needs. Successful firms will be those that can do just that. A recent study by Appway and WealthBriefing found that process automation stands at low levels at institutions worldwide. But in order to increase process speeds and improve the client experience, technology is key; it has the power to eliminate mistakes, ensure compliance, and promote swift transactions. By automating processes, an institution will be efficient from back to front and deliver faster, highquality service. This will help prevent dropouts and increase referrals. By leveraging technology, financial service institutions can transform their business models and serve the empowered clients of the digital age.

The banking system is essential. That is why governments around the world bailed banks out in the 2008 crash. When it comes to technology, if something is genuinely critical it doesn’t fail; think air traffic control or a life support machine. Why then, given their importance, do bank IT systems seem to fail with increasing regularity? Is it simply that many banks’ core IT systems are more than 30 years old and designed for a much simpler branch-only world? The proliferation of new channels stretching the original system capabilities, a history of chronic underinvestment and the risk, cost and effort required to re-platform have also complicated the issue. But it is the vast, increasing number of mobile devices and web applications requiring access to bank systems driving an explosive growth in IT-directed requests and massive transaction volumes that represent the biggest challenge for these creaking IT platforms. Banks need to address the core IT system issue now before this transaction tsunami overwhelms them.

People around the world are embracing an increasingly digital lifestyle and, to meet this shift, shopping and payment experiences also need to evolve. MasterCard is constantly exploring ways to give people easy, secure and innovative ways to shop. We have been a pioneer of mobile commerce innovation for years, but technology is moving fast. In the future we believe every device can become a shopping device, but to do this we need to think big and look at technology through a different lens. From wearables to washing machines, technology is giving us the power to transform the way people transact and interact. We are facing a true paradigm shift, and the opportunity now is to ensure all partners in the ecosystem work together to deliver a safe, secure and innovative shopping experience in both the physical and digital worlds. Ultimately the consumer will decide which technologies reach mass adoption, but in the spirit of all great pioneers we have to try new things and think differently if we are to continue to evolve.

corporate@aibms.com www.aibms.com

akif.khan@bitnet.io www.bitnet.io

+41 43 204 0608 www.appway.com

Practice lead Appway

jonathan.rose@capco.com

Spotlight: The brave new payments world is already here

A

t the moment, not a single day seems to pass without a new story about mobile payments, exotic new currencies, encrypted distributed ledgers or peer-to-peer alternatives to central payments. Not since the 1980s, when card-based electronic payment systems expanded around the world, has the payments industry been so vibrant. However, in a month that saw Barack Obama sign an executive order to commit the US federal government to chip-andPIN card technology, let’s not forget that the practical world experienced by real consumers continues to evolve at a very stately pace. Card transaction

volumes still continue to grow in the UK almost 50 years after their market launch. So regardless of how compelling the case is for new payment techniques, it is a sobering thought that success will be measured not in terms of initial take-up but in terms of sustainable growth over several generations. The winners in the evolving consumer payments market will be those who understand that long-term success will depend on two things. Firstly, innovative products must be easy to understand from the outset, otherwise consumers will continue to do what they have always done. Small details can have a huge impact.

Roberto Tittarelli

@MasterCardNews @MasterCardEU

For example, the growth of online payments was initially stunted by a misguided attempt to ask online shoppers to register for a service after pressing the pay now button at check-out. However, many first-time visitors were reluctant to go through a registration process, leading to purchase abandonment. A redesign of this process led to the register button being replaced with a continue button, together with a note that customers may register later. In the payments industry this is known as the $300million button – the annual increase in revenues generated at one single retailer by changing this simple detail. New payment innovations must avoid similar pitfalls. Secondly, new approaches require bulletproof payments operation and IT systems. In today’s brave new payments world there will be little room for error. Speed, flexibility and reliability will decide who wins. Lu Zurawski is Practice Lead, Consumer Payments EMEA at ACI Worldwide www.aciworldwide.com