Payment methods report 2018

Payment Methods Report 2018 Innovations in the Way We Pay

Payment Methods Report 2018 RELEASE | VERSION 1.0 | JULY 2018 | COPYRIGHT © THE PAYPERS BV | ALL RIGHTS RESERVED

Authors Ana Sabie Bogdan Moisa Mees van Stiphout

Contact us For inquiries on editorial opportunities please contact: editor@thepaypers.com To subscribe to our newsletters, click here For general advertising information, contact Mihaela Mihaila mihaela@thepaypers.com

Management Summary Since its first launch in 2016, Payment Methods Report has been the reification of a need we identified in the industry for a common framework of payments terminology, and for an educational overview of payment instruments and payment methods categories. The report’s educational purpose allows us to place special emphasis on customer preferences per region/industry, but also to highlight best practices from both merchants and PSPs in illustrating the right payment mix.

This year’s report aims to present the key trends and developments in global and regional payment methods by highlighting the innovation, challenges and developments in the use of the most important payment methods across geographies and verticals. Due to a complex market, brimming with (alternative) payment providers that compete to offer seamless and lowcost payments options, an instrument depicting the complexity of this space is more than demanding. Our endeavour is also driven by the fact that we understand that, since consumers are currently able to choose from a constantly growing number of payment methods at both the checkout and POS, differentiating from competitors is becoming challenging. In order to provide an accurate overview of the current state of the innovation in the way people pay, we have looked at trends across geographies but also across verticals, from both an online and offline perspective, bearing in mind as well that the evolution of cash payments is just as important as the growth of e-payments.

The payments methods that we use for offline and online purchases evolve year by year and are influenced by regulations, consumer preferences, advances in technology, innovation in customer services, and more. Uncovering the factors that determine the evolution of a payment method is essential for understanding the current state of the payments landscape and for being aware of its potential for the future. In 2018, we have witnessed in the global payments landscape important changes and developments. Europe is under the effect of PSD2 and GDPR and, partially, of SEPA Instant Credit Transfer (SCT Inst), India prepares for UPI 2.0, China’s Alipay and Tencent expand beyond borders and beyond payments, emergent economies become more and more attractive. Globally, there is an increased effort towards digitalisation aimed at promoting financial inclusion and we see governments being more aware of the power they have in promoting cashless societies.

In the first chapter, Payment Methods in Focus – Trends and Developments, we found it impetuous to take a closer look at the various types of payment instruments and methods, presenting the terminology and some trends and developments related to each payment method. In this section, we presented the current state and the development of pay later solutions, we tried to explain why cards remain one of the most popular non-cash-based payments in the world and present how the usage differs in different areas. We looked at what is estimated for instant payments and what impact it will have on online banking payments (on the rise in Europe), what is the current state of the use of cash and how it is impacted by other payment methods, as well as what is direct carrier billing’s importance in emergent markets. Another hot topic we tackled upon in this section is the use of cryptocurrencies as a payment method and presented the way in which people can actually purchase goods and services using cryptocurrencies and what industries and regions are currently using or can benefit from using crypto.

Based on their expertise, payments specialists share with us the results of their investigations regarding certain payments methods and solutions by highlighting the benefits and challenges on the market. Dean Wallace from ACI Worldwide presents the benefits of real-time payments for merchants, debating upon one of the hottest topics in the payments ecosystem at the moment, as both banks and merchants look to match their services to customer demand and expectations. ➔

3

PAYMENT METHODS REPORT 2018

•

MANAGEMENT SUMMARY

Management Summary Pay later solutions and online banking payments are looked at from a consumer and cross-border ecommerce perspective respectively, with Luke Griffiths from Klarna and Luke Flomo from Trustly providing their expert views regarding these topics.

In the second chapter, Zooming into e-wallets – An East/West perspective, we created an infographic with an overview of regional and global e-wallets in Europe, North America, India and China, followed by a mapping of e-wallet functionalities.

The section incorporates research done by The Paypers in an infographic of e-wallets mapping the 61 most prominent e-wallets today on several functionalities. The research summary and results are also enclosed.

Furthermore, the chapter includes insights from prominent payments experts. Mounir Mouawad from Google Pay presents the benefits of using Google Pay for merchants, while Javier Santamaria from European Payments Council underlines the way in which instant payments can drive the development of mobile payments. Kunal Patel debates upon the so-called “war of e-wallets” in India, highlighting the main drivers for the surge within the e-wallet space in a market largely driven by competition from credit/debit cards. Zennon Kapron from Kapronasia explains what happens when a mobile wallet becomes more than just a wallet, referring to Alipay, the mega-app used by hundreds of millions of Chinese, an app that has become more than just a platform for ecommerce payments.

In the third chapter, Innovations in the Way We Pay, we looked at how the rise of ecommerce changed the way consumers interact with merchants. Nowadays, convenience is the main driver of every development regarding the user experience in store or online. Customers can shop with ease from anywhere at any hour and on any device. Ecommerce redefined and enhanced the customer experience and payments providers had to adapt their payment methods to meet new demands for a seamless experience.

The new challenge is now “invisible payments” in an attempt to make the checkout process as fast and as simple as possible. Voice is emerging as an important commerce channel and the recent string of investments, that big tech companies like Google and Amazon have made in enhancing their “smart assistants”, shows that voice commerce has the potential to redefine commerce. We are not only communicating with devices, but devices can also communicate among themselves. Connected devices or the Internet of Things is making big strides into online and physical commerce. The growth of connected devices will pose new challenges to ecommerce marketers, but an integration with IoT devices built around purchasing and re-purchasing can have important benefits.

We have invited payments and ecommerce specialists to grant their expert knowledge to this chapter presenting expert views on the evolution of commerce, voice commerce and Internet of Things. Thad Peterson from Aite Group presents the evolution of commerce and of Amazon in the payments space. Karen Pepper from Amazon Pay explains why voice can be perceived as the new frontier in commerce, while Mark Bergthaler from Merchant Risk Council points out to the need of tailoring commerce to the Internet of Things, understanding and strategising around the way the Internet of Things can be used to bring frictionless experiences in store. ➔

4

PAYMENT METHODS REPORT 2018

•

MANAGEMENT SUMMARY

Management Summary We then found it necessary to investigate some of the most important markets worldwide and to provide an overview and data related to the way people pay. In Payment Methods Basics and Overview of How People Pay in Different Markets infographic, we provided an overview per country with details related to some ecommerce data, the preferred payments methods and some of the best-known alternative payments methods in the selected countries.

In the last chapter, How to Create the Right Payment Mix - Insights into Verticals and Geographies, we tried to understand which verticals and regions are more open to innovation. In this section, several regions and verticals are examined by experts in their field, who offer an in-depth discussion of specific situations to give a clear image of how people pay. Ralf Ohlhausen from PPRO sheds light on how to build the ideal payment mix for global businesses by laying out a plan for any merchant to gain success on a global scale. Abhishek Banerjee and Rossini Zumwalt from Emergent Payments point out the opportunities in the emerging markets (Africa, LATAM, India, and Southeast Asia). Kendrick Sands from Euromonitor International explains how a shift in retail drives card adoption in China. With greater competition in the digital payment arena, Sands explains how payments are increasingly seen as an additional channel where merchants are able to be more connected to their customers and offer a range of products and services in China. Focusing on the US, Sally Baptiste from Payment Operations Group explains how Americans are changing their payment behaviour and, more importantly, how they are not. She discusses the success and failure of certain innovations by giving insights into how the US is dealing with the changes in the payment space.

Samuel Barret from Trustly’s gaming division elucidates the challenges and opportunities in online gaming, exemplifying ways to deal with some of the most demanding payments requests from gamers. Additionally, Jens Bader, the co-founder of MuchBetter, underlines the most important payments and fraud challenges for gaming operators and the way in which complying with regulations should be approached in this industry. Jens explains how to support a good mobile experience in gaming and how to combat fraud in order to stand out from the competition. Jeroen Dekker from AcceptEasy explains what does an ideal solution for relationship payments in Europe looks like, by presenting what it means to minimise the payments hassle for B2C customers.

When it comes to the travel industry, Jean-Christophe Lacour from Amadeus’s payments business highlights the payments preferences and developments that shape this industry. He also explains how the company helps in tackling the payment needs of travellers globally, what payment methods for the travel industry may come up as alternatives for credit cards and how the western markets address the payments needs of Asian tourists who are highly mobile-wallet users.

The Payment Methods Report 2018 is a must-read key summary of the most important basics in the payments industry, trends, developments, expectations for the future. Its main goal is to help any payment service provider, merchant, or industry-related readership to take informed decisions in their future endeavours in a complex ecosystem that is constantly evolving.

5

PAYMENT METHODS REPORT 2018

•

MANAGEMENT SUMMARY

Table of contents 3 Management Summary 8 (Alternative)

Payment Methods in Focus – Trends and Developments

9 (Alternative) Payment Methods - Trends and Developments 12 (Alternative) Payment Methods in Focus 12

Credit and debit cards

13

Prepaid

13

E-wallets/Mobile Payments

14

Online banking ePayments

15

Direct debit

16

Invoice and Pay Later Solutions

17

Cash

18

Direct carrier billing

19

Cryptocurrencies

24 What Are the True Benefits of Real-Time Payments for Merchants? | Dean Wallace Practice Lead Real-Time and Digital Payments, ACI Worldwide

26 Capitalising on Cross-border Ecommerce with Online Bank Payments | Luke Flomo, Head of e-Commerce, Trustly

29 The Moment Is Now for Pay Later | Luke Griffiths, General Manager, Klarna 33

Zooming into e-wallets – An East/West perspective

34 E-wallets in Focus 38 Overview of Regional and Global E-Wallets in Europe, North America, India and China 39 Mapping of E-Wallet Functionalities 44 How the SEPA Instant Credit Transfer Scheme Unlocks the Potential of Mobile Payments | Interview with Javier Santamaria, Chair of the European Payments Council

46 The Benefits of Google Pay for Merchants | Interview with Mounir Mouawad, Head of EMEA Product Operations at Google Pay

48 The War of the Wallets in India | Kunal Patel, Council Member, Gerson Lehrman Group 50 When a Mobile Wallet Is More than Just a Wallet | Zennon Kapron, Director, Kapronasia 53

Innovations in the Way We Pay

54 Introduction 55 “Alexa, buy me stuff.” – Amazon and the payments space | Thad Peterson, Senior Analyst, Aite Group 57 Voice Is the New Frontier in Commerce | Karen Pepper, Head of the UK and Ireland, Amazon Pay 59 Innovation in the Way We Pay - IoT and Payments | Markus Bergthaler, Director of Programs and Marketing, Merchant Risk Council

6

PAYMENT METHODS REPORT 2018

•

TABLE OF CONTENTS

Table of contents 62

Payment Methods Basics and Overview of How People Pay in Different Markets - Essential Trends to Watch

63 Payment Methods Explained 73 Country Infographics 74

Brazil

75

UK

76

Netherlands

77

France

78

Germany

79

Poland

80

Canada

81

Russia

82

Turkey

83

UAE

84

China

85

Japan

86

India

87

South Africa

88

US

89

Mexico

91

How to create the right payment mix – Insights into verticals and geographies

92 How People Pay in Different Geographies and Verticals 93 How People Pay in Different Geographies 94 Going Global: Ten Steps to Success for Merchants | Ralf Ohlhausen, Business Development Director, PPRO

96

Emerging Market Ecommerce Trends and What to Watch In 2018 | Rossini Zumwalt, Chief Payments Officer & Abhishek Banerjee, Chief Technology Officer, Emergent Payments

98 How the Shift in Retail Drives Card Adoption in China | Kendrick Sands, Head of Consumer Finance Research, Euromonitor International

100

Purchasing Methods in the United States – Innovatively Static | Sally Baptiste, Consultant, Payments Operations Group

102

How People Pay in Different Verticals

103

A Faster Way to Play: No-Registration Gaming Takes Hold | Samuel Barrett, Director of Gaming, Trustly

105

The Payments Challenges for Gaming | Interview with Jens Bader, MuchBetter co-founder

108

Paying Attention: Relationship Advice for European B2C Companies | Jeroen Dekker, Head of Product & Marketing, AcceptEasy

110

The Payments Preferences and Developments That Shape the Travel Industry | Interview with JeanChristophe Lacour, Head of Product and Offer at Amadeus

113

7

Glossary PAYMENT METHODS REPORT 2018

•

TABLE OF CONTENTS

(Alternative) Payment Methods in Focus Trends and Developments

(Alternative) Payment Methods - Trends and Developments Introduction The global increase of non-cash payments creates a dynamic and intricate landscape that, although harder to navigate, will bring plenty of rewards to those who understand the trends and developments that drive future changes.

Our third edition of the Payments Methods Report looks at innovation in the way people pay and captures the essential developments that currently dominate and will transform the payments ecosystem. We look at trends across geographies but also across verticals, not discriminating between online and offline channels. For us, following the evolution of cash payments is just as important as the growth of e-payments.

The payments landscape in 2018 is on the cusp of big changes. In Europe, we have PSD2, in India, UPI 2.0 is in the works, China’s big fintech companies, Tencent and Ant Financial are expanding beyond the countries’ borders and beyond payments, emergent economies become more and more relevant. All of these factors set the stage for big changes in the payments landscape in the coming years.

Globally, we see increased efforts towards digitalisation aimed at promoting financial inclusion. In recent years, governments have become one of the main promoters of cashless payments, the most notable example being India.

However, their example is quickly followed by other nations, such as Indonesia’s National Strategy for Financial Inclusion.

Governments in both developed and emergent markets may seek to discourage the use of cash to limit financial evasion and money laundering. Digital payments, besides being easier to track and follow, generate more tax revenues and contribute more to the growing economy.

Indeed, it seems that anywhere the Internet goes, financial services follow – and the link between online and financial services has never been stronger.

Looking at Europe and North America, two regions with a highly developed financial sector, we see credit cards are still the dominating non-cash payment method. Supported by banks, PSPs, and the schemes, card payments have maintained their dominant position in the online and offline channels. Alongside cards payments, Europe boasts a large diversity of payment methods. Online banking e-payments (OBeP) as well as e-wallets, are two of the most important growing payment methods across the continent, the former getting the biggest traction thanks to the combination of PSD2 and SEPA Instant Credit Transfers.

According to the WorldPay’s Global Payments Report 2017, bank transfers are set to become the second most popular payment method globally by 2021. Bank transfers are an attractive option for online merchants and consumers because of their low acceptance costs and the convenience they provide for online shopping. ➔

9

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods - Trends and Developments Europe For Europe and beyond, The Revised Payments Directive (PSD2) is arguably the most important piece of legislation regarding the payments landscape. PSD2 came into force on 13 January 2016 and had to be implemented into national legislation by 13 January 2018. Its impact on the payments landscape is still to be seen, and opinions are varied but optimistic. The revised payments service directive may allow new payments players to enter the market and be the consumer-facing end of the payments landscape, while banks, for example, would work as the infrastructure that links different payments services. It is uncertain whether payment providers (TPPs) will be able to tackle the dominance of the card schemes and existing online banking e-payments offerings in Europe. The successes such as those in the Netherlands and in the Nordics could be difficult to replicate in more fragmented markets, but PSD2 may enable third parties to build safe payment methods with great user experience upon the existing banking infrastructure.

However, the issue of authentication is still a hot topic and it remains to be seen how frictionless it will be. At the moment, it is still unclear what functionalities banks will offer and whether APIs will provide payments guarantee. To determine how APIs should look like for use in PSD2, the European Commission (EC), with the support of the Euro Retail Payments Board (ERPB) of the European Central Bank (ECB), has created the API Evaluation Group (API EG). The goal of this initiative is to formulate a set of recommendations describing how ‘good APIs’ look like in the eyes of the market participants and are therefore likely to be ‘widely used’ by Third Party Providers (TPPs), which is one of the prerequisites for banks getting exempted from providing a fallback mechanism to their customer (online banking) interface.

Equally relevant was the launch of the SEPA Instant Credit Transfer (SCT Inst). Launched on 21 November 2017, the SEPA Instant Credit Transfer would allow individuals and businesses to transfer funds up to EUR 15,000 in less than ten seconds anywhere in the SEPA region. The scheme has been successfully launched in Austria, Estonia, Germany, Italy, Latvia, Estonia, the Netherlands, and Spain, and in 2018, PSPs from Finland will also be ready for instant payments, along with PSPs from Belgium, Malta, Portugal, and Sweden.

SEPA Instant Credit Transfers will have a significant impact on the European payments landscape, especially when it comes to reducing cash and cheque usage and for creating an integrated European single market, an objective also shared by PSD2.

India In India, Unified Payments Interface 2.0 is being one of the most important payments projects in the works at the moment. The UPI is a real-time payment system developed by National Payments Corporation of India. It facilitates bank transactions between two bank accounts on a mobile platform and has had one of the biggest impact on the growth of mobile payments in the country. The system allowed consumers to make P2P transactions and payments using their smartphones, without having to enter credit card details.

In May 2018, 101 banks are connected to the UPI and over 190 million transactions have been processed.

The National Payments Corporation of India has announced new upgrades to UPI, which will allow recurring billing for bank transfers, using e-mandate. ➔

10

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods - Trends and Developments However, it is Paytm (part of One97 and backed by investments from Ant Financial), who dominates the mobile wallets market. The payment method is widely accepted. The fintech company also operates an ecommerce marketplace and has branched into various financial services, such as lending and savings accounts.

Mobile wallets allowed India to leapfrog the need of a developed banking infrastructure for financial inclusion. Thanks to the ubiquity of smartphones, more and more Indians will have access to financial services. The mobile wallet in India will be used to receive and make payments, open banking accounts, and even identify yourself.

However, even though the infrastructure is there, ecommerce sales in India represent just 2% of all retail transactions.

This means that the market offers excellent growth opportunities for local and foreign players like Amazon, Alibaba, Walmart, Google, and PayPal, who are already pushing for more market share.

China When it comes to cashless payments, everyone looks at China’s two successful wallets, WeChat Pay and Alipay, who moved beyond payments to provide users with an entire ecosystem in which they can pay, get paid, communicate, borrow, invest and virtually manage the entirety of their financial lives from a single place.

Starting out as an ecommerce wallet, the functionalities of these payment services have grown explosively. Almost every real-life interaction can be mimicked within these apps and the daily number of interactions between users and their wallet has grown enormously. Chinese consumers do not have to carry cash anymore when leaving their homes – their mobile phone is all they need to pay and interact with merchants.

As the number of Chinese tourists has exploded in recent years, WeChat Pay and Alipay adoption has also grown in Europe and the US. The two payment methods are no longer confided to China – they can be seen in more and more countries.

If the use jumps from Chinese nationals to Western consumers, these two apps could define a new standard for convenience, one that Western consumers have never experienced before and one that no other company can currently match.

Although it is unlikely that Alipay and WeChat Pay will become mainstream in the US and Europe, it is, nevertheless, a risk that few companies can afford. Banks and payment providers need to respond with their own offering.

To find out more about regional and global e-wallets in Europe, North America, India and China and their functionalities, please check out Zooming into e-wallets – An East/West perspective infographic. The section incorporates research done

by The Paypers in an infographic mapping the 61 most prominent e-wallets today on several functionalities. The research summary and results are also enclosed.

To find out more about the way people pay in different markets, please check out Payment Methods Basic and Overview

of How People Pay in Different Markets infographic, in which we provide an overview per country with details related to some ecommerce data, the preferred payments methods and some of the best-known alternative payments methods in the selected countries. ➔

11

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus Introduction The payments methods that we use for offline and online purchases are not static. They change year by year and are influen­ ced by legislation, consumer preferences, advances in technology, innovations in customer services etc. Tracking down the factors that determine the growth of a payment method is essential for understanding how the payments landscape is and how it can be in the future.

We have looked at innovations and changes in the use of the most important payment methods across the globe. The market is brimming with payment providers and alternative payment methods providers who compete to offer seamless secure and low-cost payments options. The consumer can now choose from a large number of payment methods at the checkout, thus, finding ways of differentiating from competitors is becoming challenging. Even so, we have seen plenty of innovation and the payments landscape remains as dynamic as ever.

Credit and debit cards Cards remain the most popular non-cash-based payments in the world and their usage is growing. In emerging countries, cards have found a good ally in mobile payments. As payments interfaces like UPI in India make it easier for consumers to link their cards with their e-wallets account, card transactions are booming, especially in immature markets.

Card schemes like Mastercard and Visa have put a lot of effort towards forging important partnerships with fintechs and innovation. Visa has launched the pilot of a new dual-interface (chip- and contactless-enabled) biometric payment card with Mountain America Credit Union and Bank of Cyprus. This will be the first pilot in the US to test an on-card biometric sensor for contactless payments. Cards with embedded biometric authentication will make it easier for consumers to pay in-stores and online. According to Visa’s own research, shoppers will also prefer fingerprint authentication to chip and PIN.

Visa and Mastercard are also working on tokenisation, which will offer cards enhanced security. The idea is to hide all card details, when making a payment, behind a token (a series of numbers that encrypt the card information). In this way, card details will not be revealed during a transaction. The measure aims to make cards more secure for online shopping, a channel in which consumers are more reluctant to share their card information. Furthermore, tokenization will also solve the problem of recurring payments with card on file who cannot be processed because the card has expired and the consumer didn’t update the details.

Finally, by providing a more secure way of communicating card and payment details, tokenization can have a big impact on the way different devices can be connected and used to make payments. The Internet of Things could be the next big thing in payments and security technologies such as these could solve urgent security issues and allow users to make payments via connected devices.

Speaking of ecommerce, both Mastercard and Visa are thinking of implementing a one-payment button. This would allow online users to shop in a simple and seamless way, similarly to how they would make a PayPal payment. The project is still in early stages, but it is based on the two companies’ tokenisation technologies. ➔

12

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus In the US, the credit card market shows significant innovation. Rewards programmes of all kinds proliferate, and many credit cards have digital portals to help consumers manage purchases, debt, and account security. It also seems that physical cards are becoming less and less important as most consumers engage with financial products on their computers and mobile devices.

Prepaid cards Prepaid cards have always been a preferred payment method of (underbanked) unbanked consumers. The cards allow consumers to engage with online merchants without requiring a bank account. The convenience these cards offer is counterbalanced by high fees. Consumers have to pay the issuing fee and may have to pay a fee when they charge money to their prepaid card.

The prepaid card sector continues to grow by capitalizing on the needs of the unbanked, a category usually associated with low-income consumers but according to a study by KPMG, a large portion of those unbanked or underbanked are young adults.

Prepaid cards can appeal to a younger audience thanks to their usability and low-entry barriers. The gaming industry has quickly capitalised on prepaid cards, offering younger consumers the option to purchase games online and make in-game purchases. Prepaid cards can also feature rewards programmes, which encourage usability and customer retention.

Prepaid cards can be found within a card scheme offering such as Mastercard or Visa, but some, like paysafecard, work outside traditional credit card schemes. Consumers can purchase a paysafecard at an outlet and then use the voucher code to make purchases online. The company also offers a virtual wallet, ‘mypaysafecard’, which allows consumers to pay on ecommerce websites by entering their username and password.

E-wallets/Mobile Payments E-wallets are still in a period of proliferation; the last few years, banks, card schemes, Fintech, Big Tech, and merchants have introduced their own e-wallets. The new possibilities that e-wallets bring are appealing for several reasons: they are easily integrated on multiple devices, they are relatively easy to start using for customers, most can be used across channels, and they open the door for extensive loyalty and marketing programs.

In Europe, the most popular e-wallet has been PayPal for years, but there is increased competition from both local initiatives at a national level, such as Yoyo Wallet (UK), Lydia and Lyf pay (France), or Moneta (Poland). Furthermore, the Big Tech wallets - Apple pay, Samsung pay, and the recently relaunched Google Pay (which merged Android Pay and Google Wallet) - are making strides towards wider acceptance by merchants, integrating their services with several POS terminals. There is an abundance of choice for the European consumer, supported by banks, Fintech, Big Tech, and merchants. However, none of these e-wallets succeed in providing the consumer with a superior, all-encompassing solution, so the e-wallet landscape in Europe remains fragmented. Consequently, we see e-wallets offering extra value to consumers, which they provide by forging partnerships with large retail chains, like OK with Dutch retailers or Lyf Pay with retail giant Carrefour, or with other e-wallets and fintechs, like Google Pay and Boon. ➔

13

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus Especially in Asia we see the promise of e-wallets be fulfilled: WeChat Pay, supported by TenCent, and Alipay, supported

by Ant Financial and Alibaba, have become increasingly present and encompassing in consumer’s financial lives due to the connections to services outside of P2P or C2B payments, causing mobile payments in china to surge to CNY 81 trillion (USD 16.7 trillion). Besides offering almost complete coverage of online and offline shops in China, Alipay also offers a wide range of other financial services, such as travel booking, money market investments, insurance, and even loans, whereas WeChat pay is widely integrated in social media hosted by WeChat, and can offer merchants very targeted marketing options. Furthermore, both services offer food delivery options, tax services, bill payments, and many other services through integrated partners. This approach to e-wallets, i.e. offering an abundance of other services, has caused e-wallets to be the most popular online payment method in China.

In India, the two largest e-wallets, Paytm and Mobikwik, are also widely used, but they are far less integrated into other verticals. In the last few years, the Indian government has pushed for an increasingly cashless society, and e-wallets have profited from this trend, offering a more convenient payment option than most banks. However, e-wallets face a new competitor: Unified Payment Interfaces (UPIs). UPIs are increasingly adopted by consumers and merchants, as it is backed by the banks, allowing for direct transactions from one bank account to another. Furthermore, India is about to impose increased KYC regulations which threaten the existing non-bank e-wallets which could heavily impact the use of e-wallets, but UPIs are exempt from these regulations. November 2017 marked the first month that UPIs had a

higher transaction volume than e-wallets.

In the US, e-wallets are only used by a small portion of the population, mostly due to the preference for cash and credit cards. However, the market segment for e-wallets has been steadily increasing in the US for the past years, and several players see opportunities in the US. PayPal is the most widely used e-wallet, but it no longer stands alone at the top: it is followed by Amazon Pay and other merchant-backed wallets such as Starbucks Card and Walmart Pay. Alipay has tried to enter the US market by acquiring US money transfer company Moneygram, but was blocked by the American

Government out of concerns for national security.

Online Banking ePayments (OBeP) Online Banking ePayments (OBeP) is one of the most popular payment methods in Europe and PSD2 and instant payments may give it a big push. PSD2 makes it easier for payments providers (TPPs) to create an overlay between different banks, allowing the user to quickly authenticate and share her banking credentials to initiate payments. Furthermore, PSD2 mandates that banks have to develop APIs in order to provide a secure method for third-party providers to access the consumer’s account and initiate payments on their behalf.

The integration of instant payments infrastructure reduces settlement times from hours to seconds and enables instant settlement of refunds to consumer bank accounts, drastically improving the shopping experience. In countries like Netherlands and Germany, where OBeP is already a dominant payment method, the migration to an instant payments infrastructure will be more accelerated. ➔

14

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus In a research paper conducted by Ovum [Instant Payments and the Post PSD2 Landscape], it is estimated that by the early 2020s, instant payments will have become a mainstream method for online payments and by 2024, they would have overtaken payment cards for online purchases. In this context, we believe that instant payments will facilitate the growth of OBeP as a payment method across Europe.

These two factors (PSD2 and instant payments) make Online Banking ePayments a convenient and safe payment method that appeals to both consumers and merchants. Consumers will benefit from a superior user experience when making online purchases and merchants can instantly accept payments from different banks with one connection.

When it comes to cross-border transactions, merchants may also see OBeP as more advantageous. Instead of integrating with multiple local banks, merchants can support cross-border payments by connecting with a single provider who can handle foreign exchange and refunds. Since initiatives in Europe like PSD 2 and SCT Inst aim to create a common and unified payments infrastructure, Online Banking e-Payments may be the easiest way to connect merchants, banks and consumers.

Aided by PSD2 and the SEPA Instant Credit Transfers, OBeP has the potential to compete as an alternative payment method with credit cards.

In the US, payments providers and associations have noted the success iDeal, Trustly and Sofort. Bypassing the card networks and enabling ACH payments will reduce costs and increase competition for efficiency. Companies like Walmart and Amazon encourage the use of ACH-funded payments by providing cash rewards. If payments providers offer a convenient way to initiate Online Banking e-Payments, the effects could be disruptive for the card networks whose payments processing fees are much higher. PayWithMyBank, for example, is one of the best-known providers of ACH payments in the US.

Direct debit In Europe, subscription commerce can grow by EUR 190 billion every year, according to a study by ING. The same study found that 5% of all European consumers’ spending goes to subscription services and the potential for growth is huge.

A report from McKinsey & Company, Thinking inside the subscription box: New research on e-commerce consumers, shows that in the US, subscription for ecommerce services has grown by more than 100% a year over the past five years.

The largest such retailers generated more than USD 2.6 billion in sales in 2016, up from USD 57.0 million in 2011.

As more and more consumers shift towards subscription, direct debit may also become a more relevant payment method.

Direct debit schemes such as SEPA Direct Debit allows merchants to initiate recurring payments directly from the customer’s account. Direct debit is a great payment method for recurring payments (e.g. bill payments) or for small-value purchases. ➔

15

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus Providers of direct debit such as SlimPay, GoCardless and AcceptEasy have made accepting direct debits easier.

Instead of connecting with a bank or Direct Debit bureau (which usually involves high set-up fees and a lot of paperwork) merchants choose a direct debit provider and connect with the direct debit scheme via an API. Set-up fees are usually lower and the offering is more competitive, as different direct debit providers try to capture a bigger share of the market by charging lower fees or by providing value-added services.

Invoice and Pay Later Solutions According to the Lost in Transaction report by Paysafe invoice payments continue to be a dominant payment method in Austria (38% of Austrians now use payment by invoice, compared to just 18% using debit) and Germany (29%, compared to 20% for debit cards and 25% for credit cards. Consumers find paying by invoice to be safer, as the product has already been dispatched before payment is due and delivery is guaranteed.

In Germany, payments providers work to make paying by invoice as simple as possible. BillPay (part of Klarna), for example, only requires customers to enter their name, address and email to pay by invoice, while offering 100% payment guarantee to the merchant. RatePay, another German fintech, also offers open instalments and checkout lending solutions for ecommerce, handling the entire payment process and carrying the risk for payment default.

In recent years, we have also noticed an increasing number of start-ups offering pay later solutions Pay later options allow consumers to spread payments over a longer period of time and helps merchants convert shoppers who would otherwise be unable to make a full payment for a product or service. These credit-based instalments schemes work by either aggregating different lenders on a single platform and letting the consumer choose the most competitive credit for their purchase (Divido) or by guaranteeing the credit for the purchase (Klarna).

Pay later providers can compete with credit cards by offering added value services like convenience (with Klarna, for example, the user doesn’t have to provide payment details at the checkout), lower interest fees, faster processing times and fees (for the merchant) and increased security (pay later providers may guarantee the credit in full, thus protecting the merchant against bad credit).

Instalment plans at the checkout can help merchants differentiate from other competitors. For them, the biggest advantage is offering an additional service to the customer. It also helps with conversion as many shoppers abandon the shopping cart if the payment amount is too high.

As consumers’ appetite for credit and demand for more flexible payment option is growing, several after pay solution providers have appeared on the market. In Europe, mash, Divido, CreditClick and AfterPay are all competing for the highly lucrative Western market. In the US, Splitit, Future Pay and Affirm.

Pay later solutions are also growing in Asia Pacific, according to intelligence from GlobalData, who noticed a link between the growth of ecommerce (driven by a growing middle-class population, widespread smartphone adoption, and rising internet penetration) and demand for pay later solutions. ➔

16

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus

In China, Ant Financial is the leading provider of pay later options. In Australia, PSPs like AfterPay and zipPay, are be­coming popular. The market in New Zeeland has also seen payments providers offering instalments plans, such as PartPay, Oxipay, and Laybuy. Finally, in India, where credit card penetration is low and funding options limited, LazyPay offers paylater options to more than 250,000 customers in collaboration with major online merchants, including Zomato, Swiggy, Foodpanda, Redbus, and Faasos.

Other payments companies, like PayPal (which acquired BillMeLater) and PayU have also entered this market, capitalizing on credit lending for both retail and businesses.

It is interesting to note that many pay later providers do not stick to online commerce, but through partnerships, move to offline retail. Such examples include the partnership between mash and Verifone or Klarna and Nets, which allows users to pay by instalments at the POS. Also, of note is the launch of Mastercard Instalments, in partnership with BRD, which is an example of pay later solutions suited for offline purchases and one designed by a card scheme.

Improvements in machine learning technology can be beneficial for pay later plans as it allows lenders to accurately determine the creditworthiness of the applicant. Using artificial intelligence, lenders can perform background checks faster and approve loans at a lower-risk. Artificial intelligence may also lower entry-barriers for those who do not have a good credit score. As financing becomes easier and more secure, lenders will be more interested in joining pay later schemes to reach more and more consumers.

Cash With the emergence of new technologies, the use of cash is considerably impacted, as more and more payment methods lead to the displacement of coins and notes across the globe. According to Euromonitor International, 2016 was the first year in which we witnessed cash being dethroned, as the amount of money spent with cards was for the first time higher than the amount spent with cash. The payment world is digitising, and banks are closing branches at the fastest pace in decades; 1700 banks branches were closed in only one year in the US. Despite the enthusiastic uptake of electronic payments, 1.7 billion adults are still operating outside the traditional banking system, close to 40 million in the EU alone, being either unbanked or underbanked. There are people that have basic accounts (checking or savings), but they rely on alternative financial services providers to handle their day-to-day transactions. Some have all of the standard financial services products, but they prefer to pay with cash for various reasons.

According to a report by the European Central Bank (ECB), cash is still used in 79% of all transactions, amounting to 54% of the total value of all payments. The demand for cash is also growing - the value of euro banknotes in circulation has increased by 4.9% over the last five years, according to the European Central Bank. ➔

17

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus Even though there are many endeavours towards a cashless society, we are starting to witness the emergence of online cash payment options (Paysafe with Paysafecash, YesByCash, BSPayone – Barzahlen.de, Cashly and more. Given the low operational costs of kiosks, companies are increasingly looking to implement them to their businesses. Cash payments are also popular for gaming (PayNearMe), offering an affordable and convenient way for players to fund their online gaming accounts with cash. The ability to load accounts with cash at a retail store seems a major draw not just for customers without access to credit cards or a checking account, but also for customers who simply prefer to fund their accounts with cash.

Some markets are already much closer to going cashless. In Sweden, consumers already pay for 80% of transactions using something other than cash, in the Netherlands 55%, in Finland 46% and in Belgium 37%. Britons use digital payments in 60% of all transactions, 33% of them stating they rarely use cash. In Sweden, Riksbank predicts that cash transactions will make up less than 0.5% of the value of all payments made in the country in 2020. Even more than that, 900 of 1,600 Swedish bank branches do not store any cash, and some of them do not even have an ATM. South Korea is targeting to go coinless in 2020.

The cashless trend is not following the same route in other technologically and economically powerful countries, such as Germany. 53% of German transactions as of 2017 were still made with cash. One possible explanation for the reason why Germans still prefer cash to other payment methods is related to the socio-demographic situation. The number of older people prevails in Germany, and older people are sticking to their old payment habits. The explanation stems for the country’s traumatic past, the collapses of its currency in the past, and a general pessimism about the future.

Despite local preferences for cash and the use of cash-based payments in certain cases, there are some clear signals that we are heading towards a future with less cash, instant payments are on the rise (since November 2017, when the European Instant Payments initiative went live, it has become possible to transfer euro amounts in less than ten seconds), cards will lose market share in the coming years, voicebots are opening up new ways for merchants to connect with customers, and cash is expensive (according to Mastercard, printing and distributing cash can imply high costs for national economies, of up to 1.5% of GDP).

Direct carrier billing In 2018, the number of mobile phone users is expected to reach almost 5 billion. With more mobile phones than credit cards worldwide, a simple checkout flow and a bigger payments coverage, direct carrier billing (DCB) is a payment method that in emerging markets is almost often the only way one can purchase online. Emerging markets represent over 40% of the global DCB, generating app-store conversion rates about five times higher than credit cards. Ovum, in “Carrier Billing Global Market Trends and Forecasts”, 2015, forecasts that DCB revenues will increase to USD 24.7 billion in 2019, from USD 14.5 in 2014. ➔

18

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus In emerging markets, but also in some economically powerful countries like South Korea, a variety of purchases can be billed on a mobile phone. In Norway, DCB is the second most popular payment method for digital gaming, while in the other Nordic countries carrier billing has a 10-21% market share from digital content payments. The popularity of carrier billing is attributed to its more user-friendly payment experience: consumers do not need to sign in or create additional accounts to make payments, nor do they need to share their personal data online.

However, even with the advantage of a one-click payment flow for the user and a wide coverage, there are a few obstacles when considering implementing this method: large transactional fees that are charged to the merchant whenever a customer uses DCB, Mobile Network operators (MNO) that charge app retailers, the average price of just-intime purchase of minutes, regulatory constraints, the complex DCB ecosystem in emerging economies. PSD2 is seeing single DCB transactions being capped to a maximum of EUR 50 per transaction, with a maximum monthly limit of EUR 300, and will continue to allow electronic money institutions to extend the scope of DCB from digital content to the purchase of physical goods.

Nevertheless, we continue to witness a growth of DCB in premium rated services: subscription-based content models, charity donations, TV voting, and competitions. For the subscription-based model, DCB as a payment method registers an increase: according to Juniper Research, the value of digital content transactions paid for by carrier billing is expected to reach USD 47 billion by 2020, more than 4 times 2015’s figure of just under USD 11.3 billion.

Despite its wide adoption, this payment method has yet to realise its full potential. In Europe, its growth was constrained by a regulatory structure that was originally conceived with a limited vision of the utility of DCB. The new e-Money based version of DCB (eDCB) removes these regulatory constraints and paves the way for the accelerated growth of this form of payment.

Cryptocurrencies Cryptocurrencies are not yet among the world’s payment trends but, despite the lack of usability, the number of payments made using cryptocurrencies is consistently on the rise. Currently, there are over 1,000 cryptocurrencies available across the globe, with over 150 billion dollars in market capitalisation, 10,000% up compared to where the figure stood in 2016.

The current number of unique active users of cryptocurrency wallets is estimated to be between 2.9 million and 5.8 million.

Big companies, such as Microsoft, PayPal, SubWay, Expedia, just to name a few, have started accepting Bitcoin, while others, like WordPress, WooCommerce, Shopify, or Magento, let customers use plugins to integrate Bitcoin payments.

Although Bitcoin remains the dominant cryptocurrency, others are increasingly cutting into Bitcoin’s dominant market cap share. While Bitcoin’s market capitalisation accounted for 86% of the total cryptocurrency market in March 2015, it has dropped to 72% as of March 2017. The most spectacular growth of a cryptocurrency in 2017 was that of Ripple’ XRP, which has grown more than 35,000% in just one year. Ether (ETH), the Ethereum network’s native cryptocurrency, has established itself as the second-largest cryptocurrency. Dash and monero (XMR), increasingly popular in 2017 when it constituted a combined 4% of the total cryptocurrency market capitalisation, have experienced a decrease in terms of price. ➔

19

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus The decrease was witnessed in the case of other cryptocurrencies as well, starting with January-February 2018, due to the fact that governments and central banks around the world raised the spectre of future regulation for the cryptocurrencies space, Google banned cryptocurrency advertising and studies suggested the 2017 highs were artificially inflated (especially for Bitcoin).

What makes cryptocurrencies highly affordable compared to other payment methods is lower transaction fees (between USD 0.30 to USD 1.00 for Bitcoin). The nature of cryptocurrencies’ protocol makes each transaction final. Once the payment has been made, a customer cannot cancel the transfer. This situation keeps businesses safe against suffering from chargebacks. The entire money transfer process usually takes a maximum of 10 minutes, depending on the confirmation from the blockchain. While traditional payment methods depend on third-party companies and banks (and transactions can take up to a few days), for cryptocurrency transactions there is no financial institution acting as an intermediary.

The advantage of a rapid money transfer process for cryptocurrencies is currently challenged by instant payments, whose transactions take just a few seconds. Another important benefit is related to the fact that there is no risk of sensitive information being compromised with a cryptocurrency transaction, because none of the customer’s information is attached to it.

The most cited risks of cryptocurrencies are in terms of stability of the platforms supporting them, fluctuation in price, and cyber-threats like theft, hacking and loss. Cryptocurrencies are perceived as being too volatile for everyday transactions and difficult for consumers to use. The average consumer would feel uncomfortable paying today with a currency that could have a much greater purchasing power tomorrow. Likewise, the average grocer would be at a disadvantage due to the potential for the currency collected to worth less than the cost of goods sold. The association between the use of cryptocurrencies and illegal activities such as money laundering is another risk given by cryptocurrencies, which led to the prohibition of their use in certain countries. In addition, it is worth mentioning the fact that the emergence of technologies such as quantum computing could threaten the existence of established blockchains and, therefore, that of cryptocurrencies.

Cryptocurrencies could prove efficient in countries with a low access to financial services or in countries where credit cards register high decline rates. High decline rates are a result of the fact that all of the major credit card companies have complex anti-fraud monitoring programmes, especially in countries like Mexico, India, Brazil, the UAE, and other areas where there is a higher incidence of fraud. According to Sonny Singh, BitPay’s Chief Commercial Officer, cryptocurrency is an ideal payment method for ecommerce, in industries like technology, electronics and jewelry where there is a high risk of chargebacks, fraud and identity theft. Cryptocurrencies could also make sense in travel, as there is no currency conversion.

As Sonny Singh mentions, gaming is another hot industry for cryptocurrency spending, a high growth of the usage being forecasted in this case. Geographically speaking, Bitcoin is mostly used across North America and Europe, with a growth in LATAM and APAC countries. ➔

20

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus Sources: WorldPay, Global Payments Report 2017 https://www.worldpay.com/global/insight/articles/2017-11/global-payments-report-2017 Capgemini, BNP Paribas, World Payments Report 2017 https://www.worldpaymentsreport.com/download Preparing for UPI 2.0 – Why merchants will be the biggest winners by Abhishek Banerjee https://www.thepaypers.com/thought-leader-insights/preparing-for-upi-2-0-why-merchants-will-be-the-biggestwinners/773409 The anatomy of a good API – How to connect banks, TPPs and consumers by Ralf Ohlhausen https://www.thepaypers.com/interviews/the-anatomy-of-a-good-api-how-to-connect-banks-tpps-andconsumers/773100-38 The renaissance of the Automated Clearing House in the US by Alexandre Gonthier https://www.thepaypers.com/expert-opinion/the-renaissance-of-the-automated-clearing-house-in-the-us/770148 Ovum, Instant Payments and the Post PSD2 Landscape https://ovum.informa.com/resources/product-content/instant-payments-and-the-post-psd2-landscape Paysafe, Lost in Transaction Report https://www.paysafe.com/lostintransaction/ The use of cash by households in the euro area, European Central Bank, November 2017 The unstoppable rise of the Chinese traveller – where are they going and what does it mean for overtourism? https://www.telegraph.co.uk/travel/comment/rise-of-the-chinese-tourist/ UK Payment Markets, 2017, UK Finance Banks Shutter 1,700 Branches in Fastest Decline on Record, The Wall Street Journal (https://www.wsj.com/articles/banks-double-down-on-branch-cutbacks-1517826601) 1.7 billion Adults Worldwide do not Have Access to a Bank Account, The Wall Street Journal (https://www.forbes.com/sites/niallmccarthy/2018/06/08/1-7-billion-adults-worldwide-do-not-have-access-to-a-bankaccount-infographic/#2bfab6594b01)

➔

21

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus Close to 40 million EU citizens outside banking mainstream, WSBI (https://www.wsbi-esbg.org/press/latest-news/Pages/Close-to-40-million-EU-citizens-outside-banking-mainstream. aspx) Why Europe still needs cash, European Central Bank (https://www.ecb.europa.eu/press/key/date/2017/html/ecb.sp170428.en.html) Emptying the tills. Some Europeans are more attached to notes and coins than others, The Economist (https://www.economist.com/finance-and-economics/2016/08/11/emptying-the-tills) Why Sweden is close to becoming a cashless economy, BBC News (https://www.bbc.com/news/business-41095004) Sweden leads the race to become cashless society, The Guardian (https://www.theguardian.com/business/2016/jun/04/sweden-cashless-society-cards-phone-apps-leading-europe) South Korea can offer roadmap to cashless Asia, Reuters (https://uk.reuters.com/article/us-south-korea-cash-breakingviews-idUKKBN13R0OT) Cash remains the most favoured means of payment, Deutsche Bundesbank Eurosystem (https://www.bundesbank.de/Redaktion/EN/Topics/2018/2018_02_14_zahlungsverhalten.html) Five global indicators that we are heading towards a cashless future, Worldline (https://worldline.com/en/home/newsroom/press-releases-general/2018/pr-2018_06_04_01.html) The Global Journey from Cash to Cashless, Mastercard (https://www1.mastercard.com/content/intelligence/en/research/reports/2013/mastercard-advisors-cashless-journey-the-global-journey-from-ca.html) Number of mobile phone users worldwide from 2013 to 2019 (in billions), Statista (https://www.statista.com/statistics/274774/forecast-of-mobile-phone-users-worldwide/) Operator share of content market plummets, direct carrier billing offers $13bn revenue by 2017, Juniper Research (https://www.juniperresearch.com/press-release/content-business-model-pr1) Carrier Billing Global Market Trends and Forecasts, Ovum, 2015

âž”

22

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

(Alternative) Payment Methods in Focus Carrier billing in the Nordics: 2017 Market Report, Fortumo Operators eye content revenues as billing opportunity reaches $47 billion by 2020, Juniper Research (https://www.juniperresearch.com/press/press-releases/operators-eye-content-revenues-as-billing) The Future of Direct Carrier Billing in Europe and e-Money, Boku Germany is still obsessed with cash, Bloomberg (https://www.bloomberg.com/news/features/2018-02-06/germany-is-still-obsessed-with-cash) Global cryptocurrency benchmarking study, University of Cambridge, 2017 (https://www.jbs.cam.ac.uk/fileadmin/user_ upload/research/centres/alternative-finance/downloads/2017-global-cryptocurrency-benchmarking-study.pdf) https://coinmarketcap.com/all/views/all/ https://www.coindesk.com/ https://cointelegraph.com/tags/dash Online Payments in China – A Guide for Foreign Companies, Nanjing Marketing Group https://www.nanjingmarketinggroup.com/blog/china-online-payments Indian e-wallets are gasping for breath, Quartz https://qz.com/1218913/paytm-and-mobikwik-among-e-wallets-struggling-to-weather-the-kyc-storm/ The US Government blocks MoneyGram’s $1.2B sale to Alibaba’s Ant Financial, TechCrunch https://techcrunch.com/2018/01/02/moneygram-ant-financial-alibaba-deal-collapses/

23

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

ACI Worldwide What Are the True Benefits of Real-Time Payments for Merchants?

Real-time payments (RTP), often also referred to as instant,

The RTP cost-cutting opportunity

immediate or faster payments, is one of the hottest topics in

The ability to deliver payments back to customers in real-time has

the payments ecosystem, as both banks and merchants look to

advantages in several areas, not least in improving the process

match their services to customer demand and expectations.

around reverse logistics in digital commerce, for example. RTP should also be more cost-efficient than processing refunds

The rollout of an RTP infrastructure from banking and payments

back through the cards networks, delivering cost savings for

organisations is driving a change in attitudes across the merchant

merchants. In addition, there is potential for merchants to reduce

community. Our recent research study with Ovum , where

card acceptance costs more broadly, effectively by cutting out

we explored the payments investment choices of merchants

the middleman.

globally, supports this perception shift, with 65% of merchants now being interested in accepting RTP - up from 57% in 2017.

RTP can also be expected to deliver operational and cost saving benefits from risk reduction, through a drop in fraud and

Real-time customer experience benefits

chargebacks in online channels – a benefit which merchants

While consumers certainly want fast, frictionless payment

across all sectors will welcome.

options, real-time payments can deliver more customer benefits than just the ability to transfer money instantly. RTP can offer the

Beyond the realm of consumer payments, merchants may also

opportunity for consumers to streamline their physical wallets,

be able to use RTP to improve cash flow management, negotiate

move to mobile and take better control of their finances. 78% of

more favourable terms with suppliers and pay short-term or

merchants now believe that RTP will deliver customer experience

temporary workers more easily - a bonus that may be helpful

improvements, up from 59% in 2017.

during peak trading periods.

A real-time payments infrastructure can significantly improve

Given all the above, it is not surprising to see that 78% of

the experience of refunds and disbursements – a continuing

merchants now believe RTP will deliver operational cost-savings

problem area for consumers and merchants alike, with card

up from 57% in 2017. ➔

refunds usually taking at least a few days to process and clear.

It is perhaps unsurprising that businesses in the retail and telecoms verticals – areas in which refunds can be particularly sensitive and costly – are the most positive about RTP, with 82% of retailers and 80% of telecom companies seeing the potential to leverage real-time payments to deliver enhancements for their customers.

In countries where the banking and payments infrastructure is under-supported, RTP may offer a useful additional payments option for consumers. In our survey , merchants in Asia were the most positive about real-time payments, particularly in India, Malaysia and Thailand, where more than 90% believe that RTP holds the key to improving the customer payments experience.

24

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

ACI Worldwide Key considerations for merchants implementing RTP It is clear from the Ovum/ACI survey that merchants increasingly

Dean Wallace

recognise the many direct operational benefits they can enjoy

Practice Lead Real-Time and

through real-time payments, as well as the potential for RTP to

Digital Payments

unlock customer service enhancements. As RTP gathers pace

ACI Worldwide

around the world, merchants must ensure they have the right pro­cessing capabilities in place to take advantage of the oppor­ tunities. For some, this may involve amending development roadmaps or seeking new functionality from their payment pro­

About Dean Wallace: Dean is an avid emerging

viders, while others will need to look to their banking and/or

payments enthusiast specialising in real-time &

acquiring partners to unlock the benefits.

digital payments. At ACI, Dean has held various product leadership roles covering Cards front and back-office functions, Mobile payments, Real-Time & Digital Payments and Enterprise Payments Hub solutions. Prior to ACI, Dean has held a number of roles with VocaLink, TSYS, and IBM. About ACI Worldwide: ACI, the Universal Pay­ ments UP) company, powers electronic payments or more than 5,100 organisations around the world.

More than 1,000 of the largest financial in­sti­tu­ tions and intermediaries, as well as thousands of

Perceived benefits of RTP by merchants Source: ACI Worldwide & Ovum 2018

global merchants, rely on ACI to execute USD 14 trillion each day in payments and securities.

In addition, myriad organisations utilise our elec­ tronic bill presentment and payment Services.

Download your free copy of the ACI and Ovum 2018

Through our comprehensive suite of software

Survey on the Payments Investment Choices of

solutions delivered on customers’ premises or

Merchants Around the Globe.

through ACI’s private cloud, we provide real-time, immediate payments capabilities and enable the industry’s most complete omnichannel payments experience. www.aciworldwide.com Share this story

25

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

Trustly Capitalising on Cross-Border Ecommerce with Online Bank Payments Ecommerce in Europe is thriving, and as consumers hunt for

the next five years, the popularity of online bank payments will

cheaper options, specific brands and more unique items, they are

exceed that of credit and debit cards globally. Because of the high

increasingly turning abroad. In fact, of the 260 million Europeans

cross-border ecommerce from markets like the Nordics, Germany,

who shop online, 186 million do so from foreign websites,

and Poland, which show a great preference for online bank

according to E-Commerce in Europe 2017, a report produced

payments, retailers that don’t offer localised payment methods

by European postal service PostNord. This is good news for

could lose out on cross-border sales. So what’s driving the

online retailers, but also poses a major challenge. A retailer might

adoption of alternative payment methods, and specifically online

be able to get away with an online checkout that only offers card

bank payments? Below are four main factors:

payments if their shoppers are only from the UK, where cards are the dominant payment method. However, retailers must offer

Security

alternative payment methods if they want to cater to shoppers

At Trustly, we conducted a survey on The State of Online Banking

from other European markets, where cards aren’t always the

with research firm NEPA that revealed consumer attitudes towards

preferred payment method. Below are graphs showing how

banks and bank transfers. It revealed that many Europeans (68%

consumers in different European markets prefer to pay online,

of Spaniards, 66% of Italians, 61% of French, 55% of Germans,

according to data from PostNord. You can see that while some

55% of Dutch, 51% of Swedes) agree that they’d be more likely

markets have a high preference for debit and credit cards, others

to shop from international websites if they didn’t have to give out

prefer alternative payment methods like e-wallets, invoice, and

credit or debit card numbers to unknown foreign merchants. They

online bank payments.

go on to agree that they’d be more likely to shop on foreign sites if online banking was offered more often as a payment method (59% of Spaniards, 59% of Italians, 55% of Dutch, 47% of French, 44% of Germans, 35% of Swedes).With online bank payments, strong two-factor authentication is required, so the risk of fraud is virtually zero. When this payment method is offered, consumers feel safe shopping abroad because they don’t risk compromising their card details.

Convenience The convenience of alternative payments is increasing, and not surprisingly, this is driven by innovation and technology. In Sweden, for example, Mobile BankID is a secure app that lets consumers authenticate themselves with just a few taps and is widely used by banks and government organisations alike. Similarly, in the UK, Barclays is making it easy for its users to verify themselves via PIN­ sentry. As digital authentication methods become more main­stream in other markets, it seems natural that online bank payments will Of course, these payment preferences aren’t static. According

grow in popularity due to the increased convenience. On top of that,

to Worldpay’s Global Payments Report 2017, more than half

when paying with cards, consumers need to enter a long string of

of all online transactions will be made using alternative payment

numbers; with online bank payments, they only need their log-in

methods by 2021. The report even goes as far as to say that over

credentials to their online bank, which most know by heart. ➔

26

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

Trustly In contrast to e-wallets like PayPal, online bank payments don’t require registering a separate account, just access to one’s online

Luke Flomo

bank.

Head of e-Commerce Trustly

Simplified returns Returns are a substantial resource drain for online retailers.

Customers often order several sizes of one item to try on at home before deciding which to keep, resulting in a high return rate.

This cre­ates logistical and payment complexities, which ultimately

About Luke Flomo: Luke is a payments expert,

eat into margins and frustrate customers. However, a great returns

bringing a wealth of knowledge with his 12 years

experience can also enhance their brand and build customer

of experience in the industry. He has worked for

loyalty, thus optimising this trade-off is vital for a customer-first,

the likes of Barclaycard, WorldPay and, more

fast-growing online retailer. An online bank payment provider

recently, Klarna, where he headed up the Sales

like Trustly can help retailers simplify the administrative hassle

and Partner channel.

and reduce the cost of processing refunds with instant refunds.

Customers also love instant refunds because they receive funds

About Trustly: Trustly is a Swedish fintech

directly into their bank account, allowing them to purchase

company that makes online bank payments fast,

more goods straightaway instead of waiting days or even weeks

simple and secure. Today, it covers 29 European

to receive their money. One large Nordic online retailer that

countries and its payment solutions attract global

implemented Trustly’s instant refunds saw that its customers

merchants in ecommerce, travel, financial services

had 55% larger basket sizes and made 84% more purchases in

and more. As of November 2017, the company

the past 12 months. Overall, this equaled 185% more spend on

had processed more than EUR 10 billion worth of

goods when using Trustly.

payments since its inception in 2008.

Regulation

www.trustly.com

Online bank payments align closely with PSD2, the legislation now being adopted across the EU that aims to drive innovation, foster competition, increase security and reduce costs for con­ sumers.Banks are encouraged to create APIs that let third-party payment providers access consumer bank accounts on their behalf and initiate bank payments. As PSD2 now requires all online payments to carry two-factor authentication, it is adding friction to the card experience, while simultaneously simplifying the online bank payment experience for consumers. These factors combined are likely to further drive adoption of online bank pay­ ments. So as consumer payment preferences shift away from

Share this story

cards and toward alternative payment methods, online retailers that offer these innovative methods can streamline the ecommerce experience and boost conversion in the checkout.

27

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

Trustly Type of payment method

Online bank payments

Active since

2008

Operational Area

Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom

Industries

Ecommerce, travel, financial services, digital goods, subscriptions, online gaming

How it works

You can pay with Trustly in 3 simple steps: 1. Select your bank and log in as you normally do. 2. Choose the account from which you wish to pay. 3. Confirm your payment with your preferred authentication method.

Potential reach

All banked consumers across Europe

Market Share

NA

Acceptance

NA

Chargeback Risk

None

Facts

In 2018, Trusty was recognised by the Financial Times as one of Europe’s 1000 fastest growing companies. It also won Best Payments Company at the EGR B2B Gaming Awards.

Settlement currency

EUR, SEK, NOK, DKK, GBP, PLN

Processing currrency

EUR, SEK, NOK, DKK, GBP, PLN

Currency available for consumer

EUR, SEK, NOK, DKK, GBP, PLN

Transaction volume

Over EUR 10 billion since founding

Implementation requirements (non technical)

API manual online, designated integration support, plugins for web shops

Reconciliation

Reconciliation information (web)

Pricing

Per transaction percentage and/or fixed fee, which varies depending on volume

Channels (POS/ecommerce)

Online

For the complete company profile please click here

28

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

Klarna The Moment Is Now for Pay Later These days, online shoppers have more payment options to choose

The flip side of this excitement is lows caused by anxiety and guilt,

from during the checkout, alongside the usual card options.

with 52% of millennials saying they worry that they can’t afford the

Klarna’s Pay later - which has been adopted by the likes of ASOS,

purchase during checkout. One in five millennials has abandoned

Arcadia Group and JD Sports - lets customers pay for their items

a purchase due to worries that they will regret it later.

up to 30 days after they’ve received their delivery.

Solutions like Pay later are the perfect antidote to these cold feet Pay later is our flagship product here at Klarna. By introducing

- with 20% of millennials saying they would feel less guilty if they

this option to the UK market, we’ve helped fix one of the age-old

were offered deferred payment options, and one in five would be

problems around online shopping: customers not wanting to part

more likely to complete a purchase if they knew they could spread

with their money until they’re sure the goods are as described

the cost over time. It’s vital that merchants offer these choices

and right for them. That makes Pay later really beneficial for

at the checkout, so shoppers can be reassured a transaction is

consumers, who are able to try before they buy, and don’t face

achievable and risk-free.

the cash flow issues of having to wait for items they’ve returned, to be refunded. In turn, merchants benefit from increased sales,

The domino effect

greater customer loyalty and competitive differentiation.

A second important factor to consider when looking at the growth of Pay later is the sector in which it is most popular - fashion.

In fact, with Klarna’s Pay later, retailers have been able to increase

The retail sector is notoriously competitive, and consumers are

average basket size by 20% and basket value by 15%. Pay later

increasingly fickle. Shoppers have many options to choose from,

has also been proven to improve shopper purchase frequency by

so if they’re not getting an optimised service or user experience

20%. But let’s dive deeper into why Pay later is such a popular

from one merchant, they will simply go elsewhere.

choice for consumers - why do shoppers love it?

That’s why retailers need to keep a close eye on what their com­

Emotional ecommerce

pe­­­­titors are doing, and what their customers want. By letting

As the online shopping industry has developed, retailers have

shoppers turn their sitting rooms into fitting rooms retailers put

had to become increasingly attuned to customers’ needs to stay

the customer in control and ulti­mately create a deeper brand

ahead. Unsurprisingly, there’s a huge amount of psychological

relationship. And once one merchant sees that Pay later yields

and emotional factors at play in the average consumer’s shopping

big dividends, it creates a domino effect - with other retailers

journey. Research we conducted with Reading University showed

integrating the same service to avoid falling behind. When it

the traditional linear customer journey is now more akin to a roller­

comes to retail innovation, fortune favours first-movers.

coaster, marked by highs and lows of emotion. This is especially true of millennials, who make up the largest percentage of online

A payments revolution

shoppers.

Finally, it’s also worth taking note of the wider financial context in which Pay later is being used. The past decade has seen huge

Separately, consumer research we conducted showed that two

innovation in the payments sector, largely driven by new technology

thirds (68%) of millennials reported feeling excited when adding

and players who have turned the financial services industry on its

items to their online basket, compared to less than a quarter

head. ➔

(24%) of people over 55.

29

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

Klarna Ten years ago, consumers were limited to cash and cards, most of which were provided by the Big Four. Fast forward to today,

Luke Griffiths

and we have more choice than ever before: from contactless to

General Manager

cryptocurrencies, and everything in between. UK consumers have

Klarna UK

been especially open and quick to adopt these new methods particularly when compared to other European markets like Germany or Italy. So it’s not surprising that solutions like Klarna’s Pay later have been well-received, and have been added to the

About Luke Griffiths: Luke Griffiths heads up

consumers’ payments arsenal.

the UK division of Klarna, where he oversees However, there’s still work to do. Payment is still a sticking point

Klarna’s expansion in the market by introducing

for many consumers, and emotional factors can cause hesitation

innovative products - such as Pay later - which

at the checkout - perhaps the most important step in the online

simplify the payments process. With over 15

customer journey. Offering a fast and convenient checkout with

years’ experience in management and digital

flexible payment options is key to winning sales and customer

marketing, Luke previously held roles at eBay

loyalty.

and Wyndham Worldwide. He also has extensive international experience, building and growing businesses across the EMEA region.

About Klarna: It’s all about smoooth (yes, with 3 ooo’s). Klarna is Europe’s leading payments provider and a newly-licensed bank, which wants to smooothen the payment experience by giving shoppers the option to pay now, pay later or over time. Klarna works with 89,000 merchants, including ASOS, Topshop and JD Sports in the UK, across Europe and North America. www.klarna.com

Share this story

30

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

Klarna Type of payment method

Pay now, Pay later and Slice it

Active since

2005

Operational Area

Europe and the US

Industries

All retail

How it works

It’s all about smoooth (yes, with 3 ooo’s). Klarna is one of Europe’s leading payments providers and a newly-licensed bank, which wants to revolutionise the payment experience for shoppers and merchants alike. Founded in Stockholm, Sweden, in 2005, the fintech unicorn gives online consumers the option to pay now, pay later or over time – offering a trusted, frictionless and smoooth purchase experience.

With Klarna’s mobile-optimised online checkout shoppers can pay immediately via card, APM or online bank transfer (Sofort). Pay later, Klarna’s flagship product, lets shoppers buy goods and pay for them up to 30 days later. And with Slice it - Klarna’s consumer finance solution - shoppers can pay for higher-ticket items in flexible monthly installments, with an easy application process and real-time decisioning.

Potential reach

In 2017, 19 million shoppers used Klarna

Market Share

Klarna works with 89,000 merchants

Chargeback Risk

No risk

Settlement currency

Same as processing

Currency available for consumer

GBP, EUR, USD + others

Implementation requirements (non technical)

Local entity and bank account required

Channels (POS/ecommerce)

Ecommerce

For the complete company profile please click here

31

PAYMENT METHODS REPORT 2018

•

(Alternative) Payment Methods in Focus

Don’t Miss the Opportunity of Being Part of Large-Scale Payments Industry Overviews Once a year, The Paypers releases four large-scale industry overviews covering the latest trends, developments, disruptive innovations and challenges that define the global online/mobile payments, e-invoicing, B2B payments, ecommerce and web fraud prevention & digital identity space. Industry consultants, policy makers, service providers, merchants from all over the world share their views and expertise on different key topics within the industry. Listings and advertorial options are also part of the Guides for the purpose of ensuring effective company exposure at a global level.

Open Banking & APIs Report 2017 A new era of innovation in banking

Open Banking and APIs

B2B Fintech: Payments, Supply Chain Finance & E-invoicing

Online Payments and Ecommerce

Web Fraud Prevention & Online Authentication

For the latest edition, please check the Reports section

Zooming into e-wallets An East / West perspective

E-Wallets in Focus The term ‘wallet’ or ‘e-wallet’ is ill-defined. Some define an e-wallet as the digital equivalent of the ‘leather wrapper’ around all your cards and other content in your physical wallet. Others refer to e-wallet as being a stored-value account for e-money, a license being required for the latter.

In this report, we define an e-wallet as a digital tool (software or app) for consumers to store their payment methods. It stores credentials of (among others) debit cards, credit cards, and alternative payment methods. Some e-wallets also store loyalty programmes.

An e-wallet allows someone to make electronic transactions with an improved checkout and payment experience online, compared to keying in all payment credentials every time a purchase is done. Wallets can function in online and physical stores.

E-wallet providers Providers of an e-wallet are: •B anks, who connect their wallets to a bank account and cards, e.g. Chasepay in the US, Paylib in France, Pay by Bank App in the UK, Vipps in Norway, and MobilePay in Denmark; • Card schemes, offering their own e-wallet solution, e.g. Visa Checkout and Masterpass; •F intechs, either independently or in collaboration, that offer a wide variety of services and e-wallets, like SEQR, which tries to attract customers by offering special deals to users of the e-wallet, or Yoyo Wallet in the UK, which adds a layer of loyalty programmes to their wallet. Sometimes these e-wallets are more suited to a specific vertical, like MuchBetter is to the gaming industry; • Big Tech companies that have their own mobile e-wallets, the so-called ‘Pays’; Apple Pay, Android Pay, Samsung Pay, and Google Pay. These companies have the ambition to integrate mobile into the payment behaviour of consumers, but still struggle to add enough value for consumers to make the switch to e-wallets. To aid this, the Pays make efforts to add loyalty and marketing programs for consumers. In Asia, there is Alipay, an e-wallet belonging to Alibaba, which enjoys huge popularity throughout the continent. In China specifically, the e-wallet developed by the social networking site WeChat, WeChat Pay, is very popular due to ease of integration into the full range of transactions most people make, from groceries to paying bills; • B ig merchants, like Starbucks, which add a lot of value and offer convenient payment options in their stores for adopters of their mobile e-wallets. These wallets do not expand into other stores currently, but are very popular, especially in the US, spearheaded by wallets such as Walmart Pay and Kohl’s Pay. ➔

34

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

E-Wallets in Focus Last year in e-wallets Globally, China seems to be far ahead of the pack when it comes to e-wallets. This is exemplified by the gigantic Alipay and WeChat Pay, who succeed in combining social networks with ecommerce and financial services. They built their e-wallets from a need for a reliable and convenient payment infrastructure that most of the population lacked at the time.

These two e-wallets did not come directly from the fintech industry, but rather from an ecommerce retailer (Alibaba) and a social network (WeChat), who designed their wallets to suit the ecommerce and social platform that they appeared on.

Similarly, in India e-wallets are widely accepted and the market is mostly determined by the two largest e-wallets: Mobikwik and Paytm. The growth of e-wallets was further aided by the governmental ban on cash, causing consumers to switch completely to digital transactions. However, in the last year, e-wallets have been losing ground to the newly popular

Unified Payment Interfaces (UPIs), which prove even more useful than e-wallets for most consumers.

In Europe, the landscape is far more homogeneous and offers a multitude of additional challenges. By introducing contact­less card payments, banks have put e-wallets that present themselves as simply a convenient way to pay in a difficult position; in-store, it is hard to compete with the ease-of-use of a contactless card payment, and online, merchants offer their

returning customers card on file (one-click payments), rendering the convenience of e-wallets no longer a decisive factor for consumer adoption.

Therefore, e-wallets have started to adopt several secondary functions in their service; an increasing number of e-wallets now offer marketing options for merchants, driving the acceptance rate of their e-wallets, and loyalty options to consumers, driving the adoption. Prime examples of this are Lyf Pay in France, which partnered with Carrefour to offer a solution that could be used both in-store as well as online at most locations of the retail giant. OK in the Netherlands aims to do the same, with the support of more than 100 retailers across the nation.

Big Tech is also slowly entering Europe: Apple Pay, Samsung Pay, and Google Pay are all still in the process of rolling out to Europe, so it still remains to be seen if and how the acceptance of these e-wallets will take shape, but the Pays are working to include an increasing number of marketing and loyalty options into their platforms to attract more customers.

There is one large merchant-based e-wallet in Europe: Amazon Pay. Amazon Pay is active in 26 European countries, but its use is most often limited to the Amazon web store. However, this can be enough to be a major player in the online e-wallet ecosystem: in Germany, 1% of all online transactions are made through Amazon Pay because Amazon banned

all other e-wallets (but not other payment methods) from the German version of the website.

In the US, e-wallets are mostly driven by the retail sector. Starbucks Wallet is the most widely adopted e-wallet in the US, but its use for consumers is relatively limited; one can only use it to pay in a Starbucks shop. Other retailers, such as Walmart, offer the same: a payment option for both their banked and underbanked customers, only usable in their own stores, meant as an alternative to coupons or customer cards. âž”

35

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

E-Wallets in Focus In conclusion, e-wallets are moving towards offering a wider variety of added value to engage customers and merchants.

When this is done effectively, like in Asia, this can result in tremendous success. However, in more challenging environments e-wallets struggle to gain reach and adoption, especially without partners. The world is brimming with e-wallets that come up with new ways to add value and find the best partnership to successfully be adopted into the payment landscape.

The infographics The Paypers conducted another round of research into the e-wallet landscape globally, which produced a new summary of the e-wallets in 2018. From these results, two infographics were created to further visualise what the ecosystem looks like currently and how players relate to each other in terms of their presence globally and their offering.

The following elements were researched for every e-wallet in the report:

Variable

Description

Platform: Dependent / Independent

A platform dependent e-wallet is only offered on a specific platform (e.g.

Apple, Android, or Samsung). A platform-independent e-wallet runs on several different devices.

Business model: Transactiondriven / Data-driven

Whether the business model of the provider is primarily based upon transactions or on data.

Scope: Payment / Payment + Marketing and Loyalty

The scope of a company is based on how broad the services that they offer are. In this paper, we distinguish between companies that only provide payment services, and companies that also provide marketing and loyalty services.

Context: In-store / Online and Mobile / Bills / Print and TV

The context in which a consumer can pay with the e-wallet. Whether this is only in store, or online or mobile, whether they can pay returning payments, and if they can purchase products from print, like flyers, or television.

Proximity / Remote

Whether an e-wallet offers proximity payments (in-store), remote payments (online), or both.

P2P / C2B

Whether an e-wallet offers peer-to-peer payments, customer-to-business payments, or both.

Backing

Whether an e-wallet is backed by a merchant, bank, fintech, big tech, government, or a combination of these institutions.

âž”

36

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

E-Wallets in Focus Disclaimer The results of our research have all been based on a combination of desk research conducted by our editors and the input of our partners, most notably Innopay and Kapronasia. As thorough as our researchers are, however, some variables remain hard to distinguish and much information is hard to verify. Reports of transaction volume are in particular often incomplete, unavailable, or self-reported on part of the e-wallet provider.

Sources Card on File (CoF), Adyen https://docs.adyen.com/developers/payment-glossary/card-on-file-cof OK mobile payment app to roll out in the Netherlands, The Paypers https://www.thepaypers.com/mobile-payments/ok-mobile-payment-app-to-roll-out-in-the-netherlands/772577-16 Onlinehandel erst die Ware, EHI https://www.ehi.org/de/pressemitteilungen/onlinehandel-erst-die-ware/ BillMo And Walmart Do Money For People Who Don’t Trust Banks, pymnts.com https://www.pymnts.com/news/digital-banking/2018/billmo-walmart-steve-labella-digital-wallet/

37

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Overview of Regional and Global E-Wallets in Europe, North America, India and China India

China

Regional

Regional

Global

North America

Global

Europe

38

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Mapping of E-Wallet Functionalities

Payments

+ Marketing & Loyalty

Remote

Remote

Proximity + Remote

+ Marketing & Loyalty

Proximity + Remote

Payments

39

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Wallets Ecosystem Explained Research summary and results

Company

Platform

Business Model

Scope

Context

Proximity/ Remote

P2P/C2B

Backing

Head office

Scale

Transaction Volume

Instruments

Website

Founded

Aadhaar Pay App

Independent

Transactiondriven

1) Payment

3) Bills

Prox

C2B

Government

India

Regional

N/A

Bank Debit

https://aadharpaymentapp.org

2017

AirtelMoney

Independent

Transactiondriven

2) Loyalty & Marketing

3) Bills

Rem

P2P+C2B

FinTech

India

Regional

15 Mln users

Bank Debit, Credit Card, Debit Card

http://www.airtel.in/money/

2012

AliPay

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Merchant

China

Global

USD 3 Tln (2016)

Bank Debit, Credit Card, Debit Card

https://global.alipay.com

2004

Allied Wallet

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Prox+Rem

C2B

FinTech

UK

Global

110> Mln users (2016)

Bank Debit, Credit Card, Debit Card, Cash

https://www.alliedwallet.com/e-wallet/

2002

Amazon Pay

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Rem

C2B

Merchant

US

Global

N/A

Bank Debit, Credit Card, Debit Card

https://pay.amazon.com/uk/

2007

Apple Pay

Specific

Transactiondriven

1) Payments, Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Technology

US

Global

N/A

Credit Card, Debit Card

http://www.apple.com/apple-pay/

2014

Baidu Wallet

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Rem+Prox

P2P+C2B

FinTech

China

Regional

100 Mln users

Bank Debit, Credit Card, Debit Card

http://www.baidu.com/

BHIM app

Independent

Transactiondriven

1) Payment

3) Bills

Prox+Rem

P2P+C2B

Government

India

Regional

19 Mln users

Bank Debit

https://www.bhimupi.org.in/

2016

Boon

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank

Germany

Regional

N/A

Bank Debit

https://www.boonpayment.com/de/en/

2015

Bunq

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank

Netherlands

Regional

N/A

Bank Debit

https://www.bunq.com/

2015

Capital One Wallet

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

C2B

Bank

US

Regional

N/A

Bank Debit

https://www.capitalone.com/ applications/mobile/wallet/

CashClub Wallet (Everi)

Independent

Data-driven

2) Loyalty & Marketing

1) In-Store

Rem

C2B

FinTech

US

Global

N/A

Credit Card, Debit Card

http://www.everi.com/payments/

1991

CashU

Independent

Transactiondriven

1) Payment

3) Bills

Rem

C2B

FinTech

Dubai

Regional

2.3 Mln users (2016)

Bank Debit, Credit Card, Debit Card, Cash

https://www.cashu.com/

2002

Chasepay

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank

US

Regional

N/A

Bank Debit

https://www.chase.com/digital/digitalpayments/chase-pay

Chillr

Independent

Transactiondriven

2) Loyalty & Marketing

3) Bills

Prox+Rem

P2P+C2B

Bank

India

Regional

N/A

Bank Debit

https://chillr.com/

40

PAYMENT METHODS REPORT 2017

•

Zooming into e-wallets

2013

Wallets Ecosystem Explained Company

Platform

Business Model

Scope

Context

Proximity/ Remote

P2P/C2B

Backing

Head office

Scale

Transaction Volume

Instruments

Website

Founded

Dwolla

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Rem

C2B

FinTech

US

Global

3 Bln transactions (2015)

Bank Debit

https://www.dwolla.com/

2008

Fastcheckout (Multisafepay)

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Rem

C2B

FinTech

The Netherlands

Regional

N/A

Bank Debit, Credit Card, Debit Card

https://www.multisafepay.com/ fastcheckout-payments/

2000

Freecharge (Snapdeal)

Independent

Transactiondriven

2) Loyalty & Marketing

3) Bills

Prox+Rem

P2P+C2B

FinTech

India

Regional

10 Mln users (2016)

Bank Debit, Credit Card, Debit Card

https://www.freecharge.in/

2010

Google Pay

Independent*

N/A

2) Payments, Loyalty & Marketing

2) Omnichannel

Prox+Rem

P2P+C2B

Technology

US

Global

N/A

Credit Card, Debit Card, PayPal account

https://pay.google.com/about/

2015

ICICI Pockets

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank

India

Global

N/A

Bank Debit, Credit Card, Debit Card

https://www.icicibank.com/PersonalBanking/insta-banking/internet-banking/ 2015 pockets/index.html

Jiffy

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Rem

P2P+C2B

FinTech

Italy

Regional

N/A

Bank Debit

https://www.sia.eu/en/solutions/cards/ mobile-payments-e-commerce/jiffy

2016

LevelUp

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

C2B

FinTech

US

Regional

1 Mln users (2016)

Bank Debit, Credit Card, Debit Card, Cash

https://www.thelevelup.com/

2008

Lydia

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

FinTech

France

Regional

EUR 25 Mln per month (2018)

Bank Debit, Credit Card, E-wallet

https://lydia-app.com

2013

Lyf pay

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank/ Merchant

France

Regional

N/A

Bank Debit, Credit Card

https://www.lyf.eu/fr/

2013

MasterPass

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank

US

Global

N/A

Credit Card, Debit Card

http://www.masterpass.com

2013

mBank

Independent

Transactiondriven

1) Payment

3) Bills

Prox+Rem

P2P+C2B

Bank

Poland

Regional

854,000 users

Bank Debit, Credit Card, Debit Card, E-wallet

https://www.bankmbank.com/MobileBanking

1986

MercadoPago

Independent

Data-driven

3) Bills

2) Online, Mobile

Prox+Rem

P2P+C2B

Merchant

Argentina

Regional

138.7 Mln transactions (2016)

Credit Card, Cash

https://www.mercadopago.com.br/

2004

Mobikwik

Independent

Data-driven

2) Loyalty & Marketing

3) Bills

Prox+Rem

P2P+C2B

FinTech

India

Regional

USD 700 Mln (2015)

Bank Debit, Credit Card, Debit Card, Cash

https://www.mobikwik.com/

2009

Mobilepay

Independent

Data-driven

2) Loyalty & Marketing

3) Bills

Prox+Rem

P2P+C2B

Bank

Denmark

Regional

>3.5 Mln users (2017)

Bank Debit, Credit Card

https://mobilepay.dk/da-dk/Pages/ mobilepay.aspx

2013

Momoe (Shopclues.com)

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox

C2B

FinTech

India

Regional

N/A

Bank Debit, Credit Card

https://www.momoe.in/

2014

Moneta.ru

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Rem

C2B

FinTech

Russia

Regional

N/A

Bank Debit, Credit Card, Debit Card, E-wallet, Cash

https://www.moneta.ru

2006

41

PAYMENT METHODS REPORT 2017

•

Zooming into e-wallets

Wallets Ecosystem Explained Company

Platform

Business Model

Scope

Context

Proximity/ Remote

P2P/C2B

Backing

Head office

Scale

Transaction Volume

Instruments

Website

Founded

MuchBetter

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Rem

P2P+C2B

FinTech

Isle of Man

Global

N/A

Bank Debit, Credit Card, Debit Card

https://muchbetter.com

2017

Neteller

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Rem

C2B

FinTech

UK

Global

N/A

Bank Debit, Credit Card, Debit Card

https://www.neteller.com/en

1999

OK

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

FinTech

Netherlands

Regional

N/A

Bank Debit, Credit Card

https://okit.com/

2016

Omnyway

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

C2B

FinTech

US

Regional

N/A

Credit Card, Debit Card

http://www.omnypay.net/

2014

OneCard (Bandar Utama)

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

C2B

Merchant

Saudi Arabia

Regional

N/A

Bank Debit, Credit Card, Debit Card, Cash

https://www.onecard.net/customer/ index.html?siteLanguage=en

2004

Oxigen Wallet

Independent

Transactiondriven

2) Loyalty & Marketing

3) Bills

Prox+Rem

P2P+C2B

FinTech

India

Regional

20 Mln users (2017)

Bank Debit, Credit Card, Debit Card

https://www.oxigenwallet.com

2004

Pay by Bank App (Zapp)

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Prox+Rem

C2B

Bank

UK

Regional

N/a

Bank Dedit

https://paybybankapp.co.uk/

2013

Payback (American Express)

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

C2B

Bank

Germany

Regional

29 Mln users

Credit Card, Debit Card

https://www.payback.net

2000

Payconiq

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank

The Netherlands

Regional

N/A

Bank Debit, Credit Card

https://www.payconiq.com

2015

Paylib

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Prox+Rem

C2B

Bank

France

Regional

40 Mln users

Bank Debit, Credit Card, Debit Card

https://www.paylib.fr/

2010

PayPal

Independent

Transactiondriven

2) Loyalty & Marketing

3) Bills

Prox+Rem

P2P+C2B

FinTech

US

Global

USD 354 Bln (2016)

Bank Debit, Credit Card, Debit Card

https://www.paypal.com

1998

PayTM Wallet (PayTM)

Independent

Transactiondriven

2) Loyalty & Marketing

3) Bills

Prox+Rem

P2P+C2B

FinTech

India

Regional

122 Mln users

Bank Debit, Credit Card, Debit Card

https://paytm.com/

2010

PayUMoney

Independent

Transactiondriven

1) Payment

3) Bills

Rem

P2P+C2B

FinTech

India

Regional

USD 6 Bln (2015)

Bank Debit, Credit Card, Debit Card

https://www.payumoney.com/

2011

Payza

Specific

Data-driven

1) Payment

2) Online, Mobile

Rem

P2P+C2B

FinTech

UK

Global

N/A

Bank Debit, Credit Card, Debit Card, Cryptocurrency

https://www.payza.com/

2012

PayZapp (HDFC)

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Rem

P2P+C2B

Bank

India

Regional

8 Mln users

Bank Debit, Credit Card, Debit Card

http://www.hdfcbank.com/personal/ making-payments/pay-with-payzapp/ payzapp

2015

SamsungPay

Specific

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

C2B

Technology

South Korea

Global

USD 75 Bln (2016)

Bank Debit, Credit Card, Debit Card

https://www.samsung.com/us/ samsung-pay/

2015

SEQR (Seamless)

Independent

Data-driven

2) Loyalty & Marketing

4) Print, TV

Prox+Rem

P2P+C2B

FinTech

Sweden

Global

5.3 Bln transactions (2016)

Bank Debit

https://www.seqr.com/nl/

2001

42

PAYMENT METHODS REPORT 2017

•

Zooming into e-wallets

Wallets Ecosystem Explained Company

Platform

Business Model

Scope

Context

Proximity/ Remote

P2P/C2B

Backing

Head office

Scale

Transaction Volume

Instruments

Website

Founded

Skrill Wallet

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Rem

P2P+C2B

FinTech

UK

Global

36 Mln users (2016)

Bank Debit, Credit Card, Debit Card

https://www.skrill.com/

2001

2) Online, Mobile

Prox+Rem

C2B

Merchant

US

Global

11 Mln users (2016)

Credit Card, Debit Card, Cash

https://www.starbucks.com/card

Starbucks Card

Independent

Data-driven

2) Loyalty & Marketing

State Bank Buddy

Independent

Data-driven

2) Loyalty & Marketing

3) Bills

Rem

P2P+C2B

Bank

India

Regional

10.6 Mln users (2017)

Bank Debit, Credit Card, Debit Card

https://www.sbi.co.in/buddy/#page1

2014

Swish

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank

Sweden

Regional

5 Mln users (2016)

Bank Debit

https://www.getswish.se

2012

Vipps

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Rem

P2P+C2B

Bank

Norway

Regional

2,4 Mln users (2017)

Credit Card, Debit Card

https://www.vipps.no/

2015

Visa Checkout

Independent

Transactiondriven

2) Loyalty & Marketing

2) Online, Mobile

Rem

C2B

Bank

US

Global

> 7 Mln users (2016)

Credit Card, Debit Card

https://usa.visa.com/pay-with-visa/visacheckout.html

2014

Visa Qiwi Wallet (Qiwi)

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Prox+Rem

P2P+C2B

Bank

Russia

Regional

11 Mln users (2015)

Bank Debit, Credit Card, Debit Card, Cash

https://qiwi.com/

2008

Walmart Pay

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

C2B

Merchant

US

Regional

20 Mln users (2016)

Credit Card, Debit Card

https://www.walmart.com/cp/walmartpay/3205993

WebMoney

Independent

Transactiondriven

1) Payment

3) Bills

Rem

P2P+C2B

FinTech

Russia

Global

31 Mln users (2016)

Bank Debit, Credit Card, Debit Card

https://www.webmoney.ru/eng/

1988

WeChat Pay

Independent

Transactiondriven

1) Payment

2) Online, Mobile

Prox+Rem

P2P+C2B

FinTech

China

Global

300 Mln users (2016)

Bank Debit

https://pay.weixin.qq.com/index.php/ public/wechatpay

2013

Wells-Fargo Wallet

Specific

Transactiondriven

2) Loyalty & Marketing

1) In-store

Prox

C2B

Bank

US

Regional

N/A

Debit Card, Credit Card

https://www.wellsfargo.com/mobilepayments/wells-fargo-wallet/

Yandex.Money

Independent

Transactiondriven

1) Payment

3) Bills

Prox+Rem

P2P+C2B

FinTech

Russia

Global

30 Mln users (2017)

Bank Debit, Credit Card, Debit card, Direct Carrier, Cash

https://money.yandex.ru/new

2002

Yoyo Wallet

Independent

Data-driven

2) Loyalty & Marketing

2) Online, Mobile

Prox+Rem

C2B

FinTech

UK

Regional

1.2 Mln transactions (2015)

Bank Debit, Credit Card, Debit Card

http://yoyowallet.com/

2013

*Google Pay can be used to check out on websites regardless device (iOS as well)

43

PAYMENT METHODS REPORT 2017

•

Zooming into e-wallets

European Payments Council (EPC)

The interest to accept and develop mobile payments is coming from our increasingly digital society and the success of mobile devices.

Javier Santamaria, Chair of the European Payments

For other mobile proximity payments (i.e. non-NFC

Council, on how the SEPA Instant Credit Transfer scheme

based), the lack of standardisation in the usage of

unlocks the potential of mobile payments

the various proximity technologies (e.g., QR codes, BLE etc.) is resulting in a very fragmented approach

How do instant payments drive the development of

throughout Europe, and even at domestic level.

mobile payments? What interest do merchants

How do you see this fragmentation developing in

have to accept or develop mobile payments and, in

the near future?

turn, how could consumers be incentivised to use

The European market is currently much less mature with respect

mobile payments instead of cash or card?

to the usage of non-NFC based proximity technologies compared

The European Payments Council (EPC) wishes to contribute to the

to NFC-based for mobile card payments. To contribute to the

interoperability of mobile payments solutions at a pan-European

take-up of mobile SEPA card-based payment, the EPC created

level and to remove any barriers consumers and merchants may

last year a dedicated ad-hoc multi-stakeholder group, aiming to

face when making mobile payments. With the EPC’s new scheme,

assist to a further integration of SEPA payments in the European

SEPA Instant Credit Transfer (SCT Inst), mobile payments can be

digital market, with a special focus on the customer experience.

completed end-to-end in a matter of seconds. In conjunction with

The working group developed Mobile Contactless SEPA Card

the increasing number of European citizens that make use of a

Payments Interoperability Implementation Guidelines that went

mobile devices for their financial services including payments,

through a 3-months public consultation and for which the final

innovative payment methods, such as mobile person-to-person

publication is expected in June 2018. These guidelines cover

payment applications that use SCT Inst, are being developed.

NFC-based mobile payments including SE and HCE-based

We believe that even more use cases will be based on the new

service models. Furthermore, this group is also dedicated to non-

scheme in the future.

NFC mobile SEPA card-based proximity payments (MCPPs) in view of the development of a new white paper in the near future.

The interest to accept and develop mobile payments is coming from our increasingly digital society and the success of mobile

What is the role of EPC in creating standards and

devices. The use of mobile payments is growing and competing

guiding the development of mobile payments?

with cash, cheque and plastic card payments because of the

The EPC aims to harmonise payments in the SEPA and wishes

speed of check out, convenience for the user and the extensive

to achieve the interoperability of mobile payments solutions at

palette of services mobile devices offer, making them an ideal

a pan-European level and to remove any barriers consumers

alternative channel for payments.

and merchants may face when making and accepting mobile

For mobile contactless SEPA card payments (i.e. based on NFC technology), the choice between a

payments. To contribute to it, the EPC created a White Paper on

mobile payments, which aims to inform stakeholders including payment service providers, mobile network operators and

Secure Element (SE) and a Hosted Card Emulation

customers about the EPC’s commitment to an integrated market

(HCE) approach has a major impact on the service

for mobile payments in the SEPA. It further endeavours to offer

model and the roles of the different stakeholders.

better insight into the potential of the mobile channel to build on SEPA payment instruments. ➔

44

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

European Payments Council Furthermore, the EPC currently facilitates the setting-up of a new ad-hoc multi-stakeholder group on Mobile Initiated SEPA

Javier Santamaría

Credit Transfers, including SCT Inst, covering the various sectors

Chair

involved in the mobile payment ecosystem to develop Mobile

European Payments Council

Initiated SEPA Credit Transfer Interoperability Implementation

(EPC)

Guidelines (including SCT Inst), while leveraging the relevant documentation already developed in standardisation and indu­ stry bodies. Through this open approach, payment service provi­ ders, technology vendors, retailers, consumers, mobile network

About Javier Santamaría: Javier Santamaría is

operators, other service providers, relevant associations and other

the Chair of the EPC since June 2012, and has

interested stakeholders will be directly involved in the develop­

been one of its members since its creation in 2002.

ment of the document. The aim is to cover both customer-to-

As an independent, self- employed professional,

business and person-to-person payments.

Mr. Santamaría has accumulated broad expertise in payments across different client segments and

What new technologies will drive development of

product lines.

mobile payments in the future?

The EPC does not have a crystal ball to predict the future, but

About European Payments Council (EPC): The

the evidence is that innovative payment methods such as mobile

European Payments Council (EPC), representing

person-to-person and customer-to-business payments based on

payment service providers, supports and promotes

SCT Inst are being progressively developed and adopted in the

European payments integration and development,

market.

notably the Single Euro Payments Area (SEPA).

In view of the opportunities mobile wallets offer, we believe that

www.europeanpaymentscouncil.eu

more added value services will arise in the future, making mobile payments more attractive for their users.

Share this story

45

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Google Pay

Once the merchant confirms PSP readiness, our API requires less than 100 lines of code and enables Google Pay on both apps and websites.

The Paypers interviews Mounir Mouawad, Head of

For selected banks across Europe, users can also follow a safe

EMEA Product Operations at Google Pay, to understand

and easy authentication process to enable their credit or debit card

the benefits of Google Pay for merchants

for in-store contactless payments. The user will be authenticated by their bank’s security system and their payment information will

What consumer payment needs does Google Pay

be uniquely encrypted for their mobile device. Once the user is set

address online and in-store?

up, tapping their Android smartphone to the store’s contactless

Google Pay gives everyone an opportunity to pay everywhere with

terminal is enough to check out.

their Google Account, whether they are shopping at a physical store, in-app on their Android device, on any website, or across

There is a multitude of payment methods available

Google products. We want to make the checkout experience fast,

to merchants. What additional value does Google

easy and safe.

Pay bring to merchants?

Google Pay offers a set of benefits for both users and merchants.

69% of users today drop out of the checkout process while shop­ ping online, and abandon their carts because it takes more than

First: added security -- the data of a user’s credit card is neither

120 taps/clicks to finish the process. With Google Pay we can

stored on the mobile device nor in the system of the seller. When

enable online checkout in just a few simple clicks.

users pay with Google Pay in stores, their transactions are made using a virtual card number called a token, which is device-

Contactless is quickly becoming the preferred checkout method

specific. Such precautions provide an extra layer of security.

in stores across Europe. Furthermore, we also know consumers and merchants worry about fraud and security when they think

Second: improved checkout experience -- Google has billions

about payments. Google Pay brings together the best security

of engaged users across several products. For these users,

features from Google, Visa/Mastercard and our partner banks to

once they have their forms of payment saved with Google Pay,

provide a secure and fast contactless payment experience with

merchants can offer significantly simplified checkout experience

Android phones.

in 2-3 clicks. Our partners already report on improvements in conversion rates, client retention and client acquisition thanks to

What does a consumer need to do to use Google

Google Pay.

Pay (iOS/Android)?

To use Google Pay on apps, websites and across Google pro­

Third: Loyalty and offers -- There’s also an additional benefit for

ducts, you just need to add a debit or credit card to your Google

merchants who have loyalty programs and offers/gift cards as

account via the Google Pay app or the Payment centre (payments.

Google Pay users can store their loyalty and gift cards. We will

google.com). A “Buy with Google Pay” button can then be found

remind users to apply those at the checkout when they are in the

in many apps and websites alongside the conventional payment

vicinity of the respective merchants. ➔

methods. Google Pay automatically enters the billing, delivery and payment data for the user.

46

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Google Pay How can Google Pay be implemented online and in-stores? Which PSPs and terminal providers

Mounir Mouawad

support Google Pay? For in-store, all payment terminals that accept contactless can

Head of EMEA Product Operations

accept Google Pay so no additional implementation or work is

Google Pay

required from the merchants, beyond simply enabling contactless payments at their stores and educating their staff on how those work. To make online possible, the merchant just needs to make sure their payment service provider (PSP) already supports

About Mounir Mouawad: Mounir Mouawad

Google Pay. Once the merchant confirms PSP readiness, our easy

heads up product strategy and operations for

to integrate API requires less than 100 lines of code and enables

Google Pay in Europe, the Middle East and Africa.

Google Pay on both apps and websites.

Prior to that he worked across a variety of roles in e-commerce, supporting some of Google’s largest

Google doesn’t charge merchants or PSPs anything for offering

e-commerce clients in Europe. Mounir holds a

Google Pay as a payment option. Similarly, users are not charged

computer engineering degree from the American

anything for using Google Pay either in-store or online.

University of Beirut and an MBA from London Business School.

Which countries are already using Google Pay? Where will you be launching next?

About Google Pay: Google Pay is the fast, simple

The Google Pay in-store experience is currently available in

way to pay in millions of places – online, in stores,

19 countries globally including Canada, Brazil, Japan, Russia,

and more. It brings together everything you need

Spain, the UK, and Germany with more to come. Google Pay,

at checkout and keeps your information safe

implemented at supported online merchants and across Google

and secure. Plus, you can manage your account

products, is already available worldwide today.

wherever you want – on the web or in the app.

Could you elaborate a bit on future developments

www.pay.google.com/about

and services added, such as voice commerce?

We’re excited about the future of Google Pay and the opportunities it can offer. We’re already working on a number of interesting areas such as expanding our support for public transport, or allowing users to save their concert or event tickets into Google Pay. We’re also working closely with our partner banks to bring innovation to the industry, like allowing newly created cards to be added to Google Pay instantly without waiting for the physical card to arrive via post, or exploring opportunities of integrating payment

Share this story

experiences into the Google Assistant.

47

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Gerson Lehrman Group (GLG) The War of E-Wallets in India India is and will continue to be a fascinating market for a lot of

people registered on it. This has certainly helped customers to

financial and payments professionals. Having spent just under a

be onboarded in a much shorter timeframe.

year living and working there, I can certainly see why this is the case and why opportunities are still ripe.

However, there is still a debate as to whether it has improved processing times and whether it is an efficient and inclusive tool.

Cash has dominated the market for a long time, be it for trans­

As of the 1st of March 2018, all e-wallets now require full KYC,

actions, employee salaries, and even for online shopping via the

meaning that consumers will have to link their Aadhaar number

‘cash on delivery’ as a payment option. However, the e-wallet

to their mobile wallet.

market, in its current state, has seen a decline.

In my experience, KYC has proven to be a challenge across

Factors that affect adoption

regions in South Asia and the Asia Pacific because the processes

The main driver for the surge within the e-wallet market in India

involved have been long and tedious. As a customer, you would

to date has been the demonetisation exercise in November 2016.

be required to make an appointment and meet an official faceto-face, in addition to providing an extensive list of documents.

As a result of the demonetisation, the government removed from circulation both the 500 and 1,000 rupee banknotes, with the

A high percentage of the target audience for e-wallet providers

issuance of new 500 and 2,000 banknotes. The rationale was

is the so-called ‘unbanked’ population: people who are not

in part to deal with the amount of black money in the country,

registered with any form of account and, therefore, cannot provide

but also to try to drive and promote the use of digital services/

any means of KYC. This is especially common in rural parts of

payments.

India outside of the major towns and cities.

The government has been on a mission to foster financial inclu­

Something for nothing

sion and promote transparency across the country. In addition,

Creating e-wallet products has certainly been expansive in India

government policies such as Pre Paid Instruments (PPI), the

over the years, but adoption, as mentioned earlier, remains a

introduction of e-wallet interoperability and Universal Payment

headache for some. The Indian market is no different from others,

Interface (UPI) by the NPCI have further helped stimulate the market.

and incentives are an extremely important consideration. Indian con­sumers will only see the value in an e-wallet product if the

Adoption of e-wallet products remains a challenge for the Indian

incentives match their needs.

market, largely driven by competition from credit/debit cards.

Ecosystems remain undeveloped in rural areas, especially as

The majority of these now include the ability to top-up mobile

some merchants have yet to adopt crucial contactless point-of-

phone credit, pay for utility bills, book holidays, buy tickets for

sale terminals. A lack of knowledge or trust from the masses is

entertainment or travel, and secure loans and generous cashback

also proving to be a hindrance.

offers. They have also focused strongly on the onboarding and user experience, insomuch that banks are now using these as a

Onboarding challenges

benchmark to shape/update their own offerings. ➔

One of the biggest barriers to successful adoption of financial services in developing payments markets is KYC, or Know Your Customer. One of India’s biggest achievements has been the introduction of Aadhaar, a biometric database with over a billion

48

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Gerson Lehrman Group (GLG) New kids on the block In addition to some of the major heavyweights in the e-wallet space,

Kunal Patel

the likes of Paytm (as mentioned earlier), Oxigen, Mobikwik, PayU

Council Member

Money, Freecharge, PayPal, Vodafone m-pesa, Airtel Money and

Gerson Lehrman Group (GLG)

the local bank e-wallets dominate the market.

However, apart from local players, Google and Amazon are also trying to tap into the growing and very profitable Indian market.

Google launched its own payment platform called Tez, which

About Kunal Patel: Kunal has over 10 years’

allows users to link their existing bank accounts with the app to

experience in product development, innovation

pay for services, either in an online or offline environment.

and strategy across corporate organisations and fintech start-ups. These include banks, payment

The key to their success is not to focus on frictionless payments

acquirers, and mobile financial services, spanning

but on the additional value that a user would get from using the

Asia Pacific, South Asia, Europe, Central and

service. I had previously stated other built-in features and capa­

Latin America.

bilities focused on m-commerce and value-added services: Paytm and Airtel are two examples of e-wallets who have recently moved

About Gerson Lehrman Group (GLG): GLG

into banking services.

(Gerson Lehrman Group, Inc.) is the world’s leading platform for professional learning. Business lea­

The future and beyond

ders, investors, consultants, social entrepreneurs,

I believe we will see a consolidation of the market, but this is a double-

and other top professionals rely on GLG to learn

edged sword. It is true that intense competition forces companies

in short- and long-term engage­m ents from a

to continually innovate, drive down costs and gives consumers

mem­bership of more than 600,000 experts.

more choice, but it can also lead to confusion amongst the users.

www.glg.it Who will win the war of the e-wallets? The current environment, which is dominated by diversification and fragmentation, is already setting the stage for a possible winner. In short, those who adopt a collaborative approach, respond to ever-changing market de­mands, make use of emerging technologies and understand consumer behaviour will have the most to gain. It may seem as a long list, but checking all those points is essential for bringing to market a product that consumers need, want and will use.

Share this story

49

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Kapronasia When a Mobile Wallet Is More Than Just a Wallet Launched in 2004, Alipay was initially an online payment system

There was a special set of circumstances and developments in

designed to solve the issue of trust in ecommerce transactions.

China that helped these payment platforms develop into the

By providing a method of escrow, Alipay digitised the traditional

lifestyle platforms that they are today, but it is surprising that we

cash ecommerce transaction process that was prone to fraud.

have not seen similar products and services in other markets,

Since then, Alipay has become much more than just a platform

especially in the US. Arguably, Paypal is one of the best-

for ecommerce payments. The system now processes millions of

positio­n ed payments companies globally to provide similar

virtual and physical payments daily, becoming one of the ‘mega-

functionality but ended up acquiring Venmo, an app that under­

apps’ in China, used by hundreds of millions of consumers on a

stood social payments perhaps even better than Tencent.

regular basis.

Regulations in many jurisdictions may be part of the reason why It is considered a mega-app not just because of how many pay­

growth has been limited. In China, the government took a very

ments it processes, but due to the many other ancillary services

much ‘wait and see’ approach to fintech regulation by letting

that it supports. In many ways, payment processes helped to

fintech companies grow and regulating them after they became

provide the initial platform on which a variety of other products

a potential risk. An example is mobile payments themselves.

and services have been built. From within the Alipay wallet today,

Although Alipay was setup in 2004, the government only formally

you can book a car, buy movie or plane tickets, invest in wealth

licensed payment platforms in 2011 and then implemented

management products, or even buy insurance.

regulations in 2016. This allowed payment platforms like WeChat Pay and Alipay to grow and compete.

The other dominant lifestyle platform is Tencent’s WeChat, which offers a similar variety of products and services. Tencent leve­

Using Europe’s GDPR as a counter-example, although GDPR

raged the social and entertainment aspects of the WeChat chat

would likely not affect the underlying payments functionality of

app to develop a payment business that is just about neck and

any of these platforms, the business model for lifestyle platforms

neck with Alipay in China at the moment.

like Alipay and Tencent is shifting away from fees towards valueadded products and services. When the WeChat wallet knows

The two companies offer contrasting approaches to the same

that you have gone to see the latest documentary movie and

conclusion: Alipay used its initial footprint and lead in ecommerce

have a penchant for fine Italian food, it might make the decision

to create a multi-faceted lifestyle platform while WeChat leve­

that you are a reliable borrower and offer to lend you money.

raged its heritage in social and gaming to capture market share.

It accomplishes this through data-sharing on the back-end that looks at the potentially hundreds of daily interactions you have

This transition from a payments platform to a lifestyle platform is

with the WeChat wallet on a regular basis. This would be nearly

something that is nearly unique to China. In the United States, if

impossible in a GDPR-Europe. ➔

you wanted to use ride sharing, you would open your Uber app.

If you wanted to pay a friend, you would open Venmo or Paypal.

In China, if you wanted to do any of those things, you would just open WeChat.

50

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

kapron ASIA

Kapronasia Beyond regulation, the most significant hindrance may be consumer habits. For consumers accustomed to using a different

Zennon Kapron

app for every task, the idea of having ‘one app to rule them all’

Director

may seem a bit foreign, whereas in China, it is very natural due

Kapronasia

to the fact that smartphone is the device of choice. Furthermore, existing payment methods in China had a tremendous amount of friction. A card transaction in most stores in China involves chippin-signature, which is much slower than a QR-code payment, which has become the norm. Places like Europe and Australia

About Zennon Kapron: Zennon Kapron is a

have very user-friendly and frictionless tap-and-go payments that

Director at Kapronasia and has been involved

are just as convenient as mobile.

in financial technology for over 20 years. Before Kapronasia, Zennon was the Global Banking

That is not to say that hope is lost for similar apps ex-China. We are

Industry Manager for Intel and the CIO for Citigroup

now starting to see WhatsApp and Facebook roll out payments

Portugal. He holds a B.S. in Computer Science from

within their apps. Clearly, Amazon has designs for increasing its

Syracuse University and an MBA from INSEAD.

financial footprint, but it will be a long time before we see any of them reach the scope of functionality in a WeChat or Alipay wallet.

About Kapronasia: Kapronasia is a leading independent research and consulting company

Although we have not seen these offerings from local domestic

focused on the Asian financial services industry.

players in the United States and Europe, we may see them soon

We help financial institutions, technology vendors,

from Alipay and WeChat as the two players start to expand

consultancies and private equity companies

aggressively abroad. From the streets of Paris to the beaches of

understand the impact of business, technology,

Thailand, millions of merchants around the world accept Alipay or

and regulatory issues in banking, payments,

WeChat Pay and an increasingly large number of countries, like

insurance and capital markets.

HK, have local-currency Alipay and WeChat Pay wallets.

www.kapronasia.com For years, western companies have come to China and misjudged the habits of Chinese consumers and failed. The question is now, will Chinese companies make the same mistakes in the opposite direction as they bring their ‘lifestyle’ digital wallets to an entirely new set of consumers?

Share this story

51

PAYMENT METHODS REPORT 2018

•

Zooming into e-wallets

Innovations in the Way We Pay

Innovations in the Way We Pay The rise of ecommerce changed the way consumers interact with merchants. Consumers can now engage with stores at their convenience and are in complete control of the shopping experience. If something is not to their liking, they are just a few clicks away from another store that may offer better-priced products and a seamless shopping experience with familiar and easy-to-use payment methods.

‘In every case, at every store, the merchant was in complete control of the process. The customer was guided by the merchant through merchandising, messaging, or a combination of the two, seeing what the merchant wanted him/her to see and in the context that the merchant deemed optimised sales’ writes Thad Peterson, Senior Analyst at Aite Group, as he goes on explaining how the first pioneers of ecommerce radically changed this situation.

Nowadays, customers can shop at their convenience from anywhere at any hour and on any device. Ecommerce redefined and enhanced the customer experience and payments providers had to adapt payment methods to meet new demands for simplicity and seamlessness. In commerce, payments are gradually becoming ‘invisible’, in an attempt to make the checkout process as fast and as simple as possible. One-click buy buttons, which reduced the checkout process to a single click, are now common. Anything easier than that would mean telling your mobile phone to do the shopping and payment for you.

Voice is emerging as an important commerce channel and the recent string of investments that big tech companies like Google and Amazon have made in enhancing their “smart assistants” shows that voice commerce has the potential to, once again, redefine commerce. According to That Peterson, before voice commerce can become mainstream, voice authentication has to be resolved. If this essential challenge is resolved, then “Voice authentication (…) could be seen as a pre-curser to universal, frictionless commerce through any medium or device. “ We are not only communicating with devices, but devices can also communicate among themselves. Connected devices or the Internet of Things is making big strides into online and physical commerce. An appliance connected to the IoT could take care of its own restacking with the products it needs to function. We can already see this happening with printers that order their own ink and Samsung, LG, and others have already experimented with fridges that allow consumers to order groceries online. Apart from enabling appliances to restack with essentials, IoT devices could add a new level of convenience to delivery. Both Amazon and Walmart have piloted in-home delivery, the former even releasing a smart-lock device called Amazon Key, which allows users who are not at home to unlock their door for an online delivery.

The growth of connected devices will pose new challenges to ecommerce marketers, but an integration with IoT devices built around purchasing and re-purchasing can have important benefits. As Markus Bergthaler, MRC Director of Programs and Marketing, explains: “General ecommerce marketers are going to need to tailor their marketing for the IoT, but other companies are going to be able to revamp their supply chain and logistics around it. For marketers who have items that need to be repurchased (or who are developing smart items), an integration with the IoT can dramatically improve sales with a limited amount of overhead. Smart appliances can be designed around the idea of purchasing and repurchasing items, making it easier for businesses to recapture and re-target their core audience.”

54

PAYMENT METHODS REPORT 2018

•

Innovations in the Way We Pay

Aite Group “Alexa, Buy Me Stuff!” – Amazon and the Payments Space The evolution of commerce

Things changed in 1984 when the first online service provider,

Until the 1980’s, there were only three ways that consumers

CompuServe, launched the CompuServe electronic mall,

could engage in commerce with a merchant: in the store, on the

enabling online commerce for the first time.

phone, or with a catalog through the mail. This model has been around for over a century, and merchants have fine-tuned their

With this, the world of commerce changed forever. Suddenly,

capabilities to optimise sales through these channels with a

customers were given the ability to explore offerings in their own

good deal of success. Retail became the engine of the economy,

way whenever and wherever they chose if they could get to a

providing consumers with previously unimagined choice and

connected computer.

value in nearly every segment, from fashion to lumber. Even with the proliferation of choice, the fundamentals of commerce remained

Quoting from the ad, “… it gives you in-depth information on thou­

essentially unchanged:

sands of goods and services, and lets you buy even hard-to-find

1. The merchant displayed the merchandise in an appealing way

merchandise.”

to attract the customer.

2. The customer visited the merchant’s store (or catalog) to shop for the goods she needed.

The emergence of ecommerce exposed consumers to a global marketplace of products and services, but while the variety of

3. The merchant offered the goods at a price, and the consumer decided whether to purchase the goods.

offerings increased by a quantum, the process of purchasing was more cumbersome than an in-store purchase. In the early days of ecommerce, card entry was done for every purchase and at

In every case, at every store, the merchant was in complete control

very low levels of bandwidth, so the transaction process was very

of the process. The customer was guided by the merchant through

slow. A new category of payment processors, payment gateways,

merchandising, messaging, or a combination of the two, seeing

emerged to address this issue, and, over time, the concept of

what the merchant wanted him/her to see and in the context that

card-on-file emerged to reduce friction at individual sites.

the merchant deemed optimised sales. That is still the case today with in-store and catalog sales.

In 1994, ten years after the emergence of ecommerce, Amazon.com was launched. Since Amazon was launched at about the same

1984 CompuServe Mall Ad

time that browser based internet functionality started to explode, their growth was rapid, and, before long, Amazon was selling more things than books. Since then, it has become the largest online retailer in the world, with over 300 million customers globally. A key to their explosive growth has been their ongoing efforts to minimise the friction involved in an online transaction. While cardon-file was a good start, it still required additional log-on and verification steps that slowed the transaction and increased the likelihood that the customer would decide against the purchase.

In 1997, Amazon launched 1-Click, an automated form of cardon-file that literally reduced the payment to one single click of a mouse. 1-Click not only revolutionised ecommerce and gave Amazon.com a competitive advantage, but it also launched them

Source: Ars Technica

55

PAYMENT METHODS REPORT 2018

into the payments space. ➔

•

Innovations in the Way We Pay

Aite Group As Amazon began to add outside merchants to their marketplace, they created an opportunity to expand their payment capabilities

Thad Peterson

to new merchants and markets. 1-Click became available to those

Senior analyst

merchants in the form of Amazon Pay, the platform continuing

Aite Group

to expand. While there is dissonance with some merchants who fear that Amazon will take their data and possibly their customers, Amazon Pay is becoming a new tender type in competition with PayPal and the payment networks, and many merchants will be willing to take that risk in order to gain an incremental sale.

About Thad Peterson: Thad Peterson is a senior analyst with Aite Group, focusing on the evolution of

With the emergence of the voice user interface embedded in

the payment space, the customer payment ex­pe­

Amazon’s Echo line of devices, a new payments challenge emerged.

rience, and merchant acquiring. Thad has a proven

Voice interaction is terrific for information and entertainment

track record of identifying and developing new

delivery, but many of the protections built into an online transaction

opportunities and technologies in payments and

done on a computer or smart phone are not available. And while

financial services. He has relevant expertise in

it’s pretty easy to ask Alexa - the avatar of Amazon Echo - to buy

applying customer behaviour to the payments

something, there is no way for Alexa or Amazon to be sure that

ecosystem in both corporate and startup environ­

the person ordering is the individual who owns or controls the

ments. Thad’s consulting background includes

relationship. Transaction information can be sent to the customer

engagements on credit and debit cards, mobile

immediately after the purchase is made, but that adds friction to

payments, airline payment platforms, consumer

what was a nearly frictionless transaction online.

and merchant loyalty, payment techno­logy evolu­ tion, stored value, and product innovation.

What is needed is a way for each individual consumer to be identified in a voice interaction with Amazon Echo. If the individual

About Aite Group: Aite Group is an independent

is recognised, then the device can enable a variety of different

research and advisory firm focused on business,

transactions and access a wealth of high-value information to

technology, and regulatory issues and their impact

enhance the experience. It would enable voice purchase from any

on the financial services industry. Headquartered

organisation that offers Amazon Pay as a payment alternative,

in Boston, Aite Group works with its clients as a

and, once again, it creates a significant competitive barrier and

partner, advisor, and catalyst, challenging their

differentiator for Amazon.com. Voice authentication is not here yet,

basic assumptions and ensuring they remain at

but it is close, and, when it arrives, the revolution that happened

the forefront of industry trends

in 1997 with the launch of 1-Click could be seen as a precursor to universal, frictionless commerce through any medium or device.

www.aitegroup.com

Share this story

56

PAYMENT METHODS REPORT 2018

•

Innovations in the Way We Pay

Amazon Pay Voice Is the New Frontier in Commerce Imagine purchasing a train ticket, a flower bouquet, or your

Conversely, companies that fail to adapt will possibly suffer both

groceries – simply by asking your voice assistant. No need to

short-term and long-term consequences. Interestingly, 73%

pull out your wallet. No need to enter any credit card or address

of customers are likely to switch brands if the experience

information. You just tell your voice assistant to place an order

is poor. And in 2017 alone, lack of personalisation and low

and, voilà, it’s done. The ability to do that is already here, and it’s

consumer trust cost businesses a whopping GBP 571 billion.

poised to change the face of commerce.

The most intuitive medium yet As businesses look for the latest trends and developments, voice

Voice represents a new opportunity for consumers and brands

represents the next major wave in commerce, and the reason for

alike to redefine the way people research and purchase products.

this is simple: as our lives become increasingly digital, customers

There’s no need to use a computer or learn a device. All that’s

have come to expect a seamless experience – and voice offers an

required is human speech. Indeed, voice is “the first medium

ultra-intuitive way to purchase goods and services.

that does not require the user to learn a new way of doing things”.

A new set of expectations Today, our digital world is rapidly evolving, and consumer

With the rapid adoption of voice for multiple retail scenarios,

expectations are rising along with it. Digital technology is

commerce is moving to the next frontier – and Amazon Pay is

already pervasive, powerful, and growing – and it’s increasingly

helping businesses adapt to the expectations of today’s connected

guiding how we shop. In Europe, digital assets are expected

shoppers. Amazon Pay extends to thousands of websites around

to influence 54% of all European retail sales by 2021 ,

the world the experience that Amazon customers have come to

according to Forrester Research.

enjoy and trust on Amazon websites. The alternative payment solution makes it easy for hundreds of millions of shoppers to

As more people embrace digital technology for their purchases,

make purchases online with the information already stored in

their expectations are increasing. Consumers expect today’s com­

their Amazon account. Our premise is to help people discover

panies to be accessible all the time, wherever they are. They expect

whatever they love, wherever they find it, by making Amazon

the engagement to be customised – with more selection and

innovations available to third-party merchants. To accomplish

value. And they expect consistency and convenience. Moreover,

that, we recently released Amazon Pay for Alexa Skills in the US,

trust is becoming increasingly paramount. Today, 90% of

with future availability in the EU, allowing merchants to sell goods

shoppers in Germany, the UK, France and Italy say trust is the

and services using Alexa’s simple voice purchasing flow.

most important factor in determining their purchasing decisions.

With Amazon Pay for Alexa Skills, shoppers don’t need to leave the voice experience to enter payment information like credit card details

Customers are clear about what they expect. Now, it’s up to us

or a shipping address when making a purchase. Instead, Amazon Pay

to adapt. Those who will be able to deliver innovative customer

brings the trust and simplicity of Amazon’s checkout experience

experiences will most likely reap the rewards. As Forrester

to the merchant’s voice shopping experience. The re­sult is a seam­

Research concluded, customer experience is a company’s

less and convenient checkout experience. ➔

greatest potential source of competitive advantage.

57

PAYMENT METHODS REPORT 2018

•

Innovations in the Way We Pay

Amazon Pay An ultra-convenient purchasing experience Forward-looking companies are already implementing Amazon

Karen Pepper

Pay for Alexa Skills, by applying this innovation in their industry

Head of the UK & Ireland

to offer simple voice purchasing. For example, 1800 Flowers,

Amazon Pay

a US based company, is seeing a positive impact from this seamless purchase experience. After adding Amazon Pay for Alexa Skills, this floral and gourmet retailer increased the number of new and repeat customers who place orders through their

A b o u t K a re n P e p p e r : K a re n P e p p e r i s

Alexa skill.

responsible for leading Amazon’s payment Likewise, Virgin Trains in the UK recently became the first travel

services for third party merchants in the UK. A

company to offer ticket purchases through Alexa, making it

15-year veteran of the payments and startup

convenient for its customers to buy train tickets. As Giulio

industries, Karen was most recently named

Montemagno, Director of Amazon Pay EU, put it when Virgin

Global Head of Alliance Banks at JP Morgan and

Trains was launched back in May 2018: “This is a first-of-a-

previously held executive positions at American

kind service that will make it easier than ever to find and

Express, as well as at her own multi-million pound

book the ticket you want, even when you’re busy doing

startup in the health and fitness sector.

something else—all you need to do is ask Alexa.”

About Amazon Pay: Amazon Pay makes it easy As voice commerce moves to the mainstage, some of the most

for millions of Amazon customers to login and

innovative brands are already identifying the right payment

pay on third party websites using the payment

solutions for their customers. By embracing voice commerce

and shipping information stored in their Amazon

and integrating a payment solution like Amazon Pay, today’s

accounts. Amazon Pay can help merchants add

merchants can take customer convenience to the next level,

new customers, increase sales and turn casual

exceeding customer expectations in an age where personalised,

browsers into buyers. It’s fast, easy, and trusted

seamless experiences are what makes the difference.

– leverage the Amazon brand to grow your business.

To learn more, visit our Amazon Pay for Alexa Skills webpage.

www.pay.amazon.com/uk

Share this story

58

PAYMENT METHODS REPORT 2018

•

Innovations in the Way We Pay

Merchant Risk Council Innovation in the Way We Pay - IoT and Payments From smartphones to refrigerators, the Internet of Things is

If an ecommerce retailer isn’t appearing on the “shopping”

steadily becoming more advanced and user-friendly. Consumers

page of Google, for instance, it’s likely not showing up when a

have developed a level of trust with IoT payment processing and

consumer tries to purchase an item through Google Home.

are more readily purchasing items through a variety of devices within their homes. Ecommerce businesses will need to capitalise

Likewise, ecommerce marketers need to be aware of the fact

upon this trend if they are going to continue expanding their

that the Internet of Things is making it easier for customers to do

own reach, as customers are swiftly normalising the process of

a comparison search. Customers who are purchasing on-the-fly

purchasing items via new and unconventional means.

aren’t looking into warranty information, product guarantees or product details. They’re looking at the general description of the

From “Hey, Google” to the Amazon Dash

item and its cost. Due to this, soft selling measures may become

Secure payments are available through a number of devices,

less important than the bottom line: customers want the product

mostly operated by trusted payment processors. Google

that costs the least, delivered the quickest and produced by the

Payments, PayPal and Amazon Pay are all connected to at-home

most reputable vendor.

smart devices, such as the Amazon Echo and the Google Home.

Shoppers can verbally order products while moving throughout their house, making the purchase experience easier and more cost effective as they can quickly compare pricing and brand quality.

Consumer-based items such as Amazon Dash, an ordering service consisting of multiple components including buttons, a Wi-Fi connected barcode scanner and voice command, make it easier for products to be purchased on-the-go. Additionally, single-use devices such as coffee machines that can automatically reorder pods or printers that can reorder ink, are increasing in popularity.

Throughout all of this is a framework that is developed to be user-

Creating Logistics and Shipping for the IoT

friendly, making it easier for customers to commit to purchases,

General ecommerce marketers are going to need to tailor their

and consequently making it easier for vendors to sell their goods.

marketing for the IoT, but other companies are going to be able

At the same time, this kind of marketing automation is primarily

to revamp their supply chain and logistics around it. For marke­

benefiting larger marketplaces, as they are the ones able to

ters who have items that need to be repurchased (or who are

leverage themselves into customer homes.

developing smart items), an integration with the IoT can dramatically improve sales with a limited amount of overhead. Smart applian­

Tailoring ecommerce to the Internet of Things

ces can be designed around the idea of purchasing and repur­

Ecommerce marketers need to understand and strategise around

chasing items, making it easier for businesses to recapture and

the way the Internet of Things is being utilized. Customers are

re-target their core audience. Organizations can fine-tune and

more frequently searching for items by voice command, and

automate many of the processes that are directly related to sales

in many cases, they are looking for the items that are going

and automation, therefore cutting down on staff, improving their

to cost the least. Ecommerce portals need to be particularly

operational expenses and expanding their overall reach. ➔

conscientious about their search engine optimization strategy.

59

PAYMENT METHODS REPORT 2018

•

Innovations in the Way We Pay

Merchant Risk Council Retail Spending and Brick and Mortar It isn’t just ecommerce stores that need to adjust. Retail stores

Markus Bergthaler

are also going to need to begin offering alternative methods of

MRC Director of Programs

payment. Already, many consumers are seeking to make purch­ses

and Marketing

directly through their phones. In the future, smart wristbands and

Merchant Risk Council

other wearables may also become major methods of purchasing.

This type of shift is extraordinarily convenient for cus­tomers, but there are problems with adoption. Merchants are often hesitant to adopt different means of spending until it has become standard

About Markus Bergthaler: Markus oversees

even if it has a clear edge. This is what has made it difficult for

the development of all Association program and

chip-and-PIN transactions to become popular throughout the

marketing content including strategy, conference

United States.

education, subject matter, website content, bench­ marking and online forum topics. Markus joined

Merchants have to be more willing to adopt new transaction

the MRC from Wizards of the Coast where he led

methods while also securing them. This may require additional

the company’s fraud department.

training for staff and continued learning for retail business owners who want to remain knowledgeable about upcoming

About Merchant Risk Council: The Merchant

tech. Though investing in new payment technologies carries an

Risk Council is the leading global trade association

upfront cost, this cost can be mitigated by the additional reach

for fraud and payments professionals. The MRC

the merchant can have. Often, these new payment technologies

provides support and education to members with

will have a list of supporting merchants for their users.

proprietary benchmarking reports, whitepapers, presentations and webinars. The MRC hosts four

Retail spending through the Internet of Things is expected

annual conferences in the US and Europe, as well

to reach USD 2.5 billion by the year 2020. This trend is gro­

as regional networking meetings for professionals

wing exponentially and cannot be ignored by retailers. Vendors

to connect, exchange best practices and share

need to move forward in optimizing their products and their

emerging trends. #ProudlyACommunity

campaign strategies for IoT purchasing, as well as looking throug­­ h­out their existing processes for areas of potential improvement.

www.merchantriskcouncil.org

Meanwhile, product manufacturers will need to look to IoT to improve their marketing and supply chain management. Companies that innovate and adapt quickly to this market have a far better chance of surpassing their competitors.

Share this story

60

PAYMENT METHODS REPORT 2018

•

Innovations in the Way We Pay

Payment Methods Basics and Overview of How People Pay in Different Markets Essential Trends to Watch

Payment Methods Explained Introduction In order to offer a comprehensive overview of the subject matter, we found it impetuous to take a closer look at the various types of payment instruments and methods. We will start with a short introduction presenting the terminology and the difference between a payment method and a payment instrument, and then there will be an in-depth presentation of all the payment methods. The various payment methods will then be mapped and presented by region in an infographic, with a focus on Europe, the US, Asia, and LATAM. Online payment methods refer to the entire set of means through which shoppers can pay for their purchases over the Internet. An online payment method is presented at the checkout or on the merchant’s payment page, and should have a clear recognition by the shopper through means of a well-known logo (e.g. Mastercard, PayPal, iDEAL) or common allpurpose words like ‘credit cards’, ‘bank transfer’ or ‘payment-on-delivery’. Alternative payment methods refer to online payment methods that are used as an alternative to credit card payments.

Online payment methods rely on six payment instruments: • Card payments; • Bank transfer payments; • Direct debit payments; • Cash payments; • Cryptocurrency payments; • Direct carrier payments.

Normally, online payment methods refer to online payment method brands (Mastercard, Bitcoin, Boleto, Bancontact), online payment solution brands (e.g. Klarna, PayPal, Masterpass) or directly to one of the payment instruments (e.g. ‘bank transfer’). In this report, we draw a clear line between the six payment instruments, the actual tools for a transaction, and payment methods, the ways in which these tools are put to use.

Each of the six payment instruments has its own local, regional, global or vertical payment ecosystem. Ecosystems are represented by a specific payment scheme which can be described as the institution that sets the governing rules and technical standards for the execution of payment transactions using one of the underlying payment instruments.

As mentioned before, online payment methods refer to the ways shoppers can pay for their purchases over the Internet.

There is an endless number of payment methods to match all contexts (pay in advance, pay afterwards, and payment and delivery at the same time).

We have identified ten different payment categories. A payment method can stand in a one-to-one relationship with an instrument, as with credit cards, but it can also incorporate several payment instruments in one method, as with e-wallets (can be topped up by debit/credit card or Online Banking e-Payments).

63

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained The ten categories discerned from one another are: 1. Credit card

6. Direct debit

2. Debit card

7. Invoice – Payment after delivery – Instalments

3. Prepaid card

8. Cash (cash-on-delivery and kiosk payments)

4. E-wallet

9. Direct carrier billing

5. Online Banking

10. Cryptocurrency

Payment Method Categories Explained Below, we will elaborate on the ten payment method categories consisting of both card-based payment methods and alternative payment methods.

Credit card General description

Credit cards are issued to cardholders, after which a revolving account is created by the issuer, granting a line of credit to the cardholder. The cardholder can then borrow money for payment to a merchant. For credit cards, we distinguish two different types of schemes: the three-corner model (closed and exclusive scheme, e.g. AMEX, Diners Club, Discover) and the four-corner model (open and inclusive scheme, e.g. Mastercard, Visa, UnionPay, RuPay).

Payment instrument

Credit card

Payment guarantee

When it comes to fraud and chargebacks, credit cards offer the highest protection. At most, a cardholder is only liable for USD 50 of an unauthorised transaction. Some issuers provide zero liability cards, meaning the cardholder will be reimbursed for the full amount of the fraudulent charge.

With credit card transactions, the consumer’s cash reserves are not affected.

While the available credit for the card may drop temporarily after the fraudulent purchase is made, the cardholder is not affected much by the unauthorised purchase.

Chargeback can be used in cases of goods not arriving at all, goods that are damaged, goods that are different from the description, or where the merchant has ceased trading. There is a time limit on chargeback claims – typically 120 days. The time at which this period of 120 days starts depends on the specific circumstances, but will usually be from the day the consumer becomes aware of a problem. Additionally, once a chargeback has been filed, a refund should be credited to the account immediately.

64

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained Credit card Brands

Mastercard, Visa, JCB, Discover & Diners Club, American Express, China UnionPay, RuPay, Chase

Market reach

Credit cards are widely used internationally, and enjoy a status of being widely accepted as the common payment method for ecommerce and POS. However, in Asia, only 41% of online transactions are completed with a credit card. In some European countries (the Netherlands, Germany, Poland) alternative payment methods (online banking e-payments, invoice) are the dominant payment methods for ecommerce.

Debit card General description

On top of the cards for offline payments, debit cards are also used increasingly online, as well. Functioning almost the same way as a credit card, but without several risks of debt, the debit card has become popular in countries that drifted away from credit payments (Russia, Mexico) but have no or little accessible online banking options. In several countries where online banking has rapidly developed and increased in popularity (e.g. Germany and the Netherlands), debit cards are virtually no longer used online.

Payment instrument

Debit cards are directly linked to the checking account of the buyer.

Payment guarantee

Credit cards have a maximum fraud liability of USD 50. With debit cards, that liability cap only lasts for two days. If consumers do not immediately report a lost or stolen card that has been compromised, the fraud protection decreases significantly. After two days, the liability jumps to USD 500. If consumers let two billing cycles pass, they would not be reimbursed for any of the fraudulent purchases.

Additionally, the effects of fraud are felt immediately. A criminal has the ability to completely drain the consumer’s bank account before the unauthorised purchases are detected. The law allows banks to take 10 days to review the claim before issuing refunds. While some banks refund the cash much sooner, cardholders usually feel the effects of such a limited access to necessary funds.

Brands

Visa Debit, Debit Mastercard, Maestro, Dankort (DK), V PAY card, PostFinance Card, Interac debit cards

Market reach

In the US, credit cards are the dominant payment method for ecommerce, credit card market showing significant innovation. Rewards programmes of all kinds proliferate, and new digital account servicing tools help consumers manage purchases, debt, and account security in the country, but also globally. In Canada, debit cards (Interac debit) are more popular. In Europe, online banking e-payment methods are more widely used.

65

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained Prepaid General description

Some prepaid cards run on scheme networks such as Visa and Mastercard.

These cards can be used to make purchases or withdraw cash in the same way as a debit or credit card. The key difference is that they need to be loaded up with cash in advance – the balance then operates as the spending limit.

Another type of prepaid cards, for example paysafecard, is the type of card or voucher consumers need to buy before starting a transaction. These cards are not usually run on scheme networks (such as Visa and Mastercard) and are usually authorised immediately.

Most prepaid products have a funding limit and some do not allow multiple cards/vouchers to fund one single transaction.

Payment instrument

Cash, debit, or credit card

Payment guarantee

Payments cannot be reversed by the buyer.

Brands

paysafecard, NeoSurf, Cashu, Kaiku, Mango Money

Market reach

Prepaid cards, with their relative safety for consumers and ease-of-access, make them a popular payment method for consumers in BRIC countries and underage consumers without access to a credit card. The prepaid card sector continues to grow globally by capitalising on the needs of the unbanked or underbanked people in emerging countries.

E-wallet General description

An e-wallet is a digital tool (software or app) for consumers to store their payment methods. It stores credentials of e.g. debit, credit cards and alternative payment methods. Some e-wallets can also store loyalty programmes. An e-wallet allows an individual to make electronic transactions with an improved checkout and payment experience compared to keying in all payment credentials every time a purchase is done. Wallets can function both in online and physical stores.

Other remarks: • e -wallet providers can also be payment method providers, e.g. Visa and Mastercard; • e-wallet providers can also be independent, e.g. Seamless/SEQR, YoYo, OK The term ‘wallet’ is also often used in the situation of a stored-value account for which a license is required (e.g. e-money).

Payment instrument

66

Multiple payment methods can be used, depending on the e-wallet provider: credit card, debit card, online banking e-payment, and direct debit.

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained E-wallet Payment guarantee

The chargeback risk of an e-wallet depends on the payment instrument used to top up the e-wallet. PayPal offers consumers a protection if they are charged for goods they did not purchase or if the order did not arrive or if the order did arrive but is significantly different than it was described. Merchants are protected by PayPal when selling physical goods that are sold and shipped with proof of delivery from within the US to buyers around the globe.

Brands

PayPal, Alipay, WeChat Pay, Apple Pay, Samsung Pay, Google Pay, Masterpass, Paylib, Amazon Pay, SEQR, MobilePay, Lyf Pay, Vipps, Yoyo Wallet, Chase Pay, Allied Wallet, Starbucks Wallet, mBank, Lydia, Moneta, Dwolla, Paytm, MobiKwik, Pay by Bank App, OK, boon.

Market reach

The US: E-wallets are used mostly by young people, who tend to not stick with one e-wallet. Cash and cards are still far more important, and the preferred option for most in-store payments. The only successful e-wallets seem to be merchantbacked: e.g. PayPal, Starbucks Pay.

Europe: Adoption of e-wallets is slower than initial forecasts predicted. However, it is expected that their share will increase in the next 3-5 years. Notable exceptions are MobilePay in Denmark, with 3.2 million users, and Vipps in Norway, with 2.15 million users.

India: Rapidly growing market due to the conjunction of rising smartphone usage and lack of access to financial services to a large part of the population. In addition, demonetisation in India has proved a lucrative opportunity for e-wallet players in the country.

China: For online payments, the e-wallets (particularly Alipay and WeChat Pay) are the most popular form of payment.

Online Banking e-Payment General description

The Online Banking e-Payments (OBeP) scheme is a type of payments network

designed to facilitate online bank transfers. In an OBeP scheme, the consumer is authenticated in real-time by the consumer’s financial institution. The availability of funds is validated in real-time and the consumer’s financial institution provides the guarantee of the payment to the merchant in case the payment is made as a credit transfer (push payment): i.e. the consumer/buyer initiates the payment.

The merchant receives a real-time guarantee so (s)he can continue with the fulfilment process. The actual funds arrive later (D+1), according to the SEPA Credit Transfer Scheme.

Payment instrument

67

Bank transfer payments: an online bank transfer, or online wire transfer, is simply the movement of funds from one bank account to another. When happening within one bank’s system (also referred to an ‘on-us’ transactions), this typically happens in real-time. Transfers between banks can take longer (depending on the cut-off times) and are often subject to fluctuation of speed depending on the size of the transfer.

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained Online Banking e-Payment Payment guarantee

A successful online banking-based payment is irreversible. After the bank has received the payment, the buyer cannot reverse the transfer. The merchant is not faced with a chargeback risk. Another benefit is the relatively low transaction cost compared to card, wallet, or other alternative payments.

Brands

Multi-Bank OBeP scheme – entails that a seller or Payment Service Provider has one single connection to the OBeP network in order to accept payments from any participating financial institution. Brands: iDEAL (the Netherlands) GiroPay (Germany), MyBank (EU), ePS (Austria) and Bankaxess (Norway).

Overlay OBeP – third party (the overlay provider) which sits between the payment network and the consumer. The overlay provider requires the consumer to share their online banking credentials with them in order to have access to the consumer’s bank account and to initiate the credit transfer to the merchant.

Examples: SOFORT banking (Germany), Trustly (pan-European), PayWithMyBank (US).

Market reach

Europe: Online Banking e-Payments represent a significant share in the Netherlands, Germany, and the Nordics. It is likely to grow across Europe due to PSD2: more payments will be done via SEPA Instant Credit Transfers, since it will become easier for merchants and their buyers to initiate payments online and mobile. This is facilitated by the new role of Payment Initiation Services.

Ovum, in Instant Payments and the Post PSD2 Landscape, estimates that by the early 2020s, instant payments will have become a mainstream method for online payments and by 2024, they would have overtaken payment cards for online purchases US: The small market share of OBeP might grow with new players entering the market (PayWithMyBank), providing a better user experience and less risk.

India: A primary governing body of all retail payment systems in the country, National Payment Corporation of India (NPCI), has launched a Unified Payments Interface (UPI). The interface allows customers to make payments through a single identifier, like Aadhaar number or virtual address. UPI is an infrastructure on top of which end-user apps can build and implement the features offered

by UPI. UPI enables a customer to make payments using his mobile phone as the primary device for payments, including person-to-person, person-tomerchant, and merchant-to-person with the ability to pay someone, as well as ‘collect’ cash from someone. UPI has a huge potential; if exhausted fully, it will further promote the concept of mobile payments and also facilitate digital banking. Version 2.0 of the UPI is set for release in the coming months of 2018 and will see some game-changing features like recurring billing, coming with a reduction in costs and a greater inclusion. Merchants are expected to be the biggest winners, UPI 2.0 developments being focused on boosting peer to merchant transactions and empowering the subscription economy.

68

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained Direct debit General description

There are no card scheme networks involved in the SEPA Direct Debit (SDD) Core scheme. All communication happens directly between banks. To set up payments by SDD, the payer must complete a mandate to the merchant.

This mandate contains bank-approved wording that makes it clear the payer is setting up an authorisation for the merchant to debit their account. The interface for completing the SDD instruction is controlled by the merchant, which then sends the direct debit initiation to the bank. The SDD core scheme can be used for single (one-off) or recurring direct debit collections. Direct debit offers a relatively inexpensive payment method to merchants.

Payment instrument

SEPA Direct Debit

Payment guarantee

The SDD Core Scheme grants payers a ‘no-questions-asked’ refund right away during the eight weeks following the debiting of a payer’s account.

Therefore, during this time, any funds collected by SDD Core Scheme will be

credited back to the payer’s account upon request. Consumers may request a chargeback (claiming it was an unauthorised transaction) up to 13 months after the settlement. Solution providers offering SDD based payment methods can take over the risk of default payments and chargebacks.

Brands

RatePAY, SlimPay, GoCardless, SEPA Express, NuaPay, Fastpay, Eazipay, AccessPay, Eazy Collect, Smartdebit, B4payments

Market reach

SDD has seen strongest adoption in Germany, the Netherlands, Spain, and Austria. The payment method is often used for recurring payments, due to the lack of issues with credit card expiration. As more and more consumers shift towards subscription model, direct debit may also become a more relevant payment method in this economy.

Invoice / Installment General description

We distinguish two types of invoice payments: open invoice (payment after delivery) and instalment payments (a series of payments that a buyer makes instead of a lump sum to compensate the seller).

Payment instrument

SEPA Credit Transfer, credit card, debit card (instalments)

Payment guarantee

Solution providers offering open invoices often take over the risk of collecting the payment. They guarantee payment to the merchant, either by some sort of insurance or by taking over the invoicing process. To do this, they perform their own assessment of the shoppers’ risk profile and accept or decline the order online.

Brands

RatePAY, Afterpay, Klarna, AcceptEasy, FuturePay, Sezzle, Divido, CreditClick, Sliceit, BillPay

69

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained Invoice / Installment Market reach

Europe: Open invoice is popular in Germany, Benelux, Austria, Switzerland, and the Nordics (retail segment). In Turkey, 88% of the consumers prefer to use their credit cards instead of debit or prepaid cards to make instalments for online purchases (source: PayU). According to the Lost in Transaction report

by Paysafe, invoice payments continue to be a dominant payment method in Austria (38% of Austrians now use payment by invoice, compared to just 18% using debit) and Germany (29%, compared to 20% for debit cards and 25% for credit cards).

US: 63% of millennials (ages 18 to 29) do not have a credit card, according to a survey commissioned by Bankrate and compiled by Princeton Survey Research Associates International.

Cash General description

We distinguish two commonly used methods of cash payments, cash-on-delivery and kiosk payments. Cash-on-delivery (COD) is a payment method in which ordered goods are carried to the buyer’s place but are handed over only upon full payment.

Kiosk payments are popular in India, LATAM, Russia, Indonesia, and Japan.

Shoppers can choose this cash payment method and print a voucher or receive a reference number. With the voucher of reference number, they can pay for the item at a kiosk, cash register at a convenience store or bank branch. The kiosk notifies the merchant that the payment was made, credits the merchant’s account and confirms to the merchant to ship the item.

Payment instrument

Cash

Payment guarantee

After the payment has been made and the goods are received, the buyer cannot reverse the payment via the carrier.

Brands

Boleto (Brazil), QIWI (Russia), PayNearMe (the US), Konbini (Japan), Kudo (Indonesia), Barzahlen (Germany), Paysafecash (global), YesByCash (France)

Market reach

Despite an increasing influx of money into the payments ecosystem in Southeast Asia, cash-on-delivery (COD) remains the most popular payment method in emerging Southeast Asian markets. 53% of German transactions as of 2017 were still made with cash.

In LATAM and Russia, kiosk payments give the opportunity to make purchases to a lot of people who are in rural towns and intermediate cities, where the presence of a payment point is much more common than a bank.

70

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained Direct carrier billing General description

Direct carrier billing implies making a payment for goods or services which is charged to the customer’s mobile phone account, either to the monthly bill (for customers with a contract) or as a debit from prepaid credit.

Presently, online purchases of digital content (games, music, video, e-books, and ringtones), charity donations, TV voting, and competitions are the primary use case for direct carrier billing.

Payment instrument

Direct carrier billing

Payment guarantee

Payments cannot be reversed by the buyer. When a buyer fails to pay his tele­ phone bill, it is up to the telecom operator to collect the money.

Brands

DIMOCO, Bango, Fortumo, Boku, Zong, Text2Pay, Buongiorno, TxtNation

Market reach

Direct carrier billing helps merchants to monetise consumers who do not own a debit or credit card, such as the unbanked (i.e. consumers who do not have access to banks or credit unions), underbanked (i.e. consumers either having a checking or savings account, but also relying on alternative financial services) and younger demographics.

In emerging markets, but also in some economically powerful countries like South Korea, a variety of purchases can be billed on a mobile phone. In Norway, direct carrier billing is the second most popular payment method for digital gaming, while in the other Nordic countries carrier billing has a 10-21% market share from digital content payments.

71

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Payment Methods Explained Cryptocurrency General description

Cryptocurrency is a digital currency in which the regulation of the amount of currency units and the verification of transactions of these units is done through cryptographic techniques. Cryptography is generally used to secure the transactions, and also to control the creation of new currencies or coins. The first cryptocurrency to be developed was Bitcoin in 2009. Currently, there are over 1,000 cryptocurrencies available across the globe, with over 150 billion dollars in market capitalisation, 10,000% up compared to where the figure stood in 2016.

While Bitcoin’s market capitalisation accounted for 86% of the total cryptocurrency market in March 2015, it has dropped to 72% as of March 2017. The most spectacular growth of a cryptocurrency in 2017 was that of Ripple’ XRP, which has grown more than 35,000% in just one year. Ether (ETH), the Ethereum network’s native cryptocurrency, has established itself as the second-largest cryptocurrency.

Bitcoin allows people to pseudo-anonymously buy goods and services over the internet. All transactions are publicly visible but the account numbers are anonymised and are not in someone’s name.

Cryptocurrency payments happen in two ways: firstly, a transaction from one cryptowallet to another. These transactions are made exclusively in a cryptocurrency and mostly happen B2B or C2C. Secondly, a transaction in a cryptocurrency is made to a crypto-wallet, but can be transferred into a payments account that uses an institutional currency, e.g. EUR or USD. These transactions happen mostly B2C. Payment instrument

Cryptocurrency

Payment guarantee

Cryptocurrencies do not allow payments to be reversed because there is no third party between the sender and receiver of a payment.

Brands

Bitcoin, BitGo, coinify, Litecoin, Ethereum, Zcash, Dash, Ripple, Monero

Market reach

By the beginning of 2017, it was estimated that over 150,000 merchants worldwide accepted Bitcoin, the world’s most popular cryptocurrency, as one of their pay­ ment methods. This list includes major retailers like Amazon, Walmart, eBay, Expedia, Microsoft, Apple and even coffeehouse giant Starbucks. Most notably, cryptocurrencies are mostly adopted in the online gaming industry.

Possible explanation: security, no chargeback risk, the (pseudo) anonymity factor, the immediacy of the transactions, the low-cost and evidently the adoption of the payment method among online gamers.

Cryptocurrencies could prove efficient in countries with a low access to financial services or in countries where credit cards register high decline rates (Mexico, India, Brazil, the UAE), and other areas where there is a higher incidence of fraud.

Geographically, Bitcoin is mostly used across North America and Europe, with a growth in LATAM and APAC countries.

72

PAYMENT METHODS REPORT 2018

• Payment Methods Basics and Overview of How People Pay in Different Markets

Country Infographics

Brazil

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

211.000.000

66%

41%

0,7%

37,7%

e-wallet | 12%

PostPay | 15%

Pre-Paid | 3%

credit card | 64%

cash | 1% bank transfer | 3% debit card | 2% Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in Brazil

74

PAYMENT METHODS REPORT 2018

•

Country Infographics

UK

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

65.128.861

94%

81%

7,9%

80%

other | 8% cash | 9% bank transfer | 4%

card | 52%

e-wallet | 27%

Source: PPRO Payment Report EU

Some of the best known alternative payment methods in the United Kingdom

75

PAYMENT METHODS REPORT 2018

•

Country Infographics

Netherlands

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

16.939.923

95%

95%

2,37%

68,8%

others | 9%

card | 15%

e-wallet | 5%

bank transfer | 71%

Source: PPRO Payment Report EU

Some of the best known alternative payment methods in the Netherlands

76

PAYMENT METHODS REPORT 2018

•

Country Infographics

France

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

66.538.391

86%

65%

3,9%

65,3%

cash | 6%

others | 6%

bank transfer | 11%

card | 61% e-wallet | 16%

Source: PPRO Payment Report EU

Some of the best known alternative payment methods in France

77

PAYMENT METHODS REPORT 2018

•

Country Infographics

Germany

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

81.679.769

89%

79%

2,5%

68,8%

others | 9%

card | 12%

cash | 5%

e-wallet | 23%

bank transfer | 51%

Source: PPRO Payment Report EU

Some of the best known alternative payment methods in Germany

78

PAYMENT METHODS REPORT 2018

•

Country Infographics

Poland

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

37.986.412

68%

56%

-

63,4%

others | 7%

card | 18%

cash | 10%

e-wallet | 14%

bank transfer | 51%

Source: PPRO Payment Report EU

Some of the best known alternative payment methods in Poland

79

PAYMENT METHODS REPORT 2018

•

Country Infographics

Canada

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

36.300.000

90%

62%

2,3%

69,8%

PrePay | 2%

direct debit | 3%

Pre-Paid | 2%

direct cards | 5%

others | 1%

cash | 5% bank transfer | 7%

e-wallet | 12%

credit card | 63%

Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in Canada

80

PAYMENT METHODS REPORT 2018

•

Country Infographics

Russia

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

144.400.000

85%

40%

1,3%

54,7%

Pre-Paid | 5%

PrePay | 2%

credit cards | 11% direct cards | 36%

others | 2%

cash | 15%

bank transfer | 3%

e-wallet | 26%

Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in Russia

81

PAYMENT METHODS REPORT 2018

•

Country Infographics

Turkey

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

80.000.000

56%

55%

1,6%

49,8%

Pre-Paid | 3%

debit card | 6%

cash | 4% bank transfer | 2% e-wallet | 11%

credit card | 74%

Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in Turkey

82

PAYMENT METHODS REPORT 2018

•

Country Infographics

UAE

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

9.300.000

99%

-

-

80,6%

direct card | 12% credit card | 16% PrePay | 9%

Pre-Paid | 6% cash | 19% others | 9% e-wallet | 15%

bank transfer | 14%

Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in UAE

83

PAYMENT METHODS REPORT 2018

•

Country Infographics

China

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

1.388.000.000

57%

58%

5,8%

51,7%

Pre-Paid | 4%

PrePay | 2% credit card | 10%

debit card | 9% others | 2% cash | 7% bank transfer | 6%

e-wallet | 60%

Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in China

84

PAYMENT METHODS REPORT 2018

•

Country Infographics

Japan

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

126.000.000

96%

76%

1,6%

50,1%

Pre- Paid | 1%

PrePay | 1%

debit card | 1% PostPay | 17%

bank transfer | 14% credit card | 55% cash | 10% e-wallet | 1% Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in Japan

85

PAYMENT METHODS REPORT 2018

•

Country Infographics

India

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

1.342.000.000

25%

17%

1,5%

22,4%

PrePay | 7%

credit card | 12%

Pre-Paid | 5% e-wallet | 8%

direct card | 14%

others | 5% bank transfer | 23% cash | 26%

Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in India

86

PAYMENT METHODS REPORT 2018

•

Country Infographics

South Africa

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

55.800.000

64%

47%

0,3%

36,2%

PrePay | 5%

Pre-Paid | 4%

others | 17%

credit card | 35%

cash | 10% direct cards | 14% bank transfer | 15% Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in South Africa

87

PAYMENT METHODS REPORT 2018

•

Country Infographics

US

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

326.400.000

94%

78%

2,3%

69,3%

PrePay | 3%

Pre-Paid | 3%

debit card | 25%

PostPay | 2%

credit card | 34%

others | 3% cash | 4% bank transfer | 6%

e-wallet | 20%

Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in the US

88

PAYMENT METHODS REPORT 2018

•

Country Infographics

Mexico

Population

Online users

E-shoppers

e-GDP (ecommerce share of GDP, USD)

Smartphone penetration

130.000.000

51%

40%

-

40,7%

Pre-Paid | 3%

PostPay | 5%

PrePay | 2%

debit card | 33%

credit card | 30%

others | 2%

e-wallet | 8%

cash | 7%

bank transfer | 10%

Source: Global Payments Report, Worldpay

Some of the best known alternative payment methods in Mexico

89

PAYMENT METHODS REPORT 2018

•

Country Infographics

Explanation Payment Methods Sources Ecommerce Report Poland 2018 – Ecommerce Foundation Ecommerce Report The Netherlands 2018 – Ecommerce Foundation European Ecommerce Report 2017 – Ecommerce Foundation Global Ecommerce Report 2017 – Ecommerce Foundation Global Payments Report, Worldpay, November 2016 Payments & E-commerce Report European Union, PPRO, 2018

90

PAYMENT METHODS REPORT 2018

•

Country Infographics

How to Create the Right Payment Mix Insights into verticals and geographies

How People Pay in Different Geographies and Verticals When regarding the global state of payments, only very vague

Samuel Barret from Trustly’s gaming division elucidates the

trends can be seen: we are moving towards ecommerce, and

challenges and opportunities of the online gaming world and how

that causes consumers to use less cash and more other payment

to deal with some of the most demanding customers around.

methods. But how exactly does this change affect every region?

From “no-registration” casinos to in banner betting, some of

What are the differences between regions? Which verticals and

the most unique payment problems are tackled in the gaming

regions lend itself to innovation and which ones are static? In this

industry. Additionally, Jens Bader from MuchBetter explains

section, several regions and verticals are examined by experts in

the ins and outs of an e-wallet that is optimised for the gaming

their field, providing an in-depth discussion of specific situations

industry, and how they deal with the challenges found there.

to give a clear image of the world today.

Jens Bader, the co-founder of MuchBetter, underlines the most Most broadly, Ralf Ohlhausen from PPRO sheds light on how

important payments and fraud challenges for gaming operators

to build the ideal payment mix for global businesses: how to

and the way in which complying with regulations should be

capitalise on the ever-growing opportunities while dealing with

approached in this industry. Jens explains how to support a

the increased competition that has arisen. In ten steps, he lays

good mobile experience in gaming and combat fraud in order to

out a plan for any merchant to gain success on a global scale.

stand out from the competition.

Abhishek Banerjee and Rossini Zumwalt from Emergent

As the shortest and cheapest payments route should be from the

Payments point out the opportunities abound in the emerging

customer’s bank account directly to that of the supplier, Jeroen

markets: Africa’s e-commerce revolution, the digital powers in

Dekker from AcceptEasy explains what does an ideal solution for

Latin America, the cashlessness of India, and the mobile focus

relationship payments in Europe looks like, by presenting what

in Southeast Asia. The emerging markets are looking better than

it means to minimise the payments hassle for B2C customers.

ever, and the room for innovation is immense.

Finally yet importantly, Jean-Christophe Lacour from Amadeus Kendrick Sands from Euromonitor International explains how

highlights the payments preferences and developments that

a shift in retail drives card adoption in China. Several non-

shape the travel industry. He also explains how the company

traditional financial service providers in the country gained share

helps in tackling the payment needs of travellers globally,

by reaching previously unbanked consumers through mobile

what payment methods for the travel industry may come up

devices and online marketplaces. With greater competition in

as alternatives for credit cards and how the western markets

the digital payment arena, Sands explains how payments are

address the payments needs of Asian tourists who are highly

increasingly seen as an additional channel where merchants are

mobile-wallet users.

able to be more connected to their customers and offer a range of products and services in the country.

Focusing on the US, Sally Baptiste from Payment Operations Group explains how Americans are changing their payment behaviour and, more importantly, how they are not. Discussing the successful innovations as well as the failed ones, it will give you an insight into how the US is dealing with the changes in the payment space.

92

PAYMENT METHODS REPORT 2018

•

How to Create the Right Payment Mix

How People Pay in Different Geographies

PPRO Going Global: Ten Steps to Success for Merchants Over the last decade, ecommerce has experienced exponential

4. Plan your market entry

global growth. A wider array of markets has encouraged greater

The best marketing plan in the world will fail if not supported by

competition and provided more opportunities for online merchants

a well thought through market entry strategy. Consider the best

to reap the rewards. However, staying ahead of the competition

way to set-up shop in a new region, as it will differ depending

in such a climate is easier said than done and, if not approached

upon your business model and regional knowledge. Do you first

properly, going global can put merchants at risk of falling behind.

need to use a partner to sell via an online marketplace, auction

With this in mind, here are ten simple steps to success for

site or through an established local vendor? Or can you enter the

merchants who want to go global:

market alone, right from the start?

1. Assess cross-border market opportunities

5. Consider your market share and positioning

Consider the barriers to trade in the regions that interest you and

Your current market(s) may be crowded or dominated by one or

make sure the benefits of doing business in the area outweigh

two big names. If you enter an emerging market with a carefully

the costs of meeting market needs and expectations. Also, do

tailored and localised offering, you could grab a large slice of

not dismiss high-growth markets, such as Vietnam and Poland,

that niche before others do.

which might be relevant for your business, but not the regions that spring to mind when looking for new sales opportunities.

6. Review payment methods When it comes to payment options, decide how much risk you feel

2. Know your market and audience

comfortable with. Some payment methods may be convenient

This is important not only in terms of what you sell and to who,

for customers, but carry a greater burden of chargeback risk or

but also in terms of relevant payment preferences. Online casinos

other costs to the vendor. This type of risk can often be mitigated

do not accept credit card payments due to the fraud potential,

for example by offering less risky forms of payment (such as

while travel websites need to offer customers the option to pay

SEPA direct debits) for goods below a certain value or to trusted

via credit card due to the high value of the transaction. Sale

customers. Push payments, which are proactively sent by the

conversions are linked to the provision of appropriate payment

client, are less risky in terms of chargeback but their use must

methods – and payment behaviour varies by demographic.

be balanced with local preferences. Examples of push payments

In many cultures, younger people are more likely to use non-

include giropay in Germany and iDEAL in the Netherlands.

traditional payment methods, but if your target audience is

7. Personalise your ecommerce offering for local

primarily older, this may not be relevant.

needs 3. Plan your marketing strategy

Make sure customers are only offered the payment methods rele­

Consider your target market carefully. For example, a German

vant to their location, in a regionally-appropriate format. There are

national buying furniture online would rather not pay for a new sofa

several ways of doing this, including local versions of websites

in advance, but wait for delivery and then pay directly from their

and identification of site visitors by location, which then dictates

account. Think about the behaviour of your target customer and

the pages and payment options available. You should offer each

which marketing strategies will resonate best with them. If this is

visitor, ideally, around five of the most popular payment options in

out of your remit, then working with a local marketing partner will

their location, to maximise your chances of making a sale. ➔

provide the necessary knowledge to attract and retain business in the region, supporting long term growth.

94

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Geographies

PPRO 8. Do not procrastinate Online retailers wanting to take a share of emerging markets need

About Ralf Ohlhausen

to act now, while the trend towards internationalisation is in its

Business Development Director

infancy and market niches are free.

PPRO

9. Compliance matters As a business, you must comply with a multitude of legal, financial and customs regulations of the markets you trade in. It is, there­ fore, crucial to keep abreast of and respond to any regulatory

About Authorname: Ralf Ohlhausen, MSc in

changes in a timely fashion. This generally demands external

Mathematics and Master of Telecommunications

exper­tise, particularly as the penalties for non-com­pliance can be

Business, has over 25 years’ experience in

extremely tough.

ecommerce, financial services, mobile telecoms and IT. Ralf is responsible for expanding the

10. Consider third-party support

company’s portfolio and global reach, as well as

When making a foray into a new market or region, it is impor­

for developing new business areas and partner­

tant to keep on top of commercial and regulatory barriers

ships.

and implement the best alternative payment methods. This is funda­mental to the success of your business expansion. However,

About PPRO: PPRO enables integrated elec­

very few retailers have sufficient expertise in-house to manage all

tronic payment processing on a global scale

of these matters optimally, so finding a partner who can support

spanning the entire payments value chain from

you on your global journey can be the key to success.

acquiring through processing, collection and settlement. Positioned as ‘The Payment Pro­

While the prospect of ‘going global’ is still new for some, it’s vital

fessio­nals’, PPRO acts as a B2B payments hub,

for merchants to break into new regions quickly, armed with the

connecting PSPs and other merchant aggregators,

best strategy and proposition to seize the opportunities, before

such as acquirers and processors, with local

the competition swoops in. Only by taking this approach can

payment schemes.

merchants win new customers and multiply their bottom line, building new revenue streams and expand into new regions.

www.ppro.com

Global success is only a few steps away, and now is the time to go for it.

Share this story

95

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Geographies

Emergent Payments Emerging Market Ecommerce Trends and What to Watch Global emerging markets are looking better than ever after

While we expect Brazil to continue to lead the region for the

a strong start in 2018. Many of these markets show no signs

foreseeable future, Argentina is the one to watch closely. The

of slowing down with rapid economic, political and financial

country is coming off the back of remarkably strong ecommerce

progress across all regions.

and mcommerce performances.

AFRICA

Argentina has experienced economic unrest in recent years, but

Africa is the next ecommerce revolution and 2018 is the year to

it benefits from very high internet penetration and the largest

start making this rapidly expanding market a priority. Here we

mobile Internet usage in Latin America. It also has a larger middle

have over a billion people across 54 countries, and the 21st century

class than other countries in the region and consumers with high

has seen a remarkable industrial transformation. This young

spending power.

and high-growth continent is at the cutting-edge of global consumer behaviour, without the burden of entrenched distribu­

We are already seeing some major payments developments take

tion channels or legacy infrastructure for entrants to overcome.

effect there. Credit card systems are being overhauled with Visa and Mastercard, no longer captive to First Data and Prisma.

The region has one of the fastest growing middle-class consumer

We expect digital banks to prevail and some of the cash-based

markets in the world. Their buying power is significant and

methods, like Pago Facil and Rapi Pago, to give into more mobile

they are driving demand for content on mobile platforms. The

and digital payments.

explosion in mobile usage is not only important from a consumer perspective, but, beyond that, it’s extending into payments

INDIA

innovation.

Expect an even bigger acceleration of India’s payments inno­ vation throughout 2018. It’s been over a year since the Unified

Nearly 60% of the world’s active mobile money accounts are

Payments Interface launched, and version 2.0 sees the release of

in Sub-Saharan Africa alone, according to Ecobank Research.

some game-changing features, like recurring billing. In October

M-Pesa has been hugely successful in Kenya and we expect this

2017 alone, there were over 76 million UPI transactions made,

to be replicated across the board for mobility payments in Africa.

up from 30 million in September 2017. If this adoption speed

2018 is going to be an instrumental year for this frontier market.

continues, the reality of a cashless economy isn’t far off. It has major potential to disrupt the way Indian consumers pay digitally.

LATIN AMERICA

Expect this to fuel a further shift away from cards and wallets. The

In Latin America, high levels of connectivity are fuelling rapid

pay­­ments system overhaul has been driven by the government’s

ecommerce growth. The region’s biggest ecommerce market

investment in state-of-the-art technology, customer adoption and

– Brazil – is a global digital power within its own right. Latest

awareness campaigns. People are excited about the reduction in

trends indicate mcommerce and social media are still the best

costs and greater inclusion. ➔

way to reach consumers. Most importantly, local payment methods are the key to success, with many consumers foregoing international credit cards in place of local credit cards, pinless debit transactions and Boletos (bank and cash).

96

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Geographies

Emergent Payments SOUTHEAST ASIA Southeast Asians spend more time on their mobiles than any

Rossini Zumwalt

other market. On average, consumers spend 3.6 hours per day

Chief Payments Officer

using mobile internet. Locals are tech savvy and motivated, and

Emergent Payments

global technology companies are paying attention to this trend.

Major investment boosts from Chinese companies Alibaba and Tencent have paved the way for a big year in ecommerce across

Abhishek Banerjee

the region.

Chief Technology Officer Emergent Payments

In particular, Indonesia is one to watch with the market primed to grow rapidly. With swift GDP growth and the fastest growing number of Internet users across the globe (We Are Social and Hootsuite), Indonesia is ripe for ecommerce.

About Rossini Zumwalt: Rossini has extensive Quick to establish itself as a mobile-first nation, it presents a

experience in setting up strategy and managing

unique opportunity for merchants to introduce digital platforms to

operations for ecommerce payments and risk,

further engage tech savvy and motivated consumers. By 2025,

both as a merchant and solution provider. She

Southeast Asia’s digital economy is predicted to surge to

served as a Senior Director at Symantec and, prior

USD 200 billion, with Indonesia’s digital market to account for

to that, as Head of Global Treasury.

nearly half of that (Alphabet Inc. and Temasek Holdings Pte). This

About Abhishek Banerjee: Abhishek has a deep

would put the nation third in the region, behind Asian powerhouse

background in payments and fraud prevention

markets such as China and India.

engineering, along with big data and analytics.

Before joining Emergent Payments, Abhishek was

One of the biggest challenges for ecommerce in Indonesia has

the Head of Engineering for payments and risk at

been the low penetration of debit and credit cards. However, there

Western Union.

continues to be great potential for alternate payment methods, as

About Emergent Payments: A subsidiary

consumers demonstrate their willingness to pay and shop online.

of Emergent Technology Holdings, Emergent Payments offers a total global and local payments solution for high-growth markets. They serve as both a payment gateway and payment facilitator for digital merchants in Asia Pacific, Latin America, Africa, Middle East and Europe. www.emergentpayments.net Share this story

97

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Geographies

Euromonitor International How the Shift in Retail Drives Card Adoption in China Nearly one-third of total retailing in China is expected to come

population either due to a perceived lack of value from lower-

from online channels by 2022, marking a nine percentage point

income consumers or from consumers residing in a rural environ­

gain from 2017. This shift has resulted in several non-traditional

ment where there was limited access to mainstream financial

financial service providers gaining share by reaching previously

institutions.

unbanked consumers through mobile devices and online market­ places. With greater competition in the digital payment arena,

Alipay’s platform in China focused on enabling quick, reliable

payments are increasingly seen as an additional channel, where

and secure payments without disrupting the broader traditional

merchants are able to be more connected to their customers and

financial services sector. Starting with only online processing

offer a range of products and services.

in Alipay, ANT Financial quickly identified other gaps that were limiting online retail: basic consumer lending, insurance, credit scoring and investment services. Alipay was able to leverage their customer relationships from Alibaba and the brand strength built from facilitating commerce as a digital payment platform to offer these additional products and services. As the company expanded into financial services, it became clear that not only could they reach a wider consumer base through mobile devices, but they could also offer financial services at a far lower cost because they did not have a legacy branch network to support.

Alibaba is not the only company that has made the transition from online marketplace or social media provider to financial services and payments in China. Suning, JD.com and Tencent have all

In 2017, there were 277 million more banked consumers in China

capitalised on this rapid shift in consumers’ retailing preferences.

than five years ago. Driving this rapid adoption has been the

With further growth for the internet retailing sector in China, these

steady transition to online retail from traditional in-store channels.

companies are expected to expand offerings both in terms of

The total value of internet retailing in China, as well as its share of

products and services, but also throughout the region.

total retailing, are the largest globally and a number of factors have contributed to the faster adoption rate, including innovation from technology firms, broad distribution of mobile devices throughout rural portions of the country and the increased capabilities of smartphones.

The prime example of a Chinese technology firm adapting to offer payments and financial services is the payment company asso­ ciated with Alibaba, ANT Financial. As the shift towards online channels became more pronounced in China, the traditio­n al finan­cial service sector was unable to provide an effective digital payment platform to facilitate transactions. Additionally, basic financial services were not available to a large portion of the

98

PAYMENT METHODS REPORT 2018

•

➔

How People Pay in Different Geographies

Euromonitor International With online retail continuing to grow and financial services becoming widely available, the way consumers pay has also

Kendrick Sands

registered a significant shift over the past five years. Card

Head of Consumer Finance

payment value surpassed cash payment value for the first time

Research

in 2017. The discrepancy of the growth of payment functions

Euromonitor International

is expected to accelerate from 2017 to 2022 with a compound annual growth rate of 7.8% expected for consumer card payment value compared to cash with 0.3%. As consumers become more comfortable using cards for online payments, there is an

About Kendrick Sands: Kendrick Sands is the

increased expectation for offline merchants to also accept cards.

Head of Consumer Finance Research at Euro­

In the end, this makes the payment function more convenient for

mo­n itor International, which he joined in 2010.

consumers.

In his current position, Kendrick coordinates Euro­ monitor’s consumer finance research, providing

Debit cards drove the majority of card payment value growth from

strategic analysis and in-depth coverage of

2012 to 2017; many newly banked consumers had limited access

financial cards and payments worldwide.

to credit products due to a lack of credit rating services as well

About Euromonitor International: Euromonitor

as the lack of consumer information.

International is the world’s leading independent From 2017-2022, the driver of card payment value is projected

provider of global business intelligence and strate­

to shift away from debit to credit cards. Chinese consumers are

gic market research. We create data and analysis

expected to generate an additional USD 2.6 trillion on credit

on thousands of products and services around

products compared to USD 1.7 trillion on debit cards from 2017

the world. Euromonitor International’s global mar­ket

to 2022.

research database, Passport, provides statistics, analysis, reports, surveys and breaking news on

Despite the significant growth, debit is expected to continue to

industries, countries and consumers worldwide.

gene­rate more payment value in 2022. Unlike the retail sector, the card payment landscape has remained consistent among

www.euromonitor.com

card issuers. The top four issuers by card payment value – China Construction Bank, Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China – accounted for 61% of total card payment value. On the network side, the limitation of meaningful competition has resulted in UnionPay International becoming the world’s largest card network by payment value. However, the Chinese government has allowed other companies to apply for a licence to process payments which could lead to greater competition for the projected trillions

Share this story

of dollars of additional card spend generated by 2022.

99

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Geographies

Payment Operations Group Purchasing Methods in the United States – Innovatively Static Payments in the US market continue to multiply; however, few

The higher-trafficking wallets have built partnerships, such

options collect enough user-base to claim market-share. Trends

as Zelle through online banking, and ApplePay with device

come and go but the main players remain. Most view the card

reminders for their wallet. The issues are usage. Some consu­

as winner of the US market but there’s a player Visa wants to

mers view the ease of purchase inversely proportional to conve­

overtake.

nience of setup. With the high rate of card replacement in the US, re-filling wallets with new cards becomes a chore best ignored.

According to the JPMorgan Chase survey “How do you believe you

Of course, the P2P apps can be easily bypassed with use of cash

will be accepting/making the majority of your payments 5 years

to ‘split the bill’. Wallets continue to spike and retreat with small

from now?” cash is still strong in the US.

groups of loyal fans making every wallet basically successful yet unable to take the market.

Interestingly, only consumers expect cash to remain as strong as credit cards, while merchants hold hope for credit cards and digital wallets to rule. However, consumers own spending habits.

Looking within the US, cash must be acknowledged as an impor­ tant payment preference. US ecommerce hasn’t built methods for accepting cash, so cash spending is limited to retail. Why cash, though?

Many retailers have cash-driven points-of-sale. In restaurants and service areas, cash still carries weight as tipping drives wages and revenue. Additionally, Americans use cash as a debt-management tool. There is no better way to ensure you don’t get into debt than to spend only cash.

Mobile wallets cater to younger consumers experimenting with new/trendy payment methods. With every style of wallet con­cei­ vable, US consumers are pushed to pick a favourite and make it their preferred purchase mechanism. Many of these options have a strong ‘test’ phase, but don’t stick with the consumer.

Two large exceptions are PayPal and Starbucks. Neither wallet, when introduced, claimed the ‘nifty’ factor but each reso­nated with

The issue with these spikes is multi-pronged. First off, the target

users. When first introduced, PayPal called to security-min­ded

market is the younger demographic and they are not as faithful,

buyers and focused on ecommerce sales yet with expan­sions,

shifting to the next fad. Brand loyalty may be strong in their

processed USD 451 billion in 2017. Starbucks leve­raged their loyal

tech or social lives but it is not as strong in their financial lives.

customer base in introducing their app and in 2015, 7.5 million

Senior buyers are faithful to purchase methods but they are not

purchases went through the app weekly. The Starbucks wallet

enamoured with newer wallets as current card behaviours work

was an instant hit and continues to grow. ➔

fine.

100

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Geographies

Payment Operations Group Why are these wallets successful? Ease of use, ease of enrolment, and fulfilling customer needs – not perceived needs. And they are not

Sally Baptiste

slowing down their development. New features are released often

Consultant

with a lot of publicity, keeping users engaged. Not to be igno­red,

Payment Operations Group

credit cards have followers across generations and are expanding their reach. As attempts to win over the unbanked and underbanked peaked then fell away, the brands are looking to take specific markets and force buyers into their fold – but there are hurdles. Years ago, the brands began offering lower rates to markets

About Sally Baptiste: Sally Baptiste has 30+

with growth opportunities. Areas like telco and utilities received

years professional experience with both the largest

discounts and the trend continues today with rent and insurance

US eCommerce Acquirer. As a leader at Chase

pay-by-card discounts. The brands are deepening the card’s

Paymentech, then a Senior Business Manager

usefulness within household spend and growing into historically

of payments for AT&T, she was employed as

cash markets. Reducing cash is not this simple, however, as some

the payments expert for McAfee. With a Master

consumers tried prepaid cards for online purchases and bill pay­

of Business Administration degree and Payment

ment, but prepaid cards have initial activation and reloading fees

Card Industry Professional certification, she now

that reduce the initial value, not to mention cross-border block­

co-owns her own consulting group of Payment

ing. With check cashing locations offering money order pur­chases

Experts.

at lower fees, there is little palate for cards. Household markets are opening to cards but cash transitioning to plastic remains

About Payment Operations Group: Payment

problematic. Cards are also challenging wallets in the US by

Operations Group is a consultancy of Payment

building their own convenience factor with one-click checkout

Professionals with over 40 years’ combined

APIs. The Brands are so sincere about this convenience play,

experience in the Payments Industry – from

they are combining to release a One-Click/All-Brands API to

acquiring and ISO’s to issuing and merchant

increase appeal. Convenience-only, wallets may be losing their

perspectives. Our focus is on educating our

differentiating factors.

clients with our end-to-end approach to payment processing, helping them navigate the complex

Behind all of this manoeuvring, rewards cards have unmatched

ecosystem, and strengthening their position in

loyalty in the marketplace with miles/points/cash. Meanwhile,

their chosen processes.

debit cards, with little or no loyalty schemes, are growing quietly in the background. With both merchants and consumers viewing

www.paymentoperationsgroup.com

debit as a reliable payment mechanism, only a purchase’s placement in the household budget moves it into the world of wallet or credit. Basically, unless a payment type is convenient and engenders loyalty, it will remain a niche play. Until a new payment type is more universally appealing than cash or charge, for all

Share this story

generations and all buyers, the US market will continue as it is.

With so many new payment types, the US will remain entrenched until convenience is redefined.

101

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Geographies

How People Pay in Different Verticals

Trustly A Faster Way to Play: No-Registration Gaming Takes Hold There’s no denying: today’s consumers are impatient. Speed has

Once the player’s identity is verified, registration details are pulled

become a hygiene factor across almost all industries. People

from the account to fulfill the necessary KYC checks, and the

expect to be able to stream TV shows on demand and have their

merchant can establish an account in the background. With the

takeaway orders delivered in less time than it takes to microwave

payment provider helping to shoulder some of the KYC burden,

leftovers. The online gaming sector is no exception: players

gaming merchants can conserve resources and ultimately provide

expect to be able to play their favorite games and cash out their

a smoother player experience.

winnings instantly.

Benefits abound Similarly, registering at a gaming site has traditionally involved

While the benefits of no-registration casinos for players are clear,

filling out lengthy registration forms and then waiting for days

there are numerous up-sides for operators as well.

for the online casino to conduct its due diligence. Today, thanks to products like Trustly’s Pay N Play, it’s becoming possible for

1. Boost ROI on acquisition and reactivation

new users to play instantly on a gaming site without registration,

Did you know that around 24% of online gaming registrations are

while still allowing operators to stay compliant with the regula­

abandoned, likely because of rigorous regulatory requirements

tors, through the monitoring of both transactions and players who

and manual processes? (Jumio/Harris research survey of online

show signs of addictive and/or high-risk behaviour. With these

gaming customers in 2016) On top of that, only 1 in 3 people who

innovations, there’s been a surge of interest around “no-registration

do manage to register actually end up making a deposit within

casinos” from both players and operators alike.

24 hours (Optimove data). Operators spend massive resources to acquire players, only to lose them during the critical registration

How do “no-registration” casinos work?

and deposit steps.

The idea of depositing money to a site that doesn’t require registration can be unsettling to some players, but just because

However, with Trustly’s Pay N Play, players can register and start

they don’t need to register, doesn’t mean they don’t have an actual

playing immediately just by making a deposit via their online bank.

account. The “no-registration” model makes it easy for players to

This seamless sign-up process drastically reduces drop-off during

get started without needing to provide many details such as full

the onboarding flow, significantly lowering acquisition costs.

name, home address, and phone number or to download special

In addition, since registration and the initial deposit are linked,

software. Instead, all they need to do is make a deposit using their

the chance that players register but never deposit is eliminated,

online bank.

ultimately increasing conversion.

For example, players can click “Make a deposit,” enter the

2. Build loyalty through instant withdrawals

amount they wish to deposit, and verify themselves with their

Pay N Play helps operators to build loyalty among players

online bank to complete the deposit. The process of verifying

through instant withdrawals. According to Trustly’s internal

oneself through the online bank is incredibly safe thanks to strong

data, players at Pay N Play sites make 16% more deposits and

two-factor authentication methods, an extra layer of security that

have 17% higher transaction values each month, compared to

authenticates users based on something they know (a security

traditional gaming operators. ➔

question or username and password, for example) combined with something they have (a security token or smartphone, for example).

103

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

Trustly 3. Fulfill KYC regulatory requirements Once the player’s identity is verified via an online banking deposit,

Samuel Barrett

Trustly pulls registration details from the player’s bank account

Director of Gaming

and passes them onto the operator to fulfill the necessary KYC

Trustly

checks. The operator can then create a player account on the player’s behalf.

A future free of registration As regulators continue to tighten their grips on gaming operators

About Samuel Barrett: Samuel Barrett started

through sophisticated legislation, it’s becoming an increasing

his gaming career more than seven years ago

drain on their resources to remain compliant. Luckily, payment

at Clarion Events, where within three years he

providers are becoming more and more innovative and, going

became head of sales and was managing the

forward, they will be able to support operators in their KYC efforts.

biggest gaming show in the industry. He has since held management roles at payments businesses

In-banner betting and beyond

including ClickandBuy, Skrill (Paysafe Group), and

So as “no-registration” casinos become commonplace, how can

FX brokerage World First before joining Trustly as

operators further differentiate themselves, and where could this

Director of Gaming.

technology lead the industry next?

About Trustly: Trustly is a Swedish fintech Imagine you’re surfing the web, perhaps reading news about your

company that makes online banking payments

favorite football team. In a banner to the right, you see an offer to

fast, simple and secure. We offer instant deposits

bet on the score of tonight’s match. You click on the banner and,

and withdrawals to players across 29 European

without leaving the page, you place a bet on your team. You select

countries and our latest product, Pay N Play, lets

the amount you wish to bet, make a deposit by logging into your

players skip the sign-up step and start playing

online bank via the iframe, and confirm your deposit. You watch

games instantly, while ensuring that operators

the game and it turns out you made a smart bet. When you’re

stay compliant.

ready to cash out your winnings, you navigate to the site and withdraw the money directly to your bank account.

www. trustly.com

It’s hard to picture a smoother betting experience, as you never need to register an account or even leave the website you’re surfing. The applications of the technology are far-reaching: it could enable shoppers to buy a pair of shoes directly from a banner ad, or let music fans purchase concert tickets with greater ease. It’s a reality we aren’t very far away from and one that stands to dramatically reshape online gaming and e-commerce as we

Share this story

know it.

104

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

MuchBetter

There are three critical areas of iGaming payments that need to be fixed: unfair transaction fees, poor user experience, and high fraud levels.

Paypers interviews Jens Bader, MuchBetter co-founder,

The payment experience hasn’t always been great in gaming.

to understand the payments challenges for gaming

Mobile gaming is more popular than ever, but unlike many modern

operators

mobile apps in other sectors such as Uber, Tinder, Airbnb which work seamlessly, a lot of the payment processes on gaming

Can you give us a glimpse into the main trends in

sites have not yet fully transformed to support a good mobile

the gaming industry?

experience. That’s why, with MuchBetter, players can pay with

Market consolidation is a big trend in gaming. Margins are squeezed

just their phone and fingerprint, with no passwords or security

and it’s harder than ever to stay profitable, which is why we’re

questions to remember.

seeing so much consolidation in the market. Scale is the best route to success in today’s market. Another big trend is having

There is also the bonus abuse – where the gaming operator

to adapt to regulatory change. The US just opened the door to

spends a significant amount of money to acquire new customers

sports betting, so there will be a gold rush as operators strive to

by offering a bonus. This means that when customers open

cash in on the opportunity there. In stark contrast, other markets

deposits, they receive a certain percent of additional money to

are clamping down on gaming operations and changes to FOBT

play with. Fraudsters exploit this benefit by creating and funding

limits in the UK will hit physical casinos hard.

multiple accounts, also using a new bonus code for each of these new accounts. The challenge here is that one cannot use the

What are the challenges for gaming operators

same credit card or bank account for funding.

with regards to payments and complying with regulations?

And that’s where the wallets come in. For bonus abuse, customers

Before we launched MuchBetter to the iGaming industry, we

would create a correspondent new e-wallet for each new account.

identified three critical areas of iGaming payments that we thought

Therefore, they have a set of wallets matching the account and

needed to be fixed – then tailored a solution to match. The three

then they feed them with bonus codes, do one bet and withdraw

issues we identified were unfair transaction fees, poor user

the money. Thus, the operator loses money and ends up by

experience and high levels of fraud.

acquiring zero customers. The gaming operator cannot detect the scam because the wallet is a black box, which means it does not

Starting with transaction fees – the traditional iGaming payments

share any information with the operator about the identity of the

model where popular e-wallets are involved, is still built on the

account holder or the account’s details.

principle of charging for every transaction, but as transaction fees have increased through the years, it has put operators in an

We also seek to create a trusted environment by employing

untenable position. They either have to pay more and more for

technologies like device pairing and device authentication.

the same service, or risk losing players overnight if they drop their

When opening a MuchBetter account, one has to download

payment partner. MuchBetter solves this challenge with its net

the MuchBetter app and then the next step is verification of the

deposit model, which lets operators pay transaction fees on their

phone number. We have three unique elements: the verified phone

winnings only ‘money in’ minus ‘money out’. The fees we charge

number, the trusted device and the app and they all have to be

are in closer correspondence with the real value of the player for

in one place for the customer to use the account and authorise

the operator and we believe this is a fairer transaction model.

the transaction. We also use biometric authentication to overcome account takeover, Man-in-the-Middle attacks, or chargeback because nothing can actually be stolen, skimmed or phished. ➔

105

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

MuchBetter

What does your company do that gives an upper

Jens Bader

hand compared to existing payments methods

Co-Founder

catered for the needs of the gaming industry?

MuchBetter

MuchBetter certainly benefits from being built for the mobile era, not retrofitted to suit. We’re also the first payments platform that was built with gaming operators in mind, to solve the challenges outlined above. It’s on these issues, transaction fees, fraud and

About Jens Bader: Jens has a rich management

UX, that we really stand out from the competition.

background with more than 20 years of experience We’re also a lot more agile than the incumbent payment options.

in the Online and Mobile Payments industry.

This is a major plus given the speed at which things change in this

A seasoned commercial leader, Jens recently

industry. It’s hard for big companies to move as fast as regulatory

co-founded MIR Limited, an FCA-licensed

change, so you’re seeing a lot of payments companies and

FINTECH group that develops and operates

operators simply opting to cease trading in regions that become

second-generation electronic money services

problematic. This is a challenge for them, but obviously a great

servicing on- and offline merchants. Jens is a

opportunity for us as these markets open for new entrants.

frequent speaker on payments and fraud-related topics worldwide. Jens holds a degree in Interna­

Could you give some insights into your company’s

tio­nal Business Management.

roadmap?

We will be launching the MuchBetter loyalty and reward engine

About Muchbetter: MuchBetter is the new

shortly, which will give all MuchBetter users the chance to win

payments app for iGaming. MuchBetter allows

cash prizes and other rewards just from using the service day-to-

customers to transfer and receive funds in

day. For operators, this is another great chance to drive customer

real-time, combining state-of-the-art mobile

loyalty, without harming their interests. For us, this will help bring

technology twinned with a ground breaking

MuchBetter to a wider general-purpose audience. The service has

commercial model. MuchBetter is the equilibrium

features that are suited to all online and real-world payments, not

between security and customer experience and

just gaming, and we want MuchBetter to become users’ preferred

allows gaming operators to generate a significant

payment product for every situation.

commercial upside. www.muchbetter.com

Share this story

106

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

MuchBetter Type of payment method

e-Wallet

Active since

2017

Operational Area

Worldwide

Industries

Gaming, retail, marketplaces, financial services, digital entertainment

How it works

Mobile payments app

Potential reach

Worldwide

Market Share Acceptance

High

Chargeback Risk

Low

Facts Settlement currency

Major European and international currencies

Processing currrency

Any

Currency available for consumer

EUR, USD, GBP, CHF, PLZ, DKK, SEK, CAD, AUD

Transaction volume

Available on request

Implementation requirements (non technical)

None

Reconciliation

Merchant reporting portal, csv, xls data sets

Pricing

On request

Channels (POS/ecommerce)

Ecommerce

For the complete company profile please click here

107

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

AcceptEasy Paying Attention: Relationship Advice for European B2C Companies Automatic payments in Europe today are either expensive (credit

e-Mandates. Most countries have either adopted cumbersome

card), rigid (direct debit) or non-existent - even though they’re the

signing forms, or are condoning insecure methods. Neither

foundation of ideal B2C relationships. AcceptEasy tackles these

does much to overcome trust issues inherent in many cultures.

problems, enabling everyone happily paying from their bank

AcceptEasy therefore takes each country’s most familiar proof that

account to yours.

a customer has access to the IBAN they put up for direct debit: the local cross-bank online payment method, like iDEAL in the

Almost every B2C brand wants to be in a steady long-term relation­­

Netherlands or Sofort in Germany. Lacking that, customers sign

ship with its customers, underpinned (if not defined) by minimised

with BankID scheme or another form of (strong) authentication.

payment friction at minimal cost. For household billers and other

In each case, meeting SEPA Rulebook requirements on content,

subscription vendors, the automated recurring payment is the

signing and process.

Platonic ideal. For on-demand relationships, it’s consent implied by the transaction of stepping out of an Uber ride or Amazon

SDD flexibility. While it may sound alien to most readers of this

store. The common denominator is convenience enabled by trust:

article, more and more people want or need to figure out when

the supplier can take the money from the customer’s source of

to pay each bill every month. This does not mesh with most

funds established before the transaction at hand.

SDD implementations rigidly collecting on the same day of every month. Why not allow the customer to choose a default date

The big cut or the short cut?

and even easily deviate from that in a given month within certain

Many brands require credit cards for such relationships. This

boundaries? Or even better, think along using PSD2’s XS2A?

introduces not only a barrier for those consumers who don’t

Being flexible drastically reduces the likelihood of SDDs failing

have one, but also the cost and complexity of middlemen playing

for lack of funds, and of customers choosing instead to receive

their part and taking their cut. Credit cards are, and always will

individual bills that often need chasing.

be, very expensive for merchants and billers. The main reason for taking this road anyway is that the other road has not been

Exception excellence. An SDD can still fail, be much higher than

good enough.

normal, or otherwise warrant an exception. Notifications should not just be dumb messages, but instead offer the customer

After all, the shortest and cheapest route should be from the cus­

options to easily approve, challenge or change the upcoming

to­mer’s bank account directly to that of the supplier. For this,

payment. Better yet, if you let the customer set up a back-up

Europe invented the SEPA Direct Debit scheme. In many member

account (or card or other payment method), money can still flow

countries however, it hasn’t taken off for various reasons; we’ll

automatically.

get to those shortly. And even in countries like the Netherlands, where it did peacefully replace its well-established predecessor,

Omnichannel messaging. A lot of the above is about the mecha­

not meeting customer needs still results in millions of bills and

nics of payments. Equally important is the communication and

reminders requiring individual payments. We know, as we facilitate

process surrounding it. Do customers sign the mandate during

and optimise such payment requests (links to pre-filled online

online onboarding, or from a digital message shortly after? What

transactions) for hundreds of corporates.

if the relationship starts from a chat? Similarly, messaging during the relationship, also for incidental payment requests outside

So, what does an ideal solution for relationship payments in Europe

the scope of the e-Mandate, should reach customers in every

look like? As with most relationships, it starts with a good first

channel they might use. Including the paper bill you want them

date.

to abandon. ➔

108

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

AcceptEasy Clarity. Whether for a mandate or an individual payment, messages we send on a brand’s behalf clearly change from a

Jeroen Dekker

request to a receipt by visually changing colour and status. They

Head of Product & Marketing

do so across instances and channels, so that the portal and the

AcceptEasy

contact centre know what just happened through an email or an app. Whereby all communication channels show the same status of the payment. We call that cross-channel transaction integrity – all channels are in sync.

About Jeroen Dekker: Jeroen Dekker heads Easy and secure implementation. The above requires a combi­

Product & Marketing at AcceptEasy, following over

nation of skills and tools, especially if multiple countries are

15 years of similar roles bringing new products to

involved, that need to be bolted onto existing billing systems and

market (and vice versa) at innovative international

into various communication channels. With privacy and security

software companies in financial services, risk

top of mind. We’ve done most of the hard work for that already,

management and compliance.

running ISO-certified operations around a cloud-based platform that’s easily integrated via API and other means. Implemented in

About AcceptEasy: AcceptEasy transforms and

a dozen European countries and beyond, we can service local

optimizes how consumers and small busi­nesses

deployments as well as shared service centres.

can easily pay you everywhere, anytime throughout the relationship lifecycle. Headquartered near

AcceptEasy built a business by making the best of bad situations:

Amsterdam with clients across Europe and in

minimising the hassle for B2C customers to pay whatever could

North America, its cloud-based software and

not happen automatically. Along the way, we invented the ideal

services deliver superior customer experiences

first date to at least help start (automatic payment) relationships.

across channels while saving time, cost and trees.

Our next mission in Europe is to prevent bad situations in the first place, finally delivering on the real promise of SEPA Direct

www.accepteasy.com

Debit for companies looking to make and save a lot of money through great payment relationships with their customers.

Share this story

109

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

PSD2 opens up the possibility for travel

Amadeus

companies to offer their own direct payment methods, to increase loyalty or reduce payment costs.

The Paypers interviews Jean-Christophe Lacour, Head

the world with a single technical integration and a single view of

of Product and Offer at Amadeus’ payments business,

their payment transaction data. We also have a consultancy team

to understand the payments preferences and develop­

comprised of experts with a deep understanding of the global

ments that shape the travel industry

payment market. This team sits side-by-side with our customers and helps them build an effective global payments strategy.

Could you elaborate a bit on the key developments in Amadeus’s offering since 1987? How did the

What payment methods for the airline/travel industry

company develop in portfolio and target markets?

does Amadeus see coming up as alternatives for

Amadeus began processing travel payments when we started

credit cards? Do you expect any growth in mobile

trading in 1992. By 2012, the payments technology revolution was

wallets or in multi-currency cards for travellers?

gathering speed and we had noticed an increase in the number

Credit cards are a significant part of the payments ecosystem

of requests from our customers to help them process payments.

in travel and we believe they will continue to be, especially in

Therefore, we set up the payments business unit to proactively

markets where they already have a strong presence. In these

address these needs. Today, we offer a one-stop-shop smart

markets, even when new payment methods are launched, there is

payments hub that helps travel companies with all their payment

often a card payment behind. We see alternatives, such as mobile

needs, including processing incoming payments from customers

money, gaining the most traction in markets where credit cards

and outgoing payments to suppliers. We process about EUR 100

are less well established today, like China and most of Africa.

billion worth of payments each year from 192 countries.

How do the western markets address the payment What are the specific payment and fraud challenges

needs of Asian tourists, who are highly mobile-wallet

for the travel/airline industry?

users?

The travel industry is – almost by definition – global. According to

The growth of travel and tourism from Asia – particularly China

our research, over 30% of bookings made on airlines’ websites

– to western markets is a key opportunity for travel companies:

come from outside their home country, and 17% of bookings from

tourism from China to the European Union has tripled in

outside their home continent. The complexity required to accept

the past ten years.

payments from around the world is huge: there are close to 300 different methods of payment around the world and international

To fully accommodate Chinese travellers, travel companies need

airlines typically manage over 20 different payment providers.

to accept methods of payment such as Alipay or WeChat Pay.

There are indications that it hinders travel companies from

However, a one-off integration with just one or two payment

innovating in payments.

methods would add unnecessary complexity to a global travel company’s payment infrastructure. It is critical for travel companies

The changing airline consumer retail behaviour varies

to be able to integrate payment methods into a global payment

across geographies; how does Amadeus help in

strategy in a convenient way. The travel companies we speak to

tackling the payment needs of travellers globally?

are looking for a platform that can provide them with access to

Amadeus helps in two ways. Through our smart payment hub, we

worldwide payment methods through a single connection, and

provide fully integrated access to over 250 different methods of

access those payments via a single database. ➔

payment so travel companies can process payments from around

110

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

Amadeus What are the challenges of preparing for PSD2/ SCA for airlines?

Jean-Christophe Lacour

PSD2 should be welcomed as an initiative to foster greater

Head of Product and Offer

innovation and choice in the payments sector. Nevertheless,

Amadeus’ payments business

it presents a few interesting questions for those responsible for payments in travel companies. Travel companies need a way to distinguish between corporate cards and consumer cards when applying their surcharge policies. For the main part, their acquiring banks can help them with this. More complex, however,

About Jean-Christophe Lacour: Jean-

is ensuring that they are fully following the local implementations

Christophe Lacour, or ‘JC’, is Head of Product

of PSD2. The UK, for example, has banned surcharges on all

and Offer for Amadeus’ payments business. The

consumer payment methods, which is a step further than PSD2

core offer is Amadeus’ smart payment Hub, which

that only bans surcharges on consumer cards offered by four-

allows travel companies to manage payments

party schemes.

across all countries, sales channels and payment methods. JC joined Amadeus in 2016. Previous

Travel companies are also looking hard at how to implement the

to Amadeus JC founded, and was non-executive

Strong Customer Authentication requirement. This is especially

director for two different startups; and, before

a challenge in the travel industry where, in many cases, travel

that, held a number of senior roles with Visa.

agencies pass payment details through to suppliers who are the ultimate merchant of record. Amadeus Payments is working with

About Amadeus: Amadeus is a leading provider

payment schemes such as Visa and Mastercard to ensure that 3D

of advanced technology solutions for the global

Secure can apply to the use case where the traveller purchases

travel industry. Customer groups include travel

from a travel agent but the travel supplier is the merchant of

providers (e.g. airlines, hotels, rail and ferry

record. In addition, Amadeus Payments plays an active role in

operators, etc.), travel sellers (travel agencies and

a travel industry-working group designed to ensure that SCA

websites), and travel buyers (corporations and

recognises travel-specific B2B payments between consumers/

travel management companies).

corporate travellers, travel agencies / management companies and travel suppliers.

www.amadeus.com

Finally, PSD2 opens up the possibility for travel companies to

www.amadeus.com/en/business-function/

offer their own direct payment methods. It could also be used to

payments

increase loyalty or reduce payment costs.

Share this story

111

PAYMENT METHODS REPORT 2018

•

How People Pay in Different Verticals

REGISTER NOW TO SAVE 40% February 19-21, 2019 Berlin

Available until August 3

MPE 2018 TED-STYLE VIDEOS, PRESENTATIONS & WEBINARS

June Felix President Europe & Russia Verifone

Eliad Saporta Managing Director Coriunder

NEXT EDITION OF MPE, BERLIN:

FEBRUARY 19-21. 2019

Julian Sawyer Chief Operating Officer Starling Bank

THE European conference & exhibition on Merchant Payments Acceptance

1000+

ATTENDEES

300+

C-LEVEL EXECS

70+

135+

300+

45

SPONSORS & EXHIBITORS

FINTECH PEERS

SPEAKERS

Best merchant payments business intelligence in Europe

COUNTRIES

Visit www.merchantpaymentsecosystem.com for more information & to see videos

Glossary

Glossary A

Access Card

Acquirer

A plastic card used in an automated teller machine (ATM) to com­

A financial institution, Visa or Mastercard licensed member,

plete deposits, cash withdrawals, account transfers, and other

which concludes an agreement with merchants for the acceptance

related account functions.

of credit cards as a means of payment for goods and services, and settles card payments for merchants.

Access Control Server (ACS) Provides cardholder authentication through username and pass­

Address Verification Service

word and decides if the data is valid or not. ACH sends the signa­

Checking method for VISA, Mastercard and American Express

ture to the customer’s browser and to the Merchant Plug-in (MPI).

to prevent fraud for credit card payments in long-distance trans­

Credit card issuers are required to maintain an ACS used to

actions in which the numerical address data provided by the

support cardholder authentication.

customer is compared with the address data stored at the credit card company. Card Not Present merchants can use AVS to

Account history

accept or decline transactions based on the validity of the billing

The payment history of an account over a specified period, inclu­

address information provided by the customer.

ding the number of times the account was past due or over the

Alternative payments

credit limit.

All the payment methods that are used as an alternative to credit

Account holder

card payments and are not running on global scheme networks

Individual(s) responsible for paying the amounts charged to an

such as Visa, Mastercard or American Express.

account. A person can be allowed to use a card as an authorised

American Express (AMEX)

user but not be legally liable for the debt.

A company that provides credit cards, charge cards and traveller’s

ACH Network

check businesses. In December 2017, the company had 112.8

The ACH Network is at the center of commerce in the US, moving

million cards in force, including 50 million in the US, each with an

money and information from one bank account to another through

average annual spending of USD 18,519.

Direct Deposit and Direct Payment via ACH transactions, including ACH credit and debit transactions; recurring and one-time pay­ments;

American Express SafeKey

government, consumer and business-to-business transactions;

A 3-D Secure protocol designed to reduce online fraud by

international payments; and payments plus payment-related infor­

confirming the cardholder’s identity with an additional password.

mation. Each year, it moves more than USD 40 trillion and nearly 23 billion electronic financial transactions, and currently supports

Application programming interface (API)

more than 90% of the total value of all electronic payments in the

An API is a set of functions and protocols for building application

US. As such, the ACH Network is now one of the largest, safest

software, which defines methods of communication between

and most reliable payment systems in the world, creating value

vari­ous software components and provides access to data of an

and enabling innovation for all participants.

operating system, application, or other service.

114

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Arbitration

Bank-as-a-platform

The process by which card companies determine whether an

A strategy used to allow third parties to develop applications and

issuer or an acquirer has ultimate responsibility for a chargeback.

services around the financial institution via open APIs. Banks,

Either member initiates his process after the re-presentment

as such, become fully-fledged digital players, competing and

process is completed. Pre-arbitration, or second chargeback,

collaborating for customer relevance in payment and information

occurs when the merchant disputes the initial chargeback of the

services.

cardholder, and the cardholder does not agree with the merchant, the situation resulting in the chargeback being disputed again.

Back-end processor A third party provider that offers communication and processing

Authentication

systems to acquirers. The processing systems connect with the

A security measure designed to establish the validity of a trans­

interchange systems for clearing and settlement services for the

mission, message, or originator, or a means of verifying an indivi­

same acquirers. In some cases, the acquirer may act as its own

dual’s authorisation to receive specific categories of information

back-end processor.

or transaction approval (in the case of plastic cards or payment

Bank transfer

orders).

A payment or money transfer between two bank accounts.

Authorisation The process of verifying if the cardholder has adequate funds

Banking model

available against his/her line of credit. A positive authorisation

The diversified means by which a bank helps a customer create

results in the generation of an authorisation code, the respective

an operating account, make money transfers, pay pending orders

funds being set aside. The cardholder’s available credit limit is

and sell foreign currency.

reduced by the authorised amount.

Banking sector

B

The section of the economy devoted to the holding of financial

Bancontact/MisterCash

assets for others, investing those financial assets as an advantage

The domestic debit card scheme in Belgium, which allows

to create more wealth, and the regulation of those activities by

consumers to pay in real-time and guarantee payment to (online)

governmental agencies.

merchants and businesses. Bancontact payments are immediately debited from the consumer’s bank account, the seller’s account

Beacon

being credited the following working day. Today, there are more

A small Bluetooth device used by vendors, merchants, banks etc.

Bancontact/MisterCash cards in circulation (15 million) than

to send information such as offers, promotions, coupons to the

there are Belgian citizens (11.3 million). No less than 99% of all

mobile devices of (potential) customers passing by in close proxi­

consumers know Bancontact/MisterCash and 86% of all payments

mity.

by electronic card are Bancontact/MisterCash payments.

Bill payment BIN (Bank Identification Number)

Bank provided service that allows customers to receive and pay

The first six identification numbers that appear on a credit card,

bills by means of a computer or a smartphone.

assigned by Visa/Mastercard, used to identify the institution issu­ ing the card to the cardholder. Also known as Issuer Identification Number (IIN).

115

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Billing and Settlement Plan

Chip-and-pin payments

An electronic system designed to facilitate the flow of data and

Chip-and-pin is a UK government-backed initiative to implement

funds between travel agencies and airlines.

the EMV (short for Europay, Mastercard and Visa) standard for smart payment cards. The name of this initiative stems from

C

the presence of a semiconductor chip and associated circuitry

Card association

in the smart card, which is used in tandem with a PIN (personal

A network comprising issuing banks and acquiring banks that

identification number).

process payment cards.

In use, the smart card is placed into a PIN pad terminal or modified

Card-not-present (CNP)

swipe-card reader, which accesses the chip in the card. The user

A card transaction in which the card is not physically presented

enters a 4-digit PIN that is checked against the information stored

to a merchant at the time of the transaction.

on the card. If the entered PIN matches the stored value, the transaction is permitted to proceed.

Card scheme A payment network directly connected to a payment card. A pay­

Clearing

ment card is a payment tool issued by the bank or the financial instit­

The process of submitting transactions to the respective card

ution that is member of the payment network (Visa, Mastercard).

company (Visa, Discover, AMEX or Mastercard) for interchange pro­cessing, the fourth in the seven stages of processing. This pre­

Card verification value (CVV2)

sentment of the transactions is also a request for payment in the

A unique 3-digit check value generated using a secure crypto­

settlement process.

graphic process that is indent‐printed on the back of a Visa card

Click-and-collect

or provided to a virtual account holder.

The process by which the consumer orders online (click) and

Cash-on-delivery

collects his merchandise at a local store. It is a compromise

Payment method in which payment (cash or by card) takes place

between online and in-store shopping. The main benefits of click-

when goods are delivered. In Belgium, France and the Netherlands,

and-collect for the consumer are saving delivery or shipping delays

it is known as ‘rembours’ or ‘remboursement’.

and costs. It also saves time and prevents shopping in congested stores. In some cases, click-and-collect may enable consumers

Chargeback

who are afraid of online payment to pay at the collecting point.

A process in which the card issuer can call back a transaction either in full, or in part. A chargeback often applies if a cardholder

Closed-loop card/application

denies having performed a card transaction. In that case, the

A credit or gift card that can be used only to purchases from a

issuer files an objection with the acquirer and demands that the

single company.

transaction amount be returned from the merchant’s account.

Cloud-based payments Checkout

Enable users to perform NFC card emulation without using a

A checkout page is an ecommerce website page that a shopper

hardware Secure Element (SE) in mobile handsets.

sees during the checkout process. Those wishing to purchase a product/service will move through a series of checkout pages in a systematic manner until the transaction is finalised.

116

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Collecting payment service provider (CPSP)

Cross-border ecommerce

A technical intermediary between the seller’s website and one or

International ecommerce, when consumers buy online from

more payment schemes, which collects the funds for one or more

merchants located in other countries and jurisdictions. Online

payment methods. It takes away the programming complexity for

trade between consumers and merchants, which share one

the online seller by only having to integrate with the collector’s

common language and border or which make use of the same

payment platform. The collector takes care of the data processing

currency, are not always perceived as cross-border by consumers.

to the applicable payment method scheme. In addition, the

EU neighbours that speak a common language, united by SEPA,

collector collects the transaction funds for one or more payment

are just one example.

methods, and settles the amounts often accumulated into the

Cross-channel

merchant’s bank account.

Cross-channel implies merchants who interchangeably use

Consumer account

multiple channels to market, sell, and interact with customers.

A deposit account held by a financial institution and established

For instance, when a customer uses a merchant platform’s mobile

by a natural person primarily for personal, family, or household

app to look at a product but does not complete the purchase,

use and not for commercial purposes.

the merchant can use a cross-channel approach to remarket that product by serving up ads for it even when the customer is on

Consumer behavior

another channel or platform (say email or social media).

The process by which individuals search for, select, purchase, use, and dispose of goods and services, in satisfaction of their

Customer due diligence (CDD)

needs and wants. See also consumer decision making.

Identification and verification of customers and beneficial owners.

Consumer data analytics

Customer loyalty

The systematic examination of a company’s customer information

A customer continuing to believe that a certain merchant’s product/

to identify, attract and retain the most profitable customers.

service offer is their best option that fulfills their value proposition whatever that may be. They take that offer whenever faced with

Contactless payment

the purchasing decision. Customer loyalty is all about attracting

Payment transaction that requires no physical contact between

the right customer, getting them to buy, buy more often, buy in

the consumer payment tool and POS terminal. The user simply

higher quantities, and bring even more customers.

waves the contactless card in the proximity of the RFID-enabled merchant terminal in order to scan the user account information.

Customer reach An estimated number of the potential customers that are possible

Credit card

to reach through an advertising medium or a promotional cam­

A card indicating that the holder has been granted a line of credit.

paign.

It enables the holder to make purchases and/or withdraw cash up to a prearranged ceiling; the credit granted can be settled in

CVV

full by the end of a specified period or can be settled in part, with

A unique check value encoded on the magnetic stripe and

the balance taken as extended credit.

replicated in the chip of a card or the magnetic stripe of a Visa card to validate card information during the authorisation process.

117

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary D

Data Security Standard (DSS) or PCI-DSS

Dynamic currency conversion (DCC)

(Payment Card Industry Data Security Standard)

Dynamic currency conversion refers to the situation whereby the

A security standard for organisations that handle credit cards

shopper is offered a choice to pay in either the home currency

from the major card schemes. The common standard is the result

of the merchant or the shopper’s home currency. This offer is

of the collaboration between Mastercard, Visa and other card

instantly generated by the PSP platform (often in conjunction

associations with the purpose of protecting cardholder data to

with a DCC provider), as the DCC software recognises the home

reduce fraud.

currency of the shopper based upon the first six digits of the card, and results in a conversion wherein a mark-up has been included.

Debit card

If conversion can be applied depends on the fact whether the

A plastic card linked to a checking or savings account. Offline- or

DCC provider supports currency conversion for a particular

signature-based debit cards work in the merchant environment

currency (otherwise the transaction is authorised in the merchant’s

the same as a credit card transaction and are not required to

home currency).

be ‘online’ to the account balance. Offline signature-based functionally work like credit cards; an initial transaction is used

Under DCC regulation the mark-up applied (generally between 2

to hold funds and a second to settle or remove the funds from

and 4%) should be clearly visible for the shopper and it should

the card balance. Online debit cards or PIN-based debit cards

be up to the shopper to make a choice (no opt-out allowed).

ride over the ATM network; they require a PIN and the ability to

The DCC mark-up (2-4%) can be shared between the merchant,

authorise against the actual balance of the card in a single step

Payment Service Provider, DCC provider and acquirer. DCC

transaction. Prepaid cards fall into the debit category.

allows merchants to mitigate processing costs by earning back some of the commission if the shoppers decide to pay in their

Digital identity (e-ID)

home currency.

A collection of identity attributes, an identity in an electronic form

Direct carrier billing

(e.g. electronic identity).

It is a payment method for purchased items or services by

Digital single market

char­ging the purchase to mobile phone account. At the time of

It is one in which the free movement of goods, persons, services

checkout, the customer selects the mobile billing option on a

and capital is ensured and where citizens, individuals and busi­

smartphone and follows a two-factor authentication procedure.

nesses can seamlessly access and exercise online activities under

After the authentication, the consumer’s mobile account is char­

conditions of fair competition, and a high level of consumer and

ged for the amount of the purchase, plus applicable taxes and,

personal data protection, irrespective of their nationality or place

in some cases, a processing fee. Direct mobile billing does not

of residence.

require any previous registration, and it does not involve any other sources of funding such as credit cards or bank accounts.

Digital wallet Also called an e‐wallet, is a digital tool (software or app) for consu­

Direct debit

mers to store their payment methods. It stores credentials of e.g.

Pre-authorised debit on the payer’s bank account initiated by the

debit cards, credit cards, and alternative payment methods. Some

payee.

e-wallets also store loyalty programs.

118

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Dispute transaction (card-based)

eCheck

A dispute initiated by the cardholder. In the bankcard industry,

An electronic version of a paper check often used to conduct

the dispute can be in the form of a chargeback.

transactions over the internet.

Disruptive innovation

Ecommerce

It is an innovation that helps create a new market and value net­

A way of doing real-time business transactions via telecommuni­

work, and eventually disrupts an existing market and value network

cations networks when the customer and the merchant are in

(over a few years or decades), displacing an earlier technology.

different geographical places. Electronic commerce is a broad

The term is used in business and technology literature to describe

concept that includes virtual browsing of goods for sale, selection

innovations that improve a product or service in ways that the

of goods to buy, and payment methods. Electronic commerce

market does not expect, typically first by designing for a different

functions on a bona fide basis, without prior arrangements

set of consumers in a new market and later by lowering prices in

between customers and merchants. It operates via the internet

the existing market.

using any combination of technologies designed to exchange data (such as EDI or e‐mail), access data (such as shared databases or

Distributing payment service provider

electronic bulletin boards), and capture data (through bar coding

It is a technical intermediary between the seller’s website and one

and magnetic or optical character readers).

or more payment schemes. They take away the programming complexity for the online seller by only having to integrate with

e-IDAS

the distributor’s payment platform. The distributor takes care of

The European regulation for the electronic identification and trust

the data processing to the applicable payment method scheme.

services for electronic transactions. Since its announcement in July of 2014, the intent of the eIDAS Regulation has been to

Dunning

facilitate secure and seamless electronic transactions throughout

The process of insistent demands for the payment of a debt. In the

the European Union (EU) by providing a regulatory environment

business context, it refers to the collections process, whereby a

that would promote their use.

business communicates with customers who have failed to pay

e-Invoicing

their bills.

Electronic invoicing is the exchange of the invoice document

E

between a supplier and a buyer in an integrated electronic format.

EBA Clearing

Traditionally, invoicing, like any heavily paper-based process, is

A bank-owned provider of pan-European payment infrastructure

manually intensive and is prone to human error resulting in increa­

solutions. The company was established in June 1998 by 52

s­ed costs and processing lifecycles for companies.

major European and international banks with the mission to own and operate EURO1, the only privately owned RTGS-equivalent

Electronic banking

large-value payment system on a multilateral net basis.

A form of banking in which funds are transferred through an ex­change of electronic signals between financial institutions rather

e-Banking (online banking)

than an exchange of cash, checks, or other negotiable instru­

A method of banking in which the customer conducts trans­

ments.

actions electronically via the internet.

119

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Electronic direct debit

European Payments Council (EPC)

A method in which purchasers issue the merchant with authori­

The purpose of the EPC is to represent payment service provi­

sation to debit funds directly from their account for a cashless

ders (PSPs) and to support and promote European payments

transaction (in online trading by confirming the basket of goods

integration and development. The EPC is committed to contri­

and in POS trading with their signature or PIN). The amount is

buting to safe, reliable, efficient, convenient, economically balan­

booked automatically from the consumer’s account and credited

ced and sustainable payments, which meet the needs of payment

to the recipient’s account.

service users and support the goals of competitiveness and innovation in an integrated European economy.

Electronic funds transfer (EFT) The paperless transfer of electronically recorded payment data with

E-wallet

a monetary value in a specific currency, accepted by a customer/

See Digital wallet.

contractual merchant or a bank instead of cash as a means of pay­ ment.

F

Faster Payments Electronic payments

A UK banking initiative to reduce payment times between

Payments that are initiated, processed, and received electroni­cally.

different banks’ customer accounts from three working days using the long-established BACS system, to typically a few

EMV

hours. Many other countries are now adopting a similar model.

The international smart card standards group made up of Europay International, Mastercard International, and Visa International.

Financial inclusion The ability of an individual, household, or group to access

European Banking Authority (EBA)

appropriate financial services or products. Without this ability,

A regulatory agency of the European Union headquartered in

people are often referred to as financially excluded.

the UK. It concerns itself primarily with banking regulation, but has a mandate to develop technical standards for the security of

Fintech (financial technology)

internet payments.

New technology and innovation that aims to compete with traditional financial methods in the delivery of financial services.

European Central Bank (ECB) The central bank for Europe’s single currency, the euro. The ECB’s

G

aim is to maintain the euro’s purchasing power and price stability

General Data Protection Regulation (GDPR)

in the euro area.

The General Data Protection Regulation (GDPR) was promulgated by the European Commission in 2016, and comes into force on 25

EMA (Electronic Money Association)

May 2018. The regulation is meant to strengthen and unify data

A European trade body representing electronic money issuers

protection for individuals within the EU.

and other payment service providers. Members include elec­ tronic money institutions (EMIs), payment institutions (PIs), banks and payment schemes.

120

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary I

iDEAL iDEAL is an internet payment method in the Netherlands, based

Today, only competition rules limit the fees set by banks and

on online banking. Introduced in 2005, this payment method

payment card schemes, which are hidden from the consumer

allows customers to buy securely on the internet using direct

and neither retailers nor consumers can influence.

online transfers from their bank account.

Interchange Fee Regulation (IFR) In-app payments

The European Parliament and the Council adopted the Interchange

Payments made from within mobile applications in order to pur­

Fee Regulation (IFR) on April 29, 2015. Many provisions are to

chase dedicated content like digital money, services or even

take effect on different dates, arguably, the biggest change, the

products.

interchange fee cap, came into effect on December 9, 2015.

Installment payments

Interchange network

The payments whereby the cardholder is able to split a payment

An electronic network maintained by the card companies that

into smaller transactions spread over an agreed period of time.

exchanges data related to the value of card sales and credits among issuers and acquirers.

Instant payments According to the Euro Retail Payments Board (ERPB), instant pay­

International Bank Account Number (IBAN)

ments are electronic retail payment solutions available 24/7/365,

Standardised international bank account number, consisting of

resulting in the immediate or close-to-immediate interbank clear­

account number, sorting code and prefix, for international pay­

ing of the transaction, and crediting of the payee’s account with

ment transactions.

confirmation to the payer (within seconds of payment initia­tion).

This is irrespective of the underlying payment instrument used

Interoperability

(credit transfer, direct debit or payment card) and of the under­

A situation in which payment instruments belonging to a scheme

lying arrangements for clearing (whether bilateral interbank

may be used in other countries and in systems installed by other

clearing or clearing via infrastructures) and settlement (e.g. with

schemes. Interoperability requires technical compatibility be­tween

guarantees or in real-time) that make this possible.

systems, but can only take effect where commercial agreements have been concluded between the schemes con­cerned.

Interbank A transaction or exchange operated between banks.

Issuer Public and private companies that enter direct contractual relation­

Interchange fee

ships with consumers and/or businesses to maintain and service

When a customer pays for a purchase in a store using a credit

such relationships through the issuance of one or more plastic

or debit card, the bank that serves the store (the acquiring bank)

cards.

pays a fee to the bank that issued the payment card to the consumer (the issuing bank). A so-called interchange fee is then

Issuing bank

deducted from the final amount that the store merchant receives

The financial institution member of the card companies that has

from the acquiring bank for the transaction.

the responsibility of issuing credit, prepaid, corporate, charge and debit cards to a consumer.

121

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary L

Loyalty card

Merchant bank

A brand – specific or retailer – labeled card that has cardholder

A bank that is licensed as a member of Visa/Mastercard to pro­

benefits tied to purchase amounts, usage, membership, or num­

vide merchants with an account and therefore allows them to

ber of visits. Benefits typically include coupons or discounts for

accept credit cards.

future services.

Merchant identification number

M

A unique number assigned to a merchant account to identify it

Market fragmentation

throughout the transaction process.

Separation of a market that is relatively uniform into different seg­ ments that have different preferences and demand patterns, each

Merchant services provider (MSP)

requiring different marketing approaches.

A service provider that sets up an account on behalf of the mer­

Marketplace

chant and provides processing and report tools for accepting

An online marketplace/online platform is a type of ecommerce

online payments. Each transaction is facilitated by the MSP on

website where product and inventory information are provided

behalf of the merchant.

by multiple third parties, whereas transactions are processed by the marketplace operator. Online marketplaces are the primary

MetaToken

type of multichannel ecommerce. In an online marketplace, con­

A token that stays constant for a particular card number (PAN).

sumer transactions are processed by the marketplace operator

MetaTokens give access to merchants who do not want card­

and then delivered and fulfilled by the participating retailers or

holder data in their system but they still want to maintain a relation­

wholesalers (often called drop shipping).

ship with the card for data analytics. These MetaTokens allow merchants to analyse card usage for the life of the card. The same

Merchant account

MetaToken will be returned each time a specific card is used

A type of bank account through which businesses can accept

whether it is for a purchase, credit return, card-on-file, bill-backs,

debit and credit card payments. The merchant account is the

recurring membership/subscription payment etc.

outcome of an agreement between an acceptor and a merchant

Micropayment

acquiring bank.

A small amount of payment (under USD 20) that is particularly

Merchant aggregator

popular for the sale of information and content online and consi­

Is a service provider for ecommerce merchants that helps them

dered a market for prepaid and stored‐value cards.

process their payment transactions. Under this arrangement, the merchant can accept credit cards and bank transfers without

Millennials

setting up a merchant account with a bank or card association,

A name given to the generation born between 1982 and 2004.

the merchant being paid by the aggregator.

The Millennial generation follows Generation X (1960-1980) in order of the demographic cohorts. This generation is often associated with technology and social media. Also known as Generation Y.

122

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Mobile banking

Mobile wallet

A financial service provided by a bank or a financial institution for

A payment service that enables users to receive and send money

its customers using a mobile device (smartphone or tablet). The

via mobile devices. For consumers, all the credit and debit card

software behind it (the app) offers the mobile banking service on

information is available in one place. Mobile users then activate

a 24-hour basis.

their mobile wallet on their mobile device by downloading the provider’s corresponding app.

Mobile payments Also referred to as mobile money, mobile money transfer and

Mail Order/Telephone Order

mobile wallet. It generally refers to payment services operated

The purchase of goods or services, with the purchase order issued

under financial regulation and performed from or via a mobile

by phone or in writing by fax or using an order card.

device. Mobile payment is an alternative payment method. Instead of paying with cash, check, or credit cards, a consumer can use

M-Pesa

a mobile phone to pay for a wide range of services and digital or

A mobile payments system based on accounts held by a mobile

hard goods.

operator and accessible from subscribers’ mobile phones.

The con­­version of cash into electronic value (and vice versa)

Mobile network operator (MNO)

happens at retail stores (or agents). All transactions are autho­

A telecommunications service provider organisation that provides

rised and recorded in real-time using secure SMS.

wireless voice and data communication for its subscribed mobile users. MNOs are independent communication service providers

MyBank

that own the complete telecom infrastructure for hosting and

MyBank is an e-authorisation solution that enables safe digital

managing mobile communications between the subscribed

pay­ments and identity authentication through a consumer’s own

mobile users with users in the same and external wireless and

online banking portal or mobile application.

wired telecom networks. MNOs are also known as carrier service providers, mobile phone operator and mobile network carriers.

N

NACHA Monetisation

Abbreviation for National Automated Clearing House Association,

To monetise is to convert an asset into or establish something as

an association that manages the development, administration,

money or legal tender. The term ‘monetise’ has different meanings

and governance of the ACH Network, the backbone for the elec­

depending on the context. It can refer to methods utilised to

tronic movement of money and data in the US.

generate profit, while it also can literally mean the conversion of an asset into money. For example, the US Federal Reserve can

National Retail Federation (NRF)

monetise the nation’s debt; this involves the process of purchasing

The world’s largest retail trade association, with membership

debt (treasuries) which in turn increases the money supply. This

that encompasses all retail formats and distribution channels,

essentially turns the debt into money (monetisation).

including department, specialty, discount, catalogue, Internet, and independent stores as well as the industry’s key trading partners

Mobile point of sale (m-POS)

of retail goods and services.

A smartphone, tablet or dedicated wireless device that performs the functions of a cash register or electronic point of sale.

123

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary NFC A short-range wireless connectivity standard (Ecma-340,

An overlay OBeP – third party (the overlay provider) who sits

ISO/IEC 18092) that uses magnetic field induction to enable

between the payment network and the consumer. The provider

communication between devices when they are touched together,

requires the consumer to share their online banking credentials

or brought within a few centimeters of each other. Jointly

with them in order to have access to the consumer’s bank account

developed by Philips and Sony, the standard specifies a way for

and to initiate the credit transfer to the merchant. Examples:

the devices to establish a peer-to-peer (P2P) network to exchange

SOFORT banking (Germany), Trustly (pan-European).

data. After the P2P network has been configured, another wireless communication technology, such as Bluetooth or Wi-Fi, can be

Omnichannel

used for longer range communication or for transferring larger

Omnichannel retailing is concentrated more on a seamless

amounts of data.

approach to the consumer experience through all available shopping channels, such as mobile internet devices, computers,

O

brick-and-mortar, television, radio, direct mail or catalogue.

Online Banking e-payment (OBeP) scheme

Retailers are meeting the new customer demands by deploying

The Online Banking e-Payments (OBeP) scheme is a type of

specialised supply chain strategy software. Retailers using an

payments network designed to facilitate online bank transfers.

omnichannel approach will track customers across all channels,

In an OBeP scheme, the consumer is authenticated in real-time

not just one or two. In the brick-and-mortar channel, digitally

by the consumer’s financial institution. The availability of funds

savvy consumers are entering stores already well-informed about

is validated in real-time and the consumer’s financial institution

a product’s features and prices and expect store employees to

provides guarantee of the payment to the merchant in case the

know more than they do.

payment is made as a credit transfer (push payment): i.e. the consumer/buyer initiates the payment. The merchant receives

Online Banking

a real-time guarantee so he can continue with the fulfilment

See e-Banking.

process. The actual funds arrive later (D+1), according to the

Online payment

SEPA Credit Transfer Scheme.

In the context of Internet commerce, it is a financial transaction There are three types of schemes:

between a buyer and a seller resulting from an Internet purchase

A mono-Bank OBeP scheme entails that a seller or Payment

where the buyer has selected its payment method online goods

Service Provider has a separate connection to each participating

and services are purchased over the Internet (whether through a

financial institution.

browser or in-app).

Multi-Bank OBeP scheme – entails that a seller or Payment Service

Online payment method

Provider has one single connection to the OBeP network in order

It refers to the ways shoppers can pay for their purchases over

to accept payment from any participating financial institution.

the Internet. Online payment methods rely on one of the five-

Brands: iDEAL (Netherlands) GiroPay (Germany), MyBank (EU),

core payment instruments used to ensure the money flows from

ePS (Austria) and Bankaxess (Norway).

buyer to seller: card payments, bank transfer payments, direct debit payments, cash payments, and cryptocurrency payments.

124

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Online shopping (online retailing) A form of electronic commerce that enables consumers to buy

Qualification Requirements applicable to employees of PA-QSA

goods or services from a seller over the internet without an

Companies that will conduct PA-DSS Assessments.

intermediary service. An online shop, e-shop, e-store, internet shop, webshop, webstore, online store, or virtual store evokes the

Payment Card Industry Data Security Standard

physical analogy of buying products or services at a bricks-and-

(PCI DSS)

mortar retailer or shopping centre. The process is called business-

Common security standards for merchants and third parties

to-consumer (B2C) online shopping.

reached by Mastercard, Visa and other card associations with the goal of protecting payment and card account data. The PCI

P

Standard is mandated by the card brands and administered by

Pay-as-You-Go

the Payment Card Industry Security Standards Council.

An unbanked, credit-poor, or noncredit customer who mostly deals with cash. These consumers are targets for a prepaid card.

Payment Card Industry Security Standards Council (PCI SSC)

Pay later

Originally formed by American Express, Discover, JCB, Mastercard,

A type of payment that refers to the fact that the money is collec­ted

Visa, its goal is to manage the continuous development of Payment

from the consumer later, usually after a statement is rendered.

Card Industry Data Security Standard.

Payee

Payment brand

Party (beneficiary) to whom a bill of exchange (such as a check or

A payment brand refers to a consumer-facing brand that is directly

draft) is made payable.

linked to one of the five Meta payment instruments, for example Mastercard (card payments), ELV (direct debit payments) and

Payer

Bitcoin (crypto-currency payments). When a shopper selects

A person or a party that makes a payment for products or services

a payment brand, they instantly select one of the five payment

received to another person or party.

instruments to complete the online purchase.

Payment Application Data Security Standard

Payment flow

(PA-DSS)

The clockwise transfer of money in payment for the counter-clock­

A global security standard created by Payment Card Industry

wise physical flow of goods and services. The payment flow

Security Standards Council. It aims to prevent payment applica­

is the monetary payment for goods and services received by

tions for third parties from storing prohibited secure data, such as

the household sector from the business sector through product

magnetic stripe, CVV2, PIN.

markets and the monetary payment for resource services obtained by the business sector from the household sector through factor

Payment Application Qualified Security Assessor

markets.

(PA-QSA) Organisations that have been qualified by the PCI Security

Payment gateway

Standards Council to perform PA-DSS Assessments for PA-DSS

A mix of hardware and software which gives merchants the ability

Program purposes. PA-QSA Employees are individuals that are

to perform authorisations from a website over the internet. It is the

employed by a PA-QSA Company and have satisfied all PA-QSA

link between a merchant website and the processor.

125

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Payment instrument

PIN (Personal Identification Number)

Payment instruments are an essential part of payment systems.

A unique number used as an authentication method by the card­

Payment instruments are used to ensure the money flows from

holder when using debit cards at an ATM, point-of-sale or for

buyer to seller.

online payments. Also used with some credit cards.

- Card payments - Bank transfer payments

Peer-to-peer payments

- Direct debit payments

An online technology that allows customers to transfer funds from

- Cash payments

their bank account or credit card to another individual’s account

- Crypto-currency payments

via the Internet or a mobile phone.

- Direct Carrier payments

Point of sale (POS) Payment method

Point of sale (POS) or checkout is the location where a transaction

A generic way in which a payment method is carried out, for instance

occurs. A “checkout” refers to a POS terminal or more generally

by PIN card, credit card, internet banking, COD, premium SMS.

to the hardware and software used for checkouts, the equivalent

When a payment method is not generic but specific, it is called a

of an electronic cash register.

payment product.

Point-to-Point Encryption (P2PE) Payment page (checkout)

A standard set up by PCI Security Standards Council, which

A Web-based payment page for simple and secure acceptance

encrypts payment card data to prevent fraud.

of various payment methods. End customers input their data into a website to make online payments. The Payment Page enables

Prepaid card

merchants to accept credit cards and other national and

Stored-value card used to pay for goods and services, mainly

international means of payment such as direct debits, giropay,

as an alternative to cash. Can be open loop or closed loop.

iDEAL, eps, paybox, paysafecard and others in a fast, secure

Prepaid cards are sometimes disposable after the stored value is

manner with PCI compliance.

exhausted or reloaded.

Payment processor

Processing fees

A company (usually a third party) contracted by a merchant to

The processing cost does only relate to the processing of data

handle transactions from various channels such as credit cards

originating from the merchant’s website to the applicable financial

and debit cards from merchant acquiring banks.

institution or acquirer after each transaction. Most often, they charge a fixed fee per processed transaction between EUR 0.10 and EUR 1.00. Depending on the Payment Service Provider, they

Payment service provider (PSP) Service providers that enable web- and offline transactions for merchants. PSPs aggregate various payment methods from various acquirers into one contract and one technical interface for merchants.

126

PAYMENT METHODS REPORT 2018

•

Glossary

could charge for approved transactions, declined transactions, authorisation or transaction reversals and refunds, for example.

Glossary Provisioning

Reconciliation

Storing card data in NFC-enabled smartphones in order to be

A message generated by an acquirer or an issuer, an originator or a

able to make payments using the mobile phone. The card data

receiver, or a terminal and a processor of an electronic transaction

is stored on the SIM card or in a secure area of the smartphone.

that advises the receiver of settlement information regarding transactions processed between the sender and the receiver.

PSD (Payment Service Directive) The Directive on Payment Services (PSD) provides the legal foun­

Recurring billing transaction

dation for the creation of an EU-wide single market for payments.

A recurring payment that the merchant initiates automatically for

The PSD aims at establishing a modern and comprehensive set

services or goods at a prearranged schedule. To initiate a recurring

of rules applicable to all payment services in the European Union.

billing transaction, the merchant requires the cardholder’s per­

The target is to make cross-border payments as easy, efficient and

mission upfront only once.

secure as ‘national’ payments within a Member State. The PSD also seeks to improve competition by opening up payment mar­

Recurring payments

kets to new entrants, thus fostering greater efficiency and cost-

The payments whereby the merchant is able to charge the

reduction.

customer’s credit card without involvement of the cardholder or the need for the cardholder to re-enter credit card details when

PSD2

checking out. Recurring payments can service two business

The European Commission adopted a proposal for a revised

purposes: to facilitate recurring billings (e.g. subscription based

Directive 2007/64/EC on Payment Services (‘the PSD2’) on 24

payments and utility bill payments) and to simplify checkouts for

July 2013. The main objectives of the revision are to promote

returning customers.

better integration, more innovation and more competition in the

Returns

market for payment services within the EU.

A sales return is merchandise sent back by a buyer to the seller,

Q

usually for one of the following reasons: excess quantity shipped,

QR codes

excess quantity ordered, defective goods, goods shipped too

A type of 2D bar code that is used to provide easy access to

late.

information through a smartphone. There are static quick response codes, which are used to disseminate information to the general

Risk management

public and dynamic codes, which offer more functionality, such as

The process concerned with the identification, measurement,

editing the code at any time and targeting a specific individual for

control, and minimisation of security risks in information systems

personalised marketing.

and payment systems to a level commensurate with the value of the assets protected. Good risk management in the merchant

R

programme requires meeting the challenges of reducing the

Receipt

exposure to risk and responding quickly when risk arises.

A hard copy of the transaction given to the consumer. Also called

Monitoring merchant activity with preset parameters allows the

sales draft receipt.

transactions to be rejected for examination before potentially incurring a loss.

127

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary S

Settlement bank

SCT Scheme

A bank, including correspondent or intermediary banks, that is

The SCT scheme is an inter-bank payment scheme defining a

authorised to execute settlement of interchange on behalf of the

common set of rules and standard procedures for credit transfers

member or the member’s bank.

in euro.

Screen scrapping SecureCode

The process of collecting screen display data from one application

A Mastercard authentication solution for online payments. Part

and translating it so that another application can display it. This is

of the 3-D Secure protocols, it standardises data infrastructure

normally done to capture data from a legacy application in order

for passing cardholder authentication information among the

to display it using a more modern user interface.

merchant, acquirer, and issuer.

SME SEPA Direct Debit Mandate

Small and medium-sized enterprises (SMEs) are non-subsidiary,

It is a payment method through which a merchant, authorised by its

independent companies that employ less than a given number

customer, can collect future payments from its Euro bank account.

of employees. This number varies across countries. The most frequent upper limit designating an SME is 250 employees, as in

Single Euro Payments Area (SEPA)

the European Union.

This is the vision, directive and goal of the European Commission meaning that citizens and companies within the European Union

Supply chain

have to be able to pay with a single set of payment instruments.

The network created amongst different companies producing,

This set is the combination of a bank account and instruments

handling and/or distributing a specific product. Specifically, the

like money transfer, direct debit and cards. SEPA signifies the

supply chain encompasses the steps it takes to get a good or

end of international payments within Europe.

service from the supplier to the customer.

SEPA payment schemes

Surcharge

Simplified, the term scheme refers to a set of common rules

In debit card usage, additional fees assessed to cardholders

and standards. In Europe, this is known as the SEPA payment

by merchants and ATM providers. Merchants are sometimes

scheme. The SEPA Credit Transfer (SCT) and SEPA Direct Debit

charged additional fees for nonqualified interchange transactions.

(SDD) Rulebooks contain sets of rules and technical standards for the execution of SEPA payment transactions that have to be

T

followed by adhering payment service providers. These rulebooks

Transaction

can be regarded as instruction manuals that provide a common

An act between a merchant and a cardholder that results in a

understanding on how to move funds from account A to account

paper or an electronic representation of the cardholder’s promise

B within SEPA.

to pay for goods or services received from the act.

Settlement

Transaction number

The process of transferring funds for sales and credits between

A unique password issued by the card-issuing bank, which is used

acquirer and issuers, including the final debiting of a cardholder’s

in addition to the PIN as extra security to confirm a transaction in

account and the crediting of a merchant’s account.

internet banking.

128

PAYMENT METHODS REPORT 2018

•

Glossary

Glossary Tokenization

Velocity check

Is often used in credit card processing. The PCI Council defines

A frequency check in which payment transactions are reviewed for

tokenization as “a process by which the primary account number

repeating patterns within a defined (short) period. The check can

(PAN) is replaced with a surrogate value called a token”.

be performed based on various data for a payment transaction (e.g., if a certain pattern repeats during a period, or even appears

Turnover

in clusters).

Sales volume net of all discounts and sales taxes registered on a

Verified by Visa

yearly basis.

A Visa program to increase security and reduce fraud risks for

U

online purchases. One of the 3-D Secure protocols, it works by

Unbanked

connecting the merchant’s website to Visa in order to obtain

An umbrella term used to describe diverse groups of individuals

the specified fields at the time of purchase. The values are then

who do not use banks or credit unions for their financial trans­

submitted with the authorisation request to verify whether it is an

actions.

authentic cardholder purchase.

Underbanked

Virtual assistant

Consumers either having a checking or savings account, but also

A person who helps someone else – usually a business owner or

relying on alternative financial services.

small business - with a variety of tasks from a remote location.

Universal Wallet API

Virtual terminal

A digital wallet software developed by CardinalCommerce that

Internet-assisted user interface for payment acceptance (inclu­

allows merchants to use multiple digital wallets in their ecommerce

ding via MOTO), which is used, for example, in call centres.

operations.

Allows direct payment acceptance without signature by the pay­ ing party. Risk management checks are performed in the same

V

way as for online payments.

Value chain A value chain is the whole series of activities that create and build

W

value at every step. The total value delivered by the company is

White label

the total sum of the value built up all throughout the company.

White label refers to a product or service that is purchased

Michael Porter developed this concept in his 1980 book ‘Compe­

by a reseller who rebrands the product or service to give the

titive Advantage’.

impression that the new owner created it. White label products are often produced via mass production.

VAT Consumption tax added to a product’s sales price. It represents a tax on the “value added” to the product throughout its production process.

129

PAYMENT METHODS REPORT 2018

•

Glossary

Visit Our Enhanced Alternative Payment Method Solutions Database

All alternative payment methods are now easily accessible via The Paypers database. Find alternative payment methods, filtered on payment method category, country and region, so you can quickly and conveniently find the method you’re looking for!

onlinepayments.thepaypers.com/alternative-payment-method