august 2016 issue 534 climbing ... · cashless future scandinavia making significant strides august...

CLIMBING TO ACASHLESS FUTURE

Scandinavia making significant strides

August 2016 Issue 534 www.cardsinternational.com

• TECHNOLOGY: Contactless• CASH DISPLACEMENT: Afghanistan

• OPINION: CMA• GUEST COMMENTS: Icon Solutions and ACI Worldwide

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Cards International

www.cardsinternational.com August 2016 y 1

EDITOR’S LETTER

CONTENTS6 TECHNOLOGY: CONTACTLESS

Jessica Longley reports on the contactless boom spreading across the globe. Transforming the payments sphere, is this trend set to continue?

8 CASH DISPLACEMENT: AFGHANISTAN

While mobile adoption in Afghanistan has not been as expansive as in other countries in the region, mobile money has received a recent push. Robin Arnfield writes

10 GUEST COMMENT: ICON SOLUTIONS

Tom Hay, head of payments at Icon Solutions, argues the good points to the looming regulation that is PSD2

11 OPINION: CMA

Douglas Blakey comments on the recent statement from the Competition and Markets Authority with regards to mobile banking. The strategy is very deliverable

12 CASHLESS: SCANDINAVIA

While many regions are planning on becoming a ‘cashless’ society, only one place has taken the bull by the horns: Scandinavia. Patrick Brusnahan writes on this innovative region

14 COUNTRY SURVEY: SWEDEN

16 COUNTRY SURVEY: IRAN

18 COUNTRY SURVEY: GREECE

20 GUEST COMMENT: ACI WORLDWIDE

While banks and financial services providers need to do more to counter fraud, in many instances it is customers themselves that are compromising security. Jay Floyd, head of fraud strategy and solutions EMEA at ACI Worldwide writes

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It has taken some 16 months since first mooted but they have got there in the end-the ‘they’ being Diebold and Wincor Nixdorf.

The result is a new brand – Diebold Nixdorf – a new website and a new logo.

Now the two firms have to make it work.It was only last June that Wincor CEO Eckard

Heidloff was quoted by the German publication thus: “From our view, a merger with Diebold doesn’t make sense. We believe, that in this case 1+1 would be less than 2. The restructuring and integration effort would be unbelievable enormous. This would paralyse both companies.”

Fast forward a year and Heidloff said: “Wincor Nixdorf has done its homework, and plans for the business combination with Diebold are progress-ing well.

“Together, we are looking to create a powerful new IT company that is an innovative and reliable partner to both retail banks and retailers in these dynamic times.”

Not that it was really a merger of course. In terms of the $1.8bn deal, Diebold required to acquire needs at least 75% of Wincor’s shares to obtain control and for a time in or about Easter, that was from guaranteed.

The done deal creates the world’s largest maker of ATMs based on units sold but it is of course old hat to think of Diebold Nixdorf merely in terms of hardware.

In the first three quarters of the current fiscal, total net sales generated by Wincor’s hardware business amounted to only 44% against 56% from software/services.

At Diebold, hardware sales accounted for a mere 33% of sales revenue in the first half of the year against 67% for software and services.

It is no misprint when the new firm describes itself as services--led, software-enabled company supported by innovative hardware.

As for the ATM: the new Diebold Nixdorf boasts a combined installed base of about 1 million of the 3 million ATMs in operation around the world.

Main rival NCR is not far behind with about 800,000.

The jury will be out for a little time on the merits of the Diebold Nixdorf deal. It is targeting about $160m of annual cost synergies by the end of year three.

NCR is also energetically transforming itself from an ATM manufacturer to a tech provider across physical and digital banking channels

NCR snapped up Digital Insight; acquired inno-vative businesses and pioneers in adjacent indus-tries, such as Alaric in transaction processing and security, Transoft in cash management, and uGen-ius in video banking while it’s Radiant and Retalix sought to strengthen its position as a leader in retail technology.

NCR is also deriving new from the ATM channel via its NCR Interactive Teller, enabling a live teller to take remote control of an ATM.

Whatever the evangelists of cash displacement might try and argue, the ATM sector remains a source for revenue growth and innovation, with the 50th birthday of the first ATM only a few months away.

Douglas [email protected]

Diebold Nixdorf kicks off new eraEDITOR’S LETTER

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Cards International

2 y August 2016 www.cardsinternational.com

NEWS: DIGEST

M&A

TCM Bank snaps up Fifth Third Bank’s agent credit card portfolio in record dealTCM Bank, a credit card bank of ICBA Ban-card, has acquired the agent bank portfolio of Cincinnati-based Fifth Third Bank.

ICBA Bancard said the transaction marks the largest credit card acquisition in TCM’s history, bringing its total assets to $292m.

The transaction will add $97.9m in credit card receivables as well as 90,000 small busi-ness and consumer credit card accounts from 115 financial institutions.

TCM will own the credit card assets of the new portfolio; however, it will continue branding and marketing the cards under the names of the 115 other financial institutions.

TCM Bank president and CEO Damon Moorer said: “Adding the Fifth Third busi-ness to our portfolio aligns perfectly with our growth strategy, and further establishes TCM’s role as an ideal partner for financial institutions in the credit card industry.”

TCM Bank’s chairman of board of direc-tors and CEO of Farmers State Bank, Joe Pierce, commented: “Financial institutions that have sold their portfolios to TCM Bank can rest easy knowing that unlike many other credit card issuers, TCM Bank does not offer competing financial services.”

TCM Bank added that it expects to com-plete the integration of the portfolio by the end of 2016.<

PRODUCTS

Times Internet and HDFC Bank launch debit cardTimes Internet, the digital arm of The Times of India Group, has launched a new debit card in collaboration with India-based pri-vate sector lender HDFC Bank.

The Times Points HDFC Bank debit card offering is said to provide customers with the best deals, discounts, and rewards when shopping online.

A unique loyalty proposition allows shop-pers to earn club points from online shop-ping as well as consuming, creating and shar-ing digital content on Times Internet sites.

Additionally, cardholders can obtain a minimum 10% discount on online purchases from retail and grocery sites.

Customers receive personal accidental death cover of up to INR1m ($14,964), international air accidental death cover of INR5m, and zero liability cover of up to INR100,000 on fraudulent and skimming transactions.

Times Cards COO Archana Vohra said: “After the success of Times Card, we thought it was imperative to continue to build value for our consumers.

“We introduced the Times Points debit card – the first card in the debit space that magnifies the value proposition to customers by offering the best online deals and rewards.

“The card is aimed at young adults in their

first job who spend most of their time online and are extremely price-conscious.”

HDFC Bank’s country head of card pay-ment products, merchant acquiring services and marketing, Parag Rao, said: “This card gives great value in the form of discounts, offers, and rewards when shopping online. We are confident that our co-branded debit card will be a valuable addition to our grow-ing portfolio of products.”

The card – which is the second co-branded card launched by Times Internet in collabo-ration with HDFC Bank – will have a daily shopping limit of INR275,000 and an ATM withdrawal limit of INR100,000.<

PRODUCTS

Sydney migrates to Cubic’s Opal electronic card-only system

Cubic Transportation Systems and Transport for New South Wales have completed the migration to the Opal smart card ticketing system in Sydney, Australia.

Beginning this month, the old-style paper tickets for public transport will no longer be sold or accepted, marking the completion of Sydney’s transition to the modern, integrated electronic-ticketing system.

Commuters who do not own an Opal card

can now purchase single-trip Opal smart cards through 255 Opal top-up machines, located at train, light rail and ferry stops.

The transition to electronic ticketing ini-tially commenced in December 2012. Since then, customers have taken 800 million trips and 7.5 million cards have been issued.

Designed, installed and operated by Cubic, the Opal card-only system is currently being used for 95% of all public transport trips.

Cubic Transportation Systems managing director for Asia-Pacific Tom Walker said: “Opal is enormously popular with Sydney and regional customers who no longer need to fumble for coins or wait in long queues.

“The introduction of the single-trip smart cards provides a last resort option for cus-tomers who don’t have an Opal card at the time of travel, and continues our manifesto of convenience for all.”<

M&A

FleetCor snaps up TravelcardFleetCor Technologies, a US-based fuel card and workforce payment product provider, has purchased Dutch fuel card issuer Travel-card Nederland from LeasePlan.

Commenting on the deal, FleetCor Tech-nologies chairman and CEO Ron Clarke said: “We are excited to announce this transaction with LeasePlan, one of our most important partners.

“They have built a terrific business in Travelcard, and we welcome the Travelcard team to FleetCor.

“This transaction supports our objective of establishing meaningful positions in the largest Continental European countries.

“We look forward to continuing Travel-card’s success and to marketing it more broadly to a wider audience.”

Financial terms relating to the deal have yet to be revealed.<

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NEWS: DIGEST

PRODUCTS

Payza expands prepaid programme to global membersPayza, a UK-based payment platform, has expanded the reach of its Payza prepaid card programme to the majority of Payza account holders across the world.

The card offers an affordable, secure and convenient option for members to use funds in their Payza account online, in-store and at ATMs that accept MasterCard.

The card has been designed as a general-purpose reloadable prepaid card with chip-

and-PIN technology and online account management features.

Cardholders can transfer funds to and from their wallet, report suspicious activity, report lost or stolen cards, and reset their PIN from within their account.

Payza’s global executive vice-president, Firoz Patel, commented on the expansion: “We initially launched the Payza Prepaid Card program to a limited group in Decem-

ber 2015, because we wanted to make sure we got it right before we opened the program internationally.

“After several months of working with our test group to find out what features they liked, disliked and really wanted, we were able to build a better, more secure pre-paid card that can be used by almost every Payza member wherever they live, work or travel.”<

CONTACTLESS

Emirates NBD rolls out mobile contactless solutionUAE-based Emirates NBD has launched a mobile contactless payment solution that enables the bank’s Visa cardholders to pay for in-store purchases instantly using a mobile phone.

Based on NFC technology, the Emirates NBD Pay app allows Android mobile devices to make purchases at NFC-enabled POS ter-minals.

The bank claims that the new mobile contactless payments solution is the first in the Central Europe, Middle East and Afri-ca region (CEMEA) to incorporate Visa’s

Token Service technology, which replaces cardholder information – such as account numbers and expiry dates – with unique digital identifiers, or tokens, that can be used to make payments without exposing a card-holder’s personal account information or compromising security.

On initiating the payment process, custom-ers simply wave their smartphones near the terminal to complete a transaction.

Emirates NBD senior executive vice-pres-ident and group head of retail banking and wealth management Suvo Sarkar said: “By

being the first bank in CEMEA to sign up for Visa’s Digital Enablement Program in 2015, we have succeeded in launching Emirates NBD Pay in a short time frame.

“The service solidifies our commitment to adopting global best practices and introduc-ing next generation banking solutions to the region.

“With total convenience and security being offered to customers, we believe Emir-ates NBD cards will continue to be the most popular payment option for the market at large.” <

MOBILE

Union Bank of India introduces new credit card appUnion Bank of India has launched a new credit card management app in collabora-tion with Worldline. The Ucontrol app ena-bles customers to control credit card use by mobile phone.

Using Ucontrol, bank cardholders can manage of all their Union Bank of India cred-it cards within a single mobile application.

To obtain the new service, cardholders must upload their card details to the app and register personal details.

The app allows users to enable and dis-

able POS, ATM and internet transactions, as well as activate and deactivate cards. For-eign transactions can also be enabled and disabled.

Members can receive transaction alerts for payments made through cards registered on the app. The app also allows them to analyse

spending patterns over the last three months.Union Bank of India chairman and MD

Arun Tiwari said: “At Union Bank of India, we always strive to adopt technology to expand the reach of banking services to more customers to create a seamless, user-friendly and secure banking experience.

“A personalised payment application such as Ucontrol helps customers take charge of their cards and Worldline – a transaction processing expert – is helping us build a solu-tion for secure transactions.”<

The UK registered an 18% spike in card fraud activity in 2015, mainly due to online transactions, according to a report by FICO.

FICO’s European Fraud Map for 2015 report revealed that the rise in fraud equates to a loss of £88.5m ($116m). Around 75% of that increase was driven by card-not-pre-sent (CNP) fraud, and £42.4m of CNP fraud came from the e-commerce channel.

Martin Warwick, who provided the com-mentary in the report, said: “We cardholders are very demanding, and if we don’t get what we want then we let people know in the form of reviews and feedback, not to mention switching cards.

“Banks want to avoid intervening unnec-essarily when customers are shopping on the internet. E-commerce spending in the UK

has nearly quadrupled since 2007, so you see why this is such a target for criminals.”

The report says that card fraud increased in 10 of the 19 European countries studied. After the UK, Greece, Denmark, France and Russia recorded the highest increases.

Of the 19 countries assessed, the UK accounted for nearly 43% of total card fraud, the report highlighted.<

SECURITY

UK card fraud surges 18% during 2015

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NEWS: DIGEST

SECURITY

Three-in-four debit cards to feature EMV chips by 2017One-third of all debit cards featured a chip by the end of 2015, while three-in-four are expected to be chip-enabled by the end of 2016 according to a new study by Pulse.

The 2016 Debit Issuer Study takes stock of the debit industry’s shift to chip (EMV) cards and mobile payments as a result of the October 2015 liability shift that marked a key milestone for issuers’ transition to chip card technology.

Almost half (45%) of issuers had start-ed to issue chip debit cards by the end of 2015; however, this is somewhat lower than the 90% indicated in the previous study.

When considering all debit card transac-

tions, chip debit transactions accounted for only 4% of total debit transactions. This is largely due to the slower-than-anticipated pace of merchant adoption, which limited the use of chip cards at chip-enabled termi-nals.

Even among consumers using chip debit cards, only 11% of chip card transactions were at chip-enabled terminals, while 89% were processed as traditional magnetic stripe checkouts or online.

However, the study noted that chip debit transactions are growing at triple-digit rates year-on-year.

The study highlights that mobile payments are gaining traction. It revealed that two-

thirds of issuers had debit cards eligible to be loaded on to a mobile wallet by the end of 2015.

The previous study found that less than one-third had that capability, indicating a year-on-year increase of more than 100%.

Pulse executive vice-president of marketing and communications, Steve Sievert said: “In this sea of change, core debit performance metrics remain strong, with debit use grow-ing with each instalment of the study.

“This year’s results provide key facts behind the shift to chip debit cards and mobile payments, two of the most signifi-cant developments within the payments industry.”<

DISTRIBUTION

Fexco to launch m-cash in the PhilippinesIrish financial services firm Fexco has col-laborated with Electronic Network Cash Tellers (Encash) to launch its mobile cash withdrawal solution in the Philippines.

The Fexco EasyDebit solution will facili-tate cash withdrawals and improve acces-sibility for more than 75 million BancNet cardholders across the country.

It uses a mobile point of sale (mPOS) pin entry device and mobile phone to enable users to withdraw cash using ATM cards at accredited merchants.

Commenting on the launch, Fexco CEO Denis McCarthy said: “EasyDebit is testa-ment to the innovative culture we have in Fexco.

“Not only are we focused on developing the next breakthrough fintech idea, but also on building practical solutions that bring value to our partners.

“In Negros Occidental, for example, it takes over four hours to travel to the near-est ATM, making access to cash extremely difficult.

“EasyDebit will reduce the reliance on ATMs and encourage financial inclusion.”

Designed as a plug-and-play solution, EasyDebit offers an additional revenue source and requires little installation on the side of the merchant, who needs only down-load the app.

Fexco EasyDebit is secure as the PIN is never stored to the mobile phone. In addi-tion, the mPoS is accredited to the highest security standards, as it complies with PCI DSS and EMV Levels 1 and 2.<

SECURITY

Nearly 80% of MasterCard consumers own chip-based credit cards in the USMasterCard has announced that approxi-mately 80% of its US consumer credit cards are now equipped with chips, representing an 88% growth in chip card adoption since the 1 October 2015 liability shift started to bring EMV-secured payments to the US.

The company also reported that 1.7m million chip-active merchant locations are operating on its network, which constitutes almost 30% of the US merchant population and a 374% increase in chip terminal adop-tion since 1 October 2015.

Measured in US dollars, counterfeit card fraud has fallen by more than 60% at Mas-terCard’s top five EMV-enabled merchants.

MasterCard’s senior vice-president of product delivery, Chiro Aikat, told Cards International: “MasterCard has helped over 150 countries adopt EMV and, time and

again, we have seen the same result: signifi-cant reductions in counterfeit card fraud.

“The US is one of the most complex mar-kets in the world, and great progress has been

made in securing our payments ecosystem in a short amount of time.

“It’s rewarding for the industry to start seeing signs that merchants, issuers and con-sumers can be freed from the burdens of card fraud.”

In April this year, MasterCard introduced M/Chip Fast, a new contactless application designed to speed EMV transactions by pri-oritising the steps critical to security.

In June, the company launched a new EMV chip terminal testing and certification programme that speeds chip terminal deploy-ment to hours, rather than days, allowing merchants to move more quickly to EMV.

MasterCard said that acquirers will have more responsibility and flexibility for ter-minal testing as a part of their own internal processes and schedules.<

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NEWS: DIGEST

DISTRIBUTION

M&T Bank extends its agreement with CardtronicsM&T Bank has extended its agreement with Cardtronics to offer the bank-branded ATMs at 120 Speedway locations in New Jersey and New York.

The new agreement will give M&T Bank customers surcharge-free access to ATMs at 55 stores in New Jer-sey, as well as 65 on Long Island, New York,

and at existing bank-branded ATMs at 48 Speedway stores in Pennsylvania.

M&T senior vice-president for retail banking Rich McCarthy said: “M&T Bank’s investment in expan-sion signifies our commitment to

customers, enabling them to access cash more quickly and conveniently.

“Our New Jersey, Long Island and Penn-

sylvania customers now have convenient and surcharge-free ATM access across the region with our new presence at Speedway’s well-positioned retail stores.”

Cardtronics president of North American business group David Dove said: “This latest expansion of surcharge-free ATM access is proof of M&T Bank’s commitment to pro-viding convenient service.” <

MOBILE

MasterCard to offer m-payments in the Middle EastMasterCard has partnered with UAE-based online payment service provider Payfort to introduce what it calls the ‘next generation of payment solutions in the Middle East’.

Using MasterCard Payment Gateway ser-vices, Payfort’s online payment solution will enable consumers to benefit from enhanced security when shopping online.

Customers will also benefit from Mas-terCard’s digital wallet, Masterpass, which provides a simplified and secure shopping experience with a simple checkout process.

Commenting on the launch, MasterCard’s division president of the Middle East and North Africa, Khalid Elgibali, said: “The online business industry in the Middle East and North Africa region is expected to reach $69bn by 2020, according to Payfort State of Payments 2016.

“With this tremendous growth comes a greater need to make e-commerce transac-tions simpler, more secure and seamless for both merchants and consumers.

“Our collaboration with Payfort will help

create a sophisticated and safe online pay-ments environment – increasing the con-fidence of all stakeholders involved in an e-commerce transaction through our cashless solutions.”

Payfort MD Omar Soudodi said: “We are pleased to partner with MasterCard and allow Payfort merchants to quickly and eas-ily integrate breakthrough security solutions into their payment processes, helping them to increase credit card acceptance both online and offline.”<

MOBILE

Wirecard and O2 provide mPOS for Czech retailersGerman financial services and technology company Wirecard has partnered with tel-ecommunications provider O2 to offer a unified POS solution to retailers in the Czech Republic.

O2 will offer merchants a new offering called eKasa – a fully online, tablet-based fiscal till system – together with credit card payment transaction services.

Wirecard will serve as acquirer and will process all payment transactions. It will also act as technical service provider, and allow O2 to use Wirecard’s mobile point of sale

(mPOS) software development kit.O2 will provide customers with the eKasa

card reader, which enables secure chip and PIN mobile card acceptance.

In 2016, a new till system law was imple-mented in the Czech Republic that requires retailers to conclude payment transactions online. Details are then forwarded to the national tax office, where they are reviewed to avoid fraud.

“This practical alternative to fixed till sys-tems is suitable for merchants, companies and self-employed persons from all industries

affected by the new government directives,” Wirecard said in a statement.

O2 director of SMB segment and indirect sales Lubos Lukasik said: “It is a pleasure to work with Wirecard on this project, to really draw an advantage for retailers out of this situation. For us, Wirecard is a reliable part-ner that quickly responds to innovation.”

Wirecard MD Roland Toch said: “The new combination enables retailers to benefit from powerful payment management fea-tures as they can simply repurpose a tablet into a new checkout device.”<

CONTACTLESS

RioCard and Gemalto launch contactless wristbandBrazilian company RioCard, in collabora-tion with digital security firm Gemalto, has unveiled a contactless ticketing wristband in Rio de Janeiro to simplify payments and improve public transport.

RioCard said the new contactless ticketing wristband can be used to pay fares for any mode of transport, and will be used by over 10 million residents and visitors.

To execute the transaction, users tap or

wave wristbands near a contactless reader.Gemalto believes the solution will boost

the use of public transport as transaction speeds are higher, and help simplify travel logistics.

Gemalto is providing RioCard with its waterproof Celego contactless wristband and the Celego contactless sticker, both embed-ded with a contactless chip and certified by Visa and MasterCard.

RioCard CEO Cassiano Rusycki com-mented: “The new RioCard wristbands sup-port our goal to create a more convenient and secure travel experience for all residents and visitors.

“The success of recent contactless projects with Gemalto – such as the Lille project in France and Visa’s wearable wristband in Bra-zil – have motivated this solution which we believe will revolutionise travel.” <

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6 y August 2016

TECHNOLOGY: CONTACTLESS

www.cardsinternational.com

Where is contactless taking us?

Contactless has been around for just over two decades, but it has already transformed the payments industry. Adopted globally and expected to grow over the next decade, contactless offers new possibilities and benefits for acquirers, merchants and consumers alike. Jessica Longley reports

Launched in 1997, the first contactless payment solution was a closed-loop offering by Mobil Oil called Speed-pass. Still in use today, it offers con-

sumers the ability to pay for purchases at petrol stations using radio-frequency identification (RFID) technology devel-oped by VeriFone.

This innovation kick-started a wave of new contactless entrants to the payment solutions market; the first contactless card was introduced by Barclays Bank in the UK in 2007, while near-field communication (NFC) technology in phones was brought by Nokia in 2006, and NFC wearables were invented in 2014.

Visa launched prepaid contactless rings for participants at the Olympic Games in Rio 2016, and virtual prepaid cards for other purchases. Visa also deployed around 4,000 NFC-enabled terminals across Rio to facilitate its use.

During the last two-to-three years in par-ticular, a sudden boost in contactless pur-chases has been recorded. Indeed, the entry of payments solutions from valuable global consumer brands such as Samsung and Apple has raised consumer awareness. Today, more people are choosing contactless as a faster and easier payment method.

An increase in the number of contactless terminals and scheme mandates to upgrade them have pushed contactless to be accepted by a wider audience, as have global EMV migration and pervading smartphone pen-etration.

According to the Ericsson Mobility Report 2016, there are more than 3.2 billion smart-phone subscriptions in the world, equivalent to approximately half of the world’s total population, and this is expected to grow at

a compound annual growth rate (CAGR) of 10%, to reach 6.3 billion in 2021.

Currently, contactless is not univer-sally adopted. Europe is at the forefront of contactless implementation with 285m contactless cards. Asia-Pacific follows, while the US and Africa are lagging.

Europe the leader in contactlessEfforts by scheme providers to promote contactless cards in Europe by mandating capable terminals and rolling out contactless cards, have been a major growth driver. According to MasterCard, contactless trans-actions in Europe grew by 150% annually in 2015 over 2014.

However, the adoption of contactless is not universal across European countries. The Czech Republic, Poland and Slovakia have high adoption rates, while Sweden and Den-mark have developing growth rates, having only adopted contactless in 2015.

The UK remains the largest contactless cards market in Europe in terms of the vol-ume of cards in circulation in 2015, followed by France. The number of contactless card transactions in the UK rose by 212.2% year-on-year in January 2016. As of May 2016, there were a total of 460,000 contactless POS terminals in the country, equivalent to a 50% annual increase.

Romania, followed by The Netherlands, has had the highest growth in terms of num-ber of contactless cards in circulation at 127% year-on-year.

The growth of contactless payments in Europe and Asia-Pacific is robust, providing large-scale opportunities for the penetration of contactless cards and NFC mobile pay-ments. As a result, the European contactless

industry is mainly focused on expanding card acceptance.

Asia-Pacific following in Europe’s footstepsThe use of contactless in Asia-Pacific grew due to a market need for financial technolo-gies and consumer demand for convenience.

Contactless cards were launched in India in 2015 and today more than eight banks offer contactless solutions.

As of June 2016, Visa issued more than one million contactless cards, acceptable at more than 100,000 merchant locations.

Japan, has the most advanced and devel-oped contactless infrastructure in the world with more than one million functional contactless POS terminals.

Singapore is also fully compliant and the growth of contactless payments can be attrib-uted to the spread of contactless technology.

Finally, Australia had 37 million contactless cards in circulation in 2015, with 1.6 cards per individual according to Timetric.

North and South America lagging behindThe region of North and South America is still trailing in contactless payment adoption despite having one of the largest economies in the world.

Deployment in the US has been sluggish, partly because of the consumer inclination towards mobile payments. NFC mobile pay-ments were more successful in the US than contactless cards in 2015.

In the US, contactless cards have been in circulation since 2009, but due to the una-vailability of contactless enabled POS termi-nals, adoption was not high.

Contactless-enabled POS terminals were estimated to represent just 2% of the total

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Cards International


TECHNOLOGY: CONTACTLESS

POS terminals in the country. However, with the launch of NFC enabled mobile payments from 2014 (Samsung Pay, Android Pay and Apple Pay) the number of enabled termi-nals has risen and is estimated to represent approximately 20% of the country’s total POS terminals.

Canada is ahead of the US and South America in terms of contactless adoption and although Canada adopted contactless later, in 2009, it has had a faster adoption rate than the US, with 75% of its major retailers now accepting contactless payments.

Contactless transactions in Canada are growing at one percentage point a month, and by the end of 2015, 10% of total domes-tic card transactions were contactless. The government has been proactive in supporting a cashless economy, which helped contactless gain traction.

Mexico, on the other hand, is a cash-dominated and underleveraged economy with approximately 70% of its transactions made in cash and only eight POS terminals per 1,000 inhabitants. The government is pro-change and making efforts to introduce electronic payment initiatives.

Middle East and AfricaMiddle Eastern markets such as Saudi Ara-bia, the UAE, Kuwait, and Jordan are gradu-ally introducing contactless payments. In May 2015, six banks – UBA, Access Bank, First Bank, Zenith Bank, Skye Bank and Diamond Bank – signed an agreement with payment solution provider Unified Payments to launch PayAttitude to promote contactless payments in Nigeria

South Africa has an unbanked popula-tion of over 12 million, posing large-scale potential for the payments industry, and the growth of contactless specifically.

To address the issue, the National Depart-ment of Transport (NDOT) has asked at least one bank in each province to issue pre-paid cards. With open-loop contactless tech-nology, these cards will have a wider reach and acceptability. These cards will also cater to tourists and students, pushing mass adop-tion and higher penetration.

Which sectors are best suited?Contactless is successful in areas where con-sumers make recurrent and low-value trans-actions such as mass transit, grocery shop-ping, coffee shop purchases, news vendors, vending machines and fast-food restaurants.

Contactless gained momentum in the UK when it was implemented by Transport for London in September 2014, with more than 400 million contactless journeys made on the city’s underground and buses as of May 2016.

The number of contactless card in the UK increased from 52.8 million in September 2014 to 86.5 million in March 2015.

In Australia, it gained traction through supermarkets, and in 2016 most face-to-face transactions were contactless.

Mass transit systems are one of the larg-est segments for payment transactions and, as a result, can lead to the mass adoption of a given payment instrument.

The adoption of contactless payment transactions by various national mass tran-sit systems in countries such as France, the UK, the Czech Republic, and Poland have given the necessary thrust to the growth of contactless payments in Europe.

In terms of demographics, contactless is adopted mostly by those aged 15–35 and in those countries with higher income populations.

Somewhat older consumers tend not to be inclined to adopt new technology such as NFC-mobile payments, and overall have more security concerns.

For merchants, contactless is a reduction of queues and a more seamless and sophisti-cated purchasing experience for customers, with the ideal outcome being repeat custom. Merchants can use customer data to improve services and design more tailored and better-targeted loyalty and marketing programmes. The early adoption of contactless payment by merchants provides a lead-time benefit and a competitive edge over others.

For consumers, contactless brings conveni-ence, cost, accessibility, security and speed. It takes on average one-to-two seconds to pro-cess a contactless transaction, as compared to six-to-seven seconds for cash.

For some customers, the flexibility of being able to use a payment card quickly for low-value transactions may encourage them to actually spend more, particularly when they are low on cash and would not otherwise have had the correct money. By facilitating a cashless society, more will be spent.

Drawbacks for providersAlthough adopting contactless is profitable in the long run, issuing new cards and put-ting in place new terminals and infrastruc-ture may be costly for merchants. According to Timetric, contactless cards are 15–20% more costly than regular chip cards.

For consumers, contactless means that purchases are non-anonymous. This could prove a problem if consumers wish to keep their identities and purchases private. How-ever, contactless also allows consumers to track and budget more easily. Consequently, it could be argued that the physical limits of cash can be used as a budgeting tool for daily or weekly expenses.

A daily limit of between five and eight transactions could also restrict customer expenditure on contactless platforms. A maximum limit is put in place in some coun-tries as a measure to prevent multiple pur-chases if a card is stolen, meaning that speed is only available for low-value transactions

What can we expect from contactless?According to Timetric, NFC mobile pay-ments will grow from $25bn in 2016 to $50bn in 2018, and mobile commerce is expected to be the second-largest contributor to the growth of mobile payments, second only to the value of total fund transfers.

Europe has seen strong uptake in contactless technology since 2013. The num-ber of contactless cards more than doubled – rising from 130 million in 2013 to 285 mil-lion in 2015.

While the number of contactless card transactions rose by 69.8% year-on-year in 2015, the transaction value registered an annual growth of 82.6%. According to Timetric, the trend is expected to continue over the next five years due to mandates by Visa and MasterCard for contactless POS terminals.

Timetric also believes that there are 14 mil-lion contactless terminals globally, equivalent to almost 20% of total POS terminals. Visa has 165 million contactless cards in circula-tion and 3.2 million active POS terminals in Europe and has mandated for all Visa-accepting POS terminals to be NFC-enabled by 2020.

Although the average contactless transac-tion value remains low, standing at €12.20 in 2016, it is expected to increase marginally to €16.50 by 2020.<

Benefits of contactless for different stakeholdersMoving from cash or card and PIN to contactless has numerous benefits for acquirers, merchants and consumers alike.Acquirers benefit from contactless on four occasions: y Customer retention is achieved by

providing convenience and a faster pay-ment process.

y Acquirers profit more from contactless card use than from cash.

y Replacing low-value cash transactions with card transactions improves overall operating efficiency and increases the volume of card transactions.

y Moving low-value transactions from cash to cards gives issuers valuable insight into consumer habits and behaviour, and provides acquirers with insights into merchants’ business activities. <

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8 y August 2016

CASH DISPLACEMENT: AFGHANISTAN


Mobile money takes off slowly in AfghanistanAfghanistan hasn’t seen the levels of mobile money adoption that Kenya has with M-Pesa. Mobile money is still embryonic and Afghanistan remains a cash-based society. But the government, mobile network operators (MNOs), and NGOs are working to foster adoption of mobile money, Robin Arnfield reports

Afghanistan is one of the least banked countries in the world, with the World Bank estimating that only 10% of the population

aged over 15 had a bank account in 2014. However, around 72% of the population have mobile phones in 2016, according to GSMA Intelligence. Around 90% of the population have mobile communications coverage.

“Currently, there are a total of 16 banks operating mostly in the capital, Kabul, as well as Herat, Nengarhar and Balkh,” says the Better Than Cash Alliance report: Building a Gateway to Digital Payments in Afghanistan: The World Food Programme’s E-Voucher Initiative. “There are over 400 full-service and limited-service bank branch-es across the country.”

Mobile money servicesWhile Afghanistan’s banks are based in the major cities, the majority of the population lives in rural areas.

Because the penetration of mobile phones in Afghanistan is so high, mobile is a tool for providing financial services to the unbanked.

With the support of United States Agency for International Development (USAID), three of Afghanistan’s four-largest MNOs, Afghan Wireless Commu-nication Company (AWCC), Etisalat, and Roshan, have rolled out mobile money services.

Roshan’s service is M-Paisa, while AWCC’s service is My Money, and Etisalat’s is M-Hawala. The other leading Afghan MNO – MTN – has yet to launch its mobile money service.

Three international money transfer compa-nies provide remittances to Afghanistan from abroad: MoneyGram; Western Union, which offers cash payouts at over 350 Afghan agent locations; and TransferTo, a global airtime remittance and mobile money transfer plat-form owned by Ingenico.

Afghan governmentAfghan President Ashraf Ghani Ahmadzai has stated that a cash-only system is risky, inefficient, and vulnerable to corruption, and has ordered government agencies to use non-cash payments, or electronic money, when-ever practical.

“The Government of Afghanistan fully supports the implementation of mobile money, and the Ministry of Communica-tion and Information Technology has started working on biometric registration of SIM cards, which will make mobile money regis-tration much easier,” Abdul Razaq Wahidi, Minister of Communication and Information Technology, said in October 2015.

“It’s still a novelty for Afghans to use mobile wallets, but eventually they will get accustomed to them and like their con-venience,” says Katrin Fakiri, author of the Building a Gateway to Digital Payments in Afghanistan: The World Food Programme’s E-Voucher Initiative study and a consultant on financial inclusion.

“The President’s vision is for all Afghan civil servants to be paid via mobile wallets, starting with the Police and Military.”

SavingsSo far, mobile wallets are primarily used as transactional vehicles, not for savings. “To get people saving money in mobile wallets, you need incentives,” Fakiri says.

“It’s probably a few years away before Afghans starting saving in mobile wallets. Currently, the leaders in South Asia for mobile money are Bangladesh, India, and Pakistan, all of whom are more advanced than Afghanistan.”

Traditionally, Afghanistan has been a cash-based economy. In common with other coun-tries in the region, Afghanistan has an infor-mal cash-based value transfer system called Hawala (Arabic for transfer).

Based on trust relationships between send-ers, recipients and money brokers, Hawala has no documentation and no audit trial.

“In Afghanistan, the real competition to mobile money is Hawala,” says Fakiri. “My view is that mobile money schemes shouldn’t try to beat Hawala but join it and get the Hawala agents to become their mobile money agents. Hawala has been going for hundreds of years and is in all the villages.”

RegulationsMobile money or e-money services provided by non-financial institutions such as MNOs have to comply with Afghanistan’s Electronic Money Institution (EMI) regulations, which are under the control of the Central Bank of Afghanistan (Da Afghanistan Bank).

Four types of e-money account are permit-ted: a cash card, a debit card, a mobile wallet, and a stored-value account card. Prior to the introduction of the EMI regulations in Octo-ber 2011, e-money service providers needed to have a Money Service Provider licence.

The EMI legislation is specifically for non-financial institutions. Afghan banks and deposit-accepting microfinance institutions (MFIs) are allowed to offer e-money services under the regulations governing banks and non-bank financial institutions.

The EMI regulations state that e-money must be fully deposited in the banking sys-tem in a trusteeship account, “the beneficiar-ies of which are the individual customers of the EMI licence-holding entity that deposits the funds.”

In addition, the trustee of the account must be the EMI entity depositing the e-money. Recipients of an EMI licence are required to have minimum capital equivalent to $1m.

Consumer-to-consumer mobile transfers are limited to 10 transactions a day with a maximum limit of AFN15,000 ($220) per transaction. There are no limits for consum-er-to-business, business-to-business, or busi-ness-to-consumer transactions. The maxi-mum amount that can be held in an e-money account is AFN150,000 ($2,200).

“While an e-money account can receive incoming remittances from abroad, it cannot

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CASH DISPLACEMENT: AFGHANISTAN

be used to send money outside Afghanistan.

RoshanRoshan, which has 6.5 million total subscrib-ers compared to Etisalat’s five million, was the first Afghan mobile operator to launch a mobile money service. It formed a partner-ship with Vodafone Group to launch M-Paisa in November 2008, based on the UK-based telco’s M-Pesa platform. Paisa means cash in both of Afghanistan’s national languages Dari and Pashto.

In April 2011, Roshan received an EMI licence for M-Paisa from the Central Bank of Afghanistan, marking the first issuance of this type of licence in Afghanistan. Roshan had been operating under a Money Service Provider licence since introducing M-Paisa in 2008.

“M-Paisa has over 100,000 customers, and processes over $4m per month,” says a Roshan spokesperson. “M-Paisa has over 350 active agents across Afghanistan who provide cash withdrawal services to M-Paisa customers. Of these agents, 132 are branches of the country’s four major banks – Afghani-stan International Bank (AIB), Afghan Unit-ed Bank (AUB), Azizi Bank, and First Micro Finance Bank (FMFB).”

Customers open an M-Paisa account at a registered M-Paisa agent’s location by pro-viding their Roshan SIM card and mobile number, their national ID card, and a colour photo of themselves.

The spokesperson explains M-Paisa works on all GSM-based mobile phones, from the most basic to the most advanced, as it uses Unstructured Supplementary Service Data (USSD).

After dialing a USDD number, customers can select the necessary options on an IVR-based menu in Dari, Pashto, and English. “As M-Paisa can be used with any type of phone via USSD, we don’t have a mobile web interface or a phone app as yet,” the spokes-person says.

USSD is a protocol which enables GSM-based cellphones to communicate in real-time with a service provider’s computers.

In 2012, Roshan signed an agreement with TransferTo under which Afghans living abroad can send mobile money to Roshan subscribers in Afghanistan.

“Recipients can use this money for what-ever purpose they like, for example buy-ing airtime or paying utility bills,” says the Roshan spokesperson.

“As more customers sign up for M-Paisa, we have been using more features including banking services, money transfers and pur-chasing goods and services,” says the spokes-person.

“M-Paisa users can link their bank

accounts to their M-Paisa accounts to trans-fer funds between the two. This feature has effectively expanded the frontier of banking to the unbanked population of Afghanistan, leading to greater financial inclusion.”

Provided an M-Paisa customer has a bank account with one of Roshan’s partner banks, they can link their bank account to their M-Paisa account by visiting one of their bank’s branches. “At the bank, they will be issued with a PIN, and their two accounts will be linked within 24 hours,” the Roshan spokesperson says.

M-Paisa allows its users to send money to customers of other Afghan service providers, but M-Paisa users are unable to receive funds from them, says the Roshan spokesperson. “We call this feature: send money to non-registered customers,” he says.

“In terms of the number of M-Paisa trans-actions, buying airtime top-ups is the largest transaction type, followed by salary pay-ments, cash-in/cash-out, P2P transfers, bill payments, and merchant payments,” he con-tinues.

“M-Paisa has proven to be an effective tool in fighting corruption; it was used in a pilot to pay salaries to around 1,300 Afghan National Police officers in 13 provinces and districts from 2009 to 2014.

“In some cases, the officers receiving their salaries through M-Paisa saw an immediate increase of 30%, which came about because the middlemen were eliminated, so the offic-ers received their salaries in full.”

The role of USAIDUSAID’s Financial Access for Investing in the Development of Afghanistan (FAIDA) program says it ‘works with the Afghan government and the private sector to develop a robust financial services indus-try, as well as to develop a financial ser-vices legal framework and market infra-structure’.

“USAID/FAIDA is working to harness the power of technology for mobile money, branchless banking and electronic payments as service delivery mechanisms through part-nerships with the Afghan government and between banks, MNOs, MFIs, and value-added service providers,” says Maseehullah Qadeer, Better Than Cash Team Leader at USAID/FAIDA and Technical Advisor to the Afghan President’s Policy Coordination Unit.

These initiatives include helping the Cen-tral Bank to make several key amendments to the previous provisions of the Money Service Provider license.

These include KYC registration, AML, and Counter-Terrorism Financing provisions; stricter regulations and enforcement for sus-picious transaction reporting; and measures

to improve transparency and accountability among mobile money operators and their agents and merchants.

“These amendments were approved by the Central Bank’s Supreme Council in July 2011, and implemented in October 2011,” says Qadeer. “So far, the Central Bank has issued EMI licenses to Roshan, followed by Etisalat and AWCC.”

Mobile money initiatives supported by USAID/FAIDA include the World Food Pro-gram’s (WFP) program to pay food aid via mobile money, which involves partnerships with AWCC and Etisalat; electricity bill payments via AWCC, Etisalat and Roshan; private-sector salary payments via AWCC, Etisalat and Roshan; government salary payments via AWCC; and microfinance loan repayments via Roshan.

As of June 2016, the WFP has over 77,000 registered users of its monthly mobile benefit payment service, while 78,000 people are making bi-monthly mobile electricity pay-ments.

In addition, 41,000 people are receiving monthly private-sector salaries, 11,000 are receiving monthly government salaries, and 5,600 people are making monthly microfi-nance loan repayments.

“Normally, each month around $170,000 is disbursed via mobile money on the above projects,” says Qadeer. “This amount varies on the size of electricity bills.”

National payments switchSwitzerland-based BPC Banking Technolo-gies has supplied its SmartVista software for Afghanistan’s national payments switch, which went live in 2016.

“SmartVista is being used as the national cards and mobile payment switch in Afghani-stan to provide interoperability and is intend-ed to interconnect all banks, mobile wallets, third-party aggregators, etc.,” says Zaheer Bawar, Managing Director of Afghanistan Payment System.

APS is a consortium of financial institu-tions funded by the Afghan Central Bank through the World Bank, which aims to develop the Afghan retail banking market by providing interoperable electronic and mobile payment services.

“For mobile wallets to scale, there has to be interoperability between the schemes and a good agent network,” says Fakiri.

“Now that there is interoperability in Afghanistan, it’s possible to send mobile money from one scheme to another and from one bank to another.

“But Afghan mobile money agents are proprietary to a specific scheme for the most part, and my hope is that the agents will become interoperable.”<

CI 534.indd 9 19/08/2016 15:30:52

Cards InternationalGUEST COMMENT: ICON SOLUTIONS

Is PSD2 a self-defeating regulation?When the Payment Services Directive (PSD2) replaces PSD in 2018, it will have scope to cover new payment services. The legislation is designed to better protect consumers, improve competition and drive innovation. Tom Hay, head of payments at Icon Solutions, writes on this important legislation

PSD2 has created turbulence because it requires banks to provide customer account access (XS2A) to third-party payment providers (TPPs), payment

charge transparency, and strong customer authentication for all electronic transac-tions.

Inconsistent and incoherentDespite years of negotiations between the European Parliament, Council and Commis-sion, critical parts of the legislation remain ill-defined.

For example, with XS2A, a bank that ‘provides a mechanism for indirect access should allow direct access’. None of the legal experts I have consulted with have been able to explain the difference between indirect and direct.

Regarding authentication, another clause says: “Where the payee or PSP of the payee fails to accept strong customer authentica-tion, it shall refund the financial damage caused.”

However the payee does not determine the type of customer authentication and there-fore can neither accept nor reject.

With legislation littered with perplexity, rule makers have asked the European Bank-ing Authority (EBA) to iron out the details by drafting Regulatory Technical Standards (RTS). The document, covering strong cus-tomer authentication and secure communica-tion, is due in summer 2016.

The EBA’s statement that it will need to ‘make difficult trade-offs between competing demands’ highlights the difficulties it faces when attempting to draft standards.

In any case, it is unrealistic to expect the RTS to resolve the ambiguities. After all, the EBA’s discussion paper acknowledged that the need for innovation requires flexibility.

Innovation inertiaThis continued uncertainty is stifling market progress. PSD2 is designed to boost innova-tion, but what we’re witnessing is a plan-ning blight. Market participants cannot plan innovative products because they don’t know what will be allowed and what won’t.

And even if the RTS rules are clear they

don’t come into force until October 2018, 10 months later than PSD2, which begs the question: why continue with a January dead-line?

Taking a wider view, the potential of appli-cation programming interface (API) technol-ogy has been overshadowed by a myopic focus on PSD2. Banks need to open up new revenue streams and the innovative use of APIs is central to this. Rather than exploring their transformative strategic potential banks are increasingly fixated on PSD2 compliance.

Stepping up securityThe counterproductive nature of the regu-lation is most apparent when we look at PSD2’s stated objective to ‘make payments safer and more secure’.

Central to this is the requirement for PSPs to apply ‘strong customer authentication’ when payers initiate ‘an electronic payment transaction’ – effectively two-factor authen-tication.

Given that security measures are grow-ing in sophistication and that the drive is constantly towards a frictionless experience for consumers, there will be some conflict between the direction that industry and regu-lators wish to travel in. It is unclear whether consumers will benefit from these mandated security procedures.

It may provide a boon for fraudsters as consumers will need to provide their banking security credentials (rather than card security credentials) to initiate payments. After years of telling consumers to keep bank credentials to themselves, rule makers are now asking them to splash them all over the web.

It is also likely to reduce customer conveni-ence as simple one-click checkouts such as Amazon and PayPal become outlawed. Visa and MasterCard attempted to increase online security by introducing 3D Secure, which is hated equally by customers who see it as intrusive and difficult, and merchants who can measure the number of sales that are abandoned at that stage.

If PSD2 mandates the use of two-factor authentication, the majority of which rely on cumbersome one-time-passwords, the effect will be a similarly negative impact on the

adoption and usage of these new payment methods.

One alternative is innovation in risk man-agement. Klarna has built a $2.25bn business through dynamic risk profiling to achieve a frictionless check-out. Imposing a ‘one size (mis)fits all’ approach to authentication will remove any competitive advantage to those differentiating through cutting-edge approaches.

Free riders and free bankingThere are no commercial incentives for banks around PSD2. They will have to invest millions to open up their infrastructure to provide XS2A and make the myriad opera-tional changes around pricing transparency, authentication and liability. Once again banks are being forced to manage regulatory hurdles, rather than investing in innovation.

How can costs be recouped? They can-not, as PSD2 explicitly prohibits banks from charging third parties for access, creating a free rider problem as TTPs enjoy all the ben-efits without the costs.

Once established, PSD2 will reduce banks’ ongoing revenues. According to Accenture, UK banks could lose up to 16% of their online retail payments-based revenues by 2020 – approximately £1.45bn ($1.9bn).

If combined with the recent reduction in interchange fees, customer accounts will become incredibly expensive. It’s likely that these costs will be passed on to consumers.

Voices calling for the end of free banking have been growing louder in recent years. PSD2 may well be the tipping point that turns words into action.

From where we stand today, far from har-monising the payments market in Europe, PSD2 is more likely to create fragmentation, inequality and complexity with the consumer paying as a result of less security, more fric-tion and potentially higher charges.

With the voices of a few dissenters drowned out by a wave of approval, there is a major risk that instead of achieving its stat-ed objectives to make payments more secure, boost innovation, create a level playing field while reducing the cost of payments, in real-ity PSD2 will result in exactly the opposite.<


CI 534.indd 10 19/08/2016 15:30:52

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OPINION: CMA

CMA: take a bowSo we know now what we get for £5m ($6.5m) and two years’ worth of work from the Competition and Markets Authority. Its final report is measured, proportionate and effective; furthermore the outcomes are deliverable, argues Douglas Blakey

The CMA’s report states that the established banks do not have to work hard enough to retain and win customers, and it is too hard

for newer, smaller banks to grow.Fair comment. A number of proposals arise from the

investigation, designed to help consumers and SMEs get a better deal.

You could almost hear the sigh of relief from the big banks that CMA avoided the danger of doing anything too silly.

The report’s conclusions are best summed up by Anthony Duffy, director of retail bank-ing in the UK and Ireland at Fujitsu.

He says: “The Competition and Markets Authority’s findings are designed to encour-age competition and switching in the retail banking market.

“It is further evidence of the interest that regulators continue to have in the working of the UK’s financial services industry.”

One of the most significant changes is the opening of banking data through an Open Banking Programme.

John Smith, MD at EMEA, Fiserv sums up the potential for open APIs to accelerate competition in the sector, speed-up the revo-lution of mobile banking and change custom-ers lives for the better.

“Open APIs could enable banks to offer simple and complex services, normally offered in high-street branches or online, through mobile apps.

“The opening of information will also allow customers to compare deals and shop around for better offers.

“The analysis made possible via this shared data has the potential to guide the generation of new technologies, services and functional-ity in the financial services as it has in other industries.”

Reaction to the report is far from univer-sally positive, however.

Daoud Fakhri, principal analyst for retail banking at Verdict Financial, sums up the views of many commentators, arguing: “Given the widespread consumer indiffer-ence to switching since the service launched, the incremental improvements that have been proposed by the CMA are highly unlikely to

have any noticeable impact on switching rates.”

Mark Mullen, chief executive of challenger Atom Bank, criticises the way in which the CMA has told banks to police changes.

He says: “It’s like trusting a pyromaniac with the security for a fireworks party. It means that new banks like Atom will have little direct say in shaping the future.”

At Metro Bank, CEO Craig Donaldson adds: “We are astonished that the CMA’s findings do not attempt to level the playing field for new entrants and challenger banks, by recommending that the PRA looks into disproportionate capital requirements.

“Disproportionate capital requirements are anti-competitive and unduly support the large incumbent banks by allowing them to hold up to 10 times less capital for the same loans than challenger banks.

“The CMA was given a rare opportunity to support and develop competition in bank-ing, it is disappointing that they decided not to get at the root of the problem, but rather tinkered around the edges.”

The Guardian was fairly typical of the con-sumer press: “Weak and disappointing from a toothless watchdog.”

It argues it was ‘questionable whether the CMA measures will be enough, not only to increase competition but also to ensure banks deliver a better service for their customers’.

The CMA arguably goes too far in hailing its open banking proposals as revolution-ary – evolution yes, but a new app is hardly revolutionary.

Critics have suggested that banks may struggle to deliver this given problems with their proprietary systems.

As the banks have performed the switching service pretty well across the sector, sorting out the proposed app ought to be deliverable.

The CMA also proposes that banks will have to publish core indicators of service quality based on customers’ willingness to recommend their bank to friends, family or colleagues.

This will be of passing interest, though a major surprise if the pecking order in the early days does not result in Metro Bank, first direct and Nationwide in that order,

with TSB and Halifax vying for a top five slot.

Expect Handelsbanken to score highly in the SME sector, with the Cooperative Bank, despite its troubles, also scoring particularly well.

For some critics, the concept of major banks making a profit and paying a dividend is an alien concept.

The perennially loss-making Guardian used to bang on about excessive bank profits, and become positively hostile if banks dared to report double-digit returns on shareholder capital every year.

Unless one is looking towards Canada, growing shareholder dividends and decent returns on capital seem to come from anoth-er banking era.

Nor is there merit in suggesting, as some do, that low levels of switching are by defini-tion an automatic cause for concern.

One or two of the digital startups may yet break the mould and become major players.

The jury is out, when one considers that one of the best-publicised and well-fund-ed startups has been up and running for months, but has not quite managed to launch an Android app.

Another startup gave it a go for a bit, and then cashed in when a major French player dangled a cheque before you could say ‘take the money and run’.

There was no merit to UK plc in the cur-rent climate in the CMA battering the big five banks, and it has wisely resisted that temptation.

Professor Alistair Milne – a leading finan-cial economics expert specialising in technol-ogy and innovation, and rather more clued-up on banking than some of the bank-bash-ing consumer press commentators – argues that critics of the CMA are missing a trick.

Milne says the CMA has got it right.“The CMA investigation is not just anoth-

er stitch up by the banking industry. Instead it offers a first real opportunity for change,” he explains.

“Properly followed up, the CMA recom-mendations can be the start of a technologi-cal revolution, leading to an era of open and competitive banking that benefits us all.”<

CI 534.indd 11 19/08/2016 15:30:52

The cashless revolut ion is t ru ly underway in Scandinavia. In Nor-way, reports say that only 6% of the population are still using cash.

According to Sweden’s central bank, the Riksbank, cash transactions made up barely 2% of all payments made in Sweden in 2015, a figure which has been predicted to drop to 0.5% by 2020.

Over the past 10 years, Danish banks have closed down every fifth cash machine and every second bank branch in the country.

Minimising cashBanks in Norway are slowly adapting their branches into cashless locations. In 2014, 64 branches of DNB were made cashless. Simi-larly, Nordea stopped handling cash at all its branches in October 2015. This initiative is anticipated to accelerate the shift towards electronic payments.

In January 2016, Swedish banks expanded Swish, a mobile app for online transactions. While previously used for P2P and in-store payments, it has grown in popularity with 4.4 million users in Sweden as of June 2016.

In December 2015, $688.4m worth of transactions went through Swish, increasing to $892.3m in May 2016.

In addition, MasterCard launched its MasterPass digital wallet in association with Nordea, SEB and Swedbank in Decem-ber 2015. ICA Banken and Resurs Bank also joined in early 2016. MasterPass users can shop online without having to enter pay-ment and shipping information with every purchase.

Government policies, as well as a rising consumer preference, are aiding the push


Who needs cash? Not Scandinavia

While a ‘cashless society’ is often brought up in thinkpieces and discussions worldwide, there is only one region taking the initiative with this movement. Scandinavia is closest to truly being cashless, but how is the market shaping up? Patrick Brusnahan writes on this region with help from Timetric’s research

n DEBIT CARD ISSUER SHARES IN SWEDEN, 2015

Swedbank33.4%

SEB23.1%

Nordea16.2%

Others14.6%

ICA Banken4.5%

Handels-banken 8.0%

Source: Timetric

n DEBIT CARD ISSUER SHARES IN DENMARK, 2015

Others48.0%

Danske Bank26.8%

Nykredit 1.5%

Sydbank5.5%

Nordea18.3%

Source: Timetric

n DEBIT CARD ISSUER SHARES IN NORWAY, 2015

Others41.9%

DNB 36.7%

SpareBank 12.4%

Handelsbanken4.4%

Nordea BankNorge 7.4%

DanskeBank 7.1%

Source: Timetric

CI 534.indd 12 19/08/2016 15:30:57

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towards a cashless society. The Danish government proposed a plan in May 2015 that would allow certain retailers to refuse cash payments; it is expected to be imple-mented in 2016. Moreover, the govern-ment has set a deadline to make Denmark completely cashless by 2030.

This seems to be working, as cash pay-ments are declining in Denmark. Cash transactions accounted for 35.7% of total payments in 2011 and this decreased to 28.1% in 2015. In comparison, in other developed European markets, cash took 44.1% of the overall volume.

The Swedish government is equally focused on bringing about a cashless society, a policy supported by retailers’ reluctance to accept cash.

Examples include retailer Kungsaengen and mobile phone retailer 3, neither of which accept cash. The payment cards market grew at a compound annual growth rate (CAGR) of 8.58% between 2011 and 2015.

Contactless technologyNorway is still in the early stages of adopt-ing contactless technology, with only DNB, Danske Bank and Handelsbanken offering contactless cards.

In an attempt to increase uptake, banks are differentiating product offerings with new features.

In 2016, Danske Bank rolled out its Mas-terCard-branded contactless cards with inte-grated fingerprint sensors in association with the Norway-based fingerprint authentication technology provider Zwipe.

It is the world’s first fingerprint-activated contactless card, combining authentication with convenient contactless technology.

In June 2016, debit network BankAxept partnered with Canada-based debit network Interac to accelerate a rollout of NFC-ena-bled mobile payment solutions.

Contactless technology is still in develop-ment in the Swedish market and only a few banks, such as ICA Banken and Danske Bank, offer contactless cards.

It certainly suffers from a lack of promo-tion from the bigger banks. ICA Banken is the largest issuer of contactless cards, with plans to issue 560,000 contactless payment cards by the end of 2016.

This seems fairly ambitious as Timetric estimates that, at the end of 2015, there were only 100,000 contactless cards in Sweden.

With the rising number of small businesses and street vendors accepting payment cards for small-value transactions, the introduction and further adoption of contactless is expect-ed to drive the market’s growth.

According to Timetric, Denmark had the highest number of contactless terminals and

the second-highest number of contactless cards in the Nordic region as of 2015.

In November 2015, there were 5.3 million contactless cards in the country – equivalent to 55.6% of overall payments cards – and 61,000 contactless POS terminals in the country, approximately 43.8% of the overall number of POS terminals.

To capitalise on its growing popularity, Danske Bank and Jyske Bank began offer-ing contactless Dankort cards from August 2015. Contactless mobile payments are also gaining ground.

Nets entered into an agreement with JCB in April 2016, allowing merchants to accept Dankort debit card payments via smart-phones using J/Speedy, JCB’s contactless tech-nology. This can be used to make contactless payments up to DKK200 ($29.80); a security code is required for transactions above this amount.

Looking at alternativesA number of new payment options have cropped up in Norway. Seqr was launched in January 2013, followed by MeaWallet in October 2014.

In October 2015, SpareBank 1 acquired mCash, which had 100,000 users and was accepted in 600 stores at the time of the deal.

Danske Bank also launched Mobile Pay

in September 2015 in partnership with 100 retail outlets in Norway and with Rema 1000, a supermarket chain, in 2016.

In an attempt to increase consumer con-venience, BankAxept is planning to launch a new online payment service in 2016, BankAxess, to allow customers to transfer funds from their account directly. The ini-tiative is anticipated to increase the value of online and mobile payments.

Non-banking firms are starting to offer banking and financial services in Sweden. The invoice-based payment solution pro-vider Klarna applied for a banking license in October 2015.

It is still awaiting approval from the Swed-ish Financial Supervisory Authority (FSA) and plans to offers savings accounts and debit cards.

A number of mobile POS (mPOS) provid-ers are trying to capitalise on the increasing number of transactions made at retail outlets by foraying into the Danish payments indus-try.

The latest of these is the introduction of a cloud-based POS solution by startup Shop-box in April 2016. This solution aims to provide faster transaction processing at small merchants such as coffee shops, clubs and sports arenas. Shopbox’s POS solution runs on both iOS and Windows-based tablets.

In addition, iZettle launched the iZettle Card Reader Lite in February 2015, a chip-and-PIN card reader that can be connected to tablets and smartphones to accept card-based payments.

To expand its reach in the Nordic and Baltic regions, Nets signed a $255.5m agree-ment with Nordea in June 2015 to acquire its merchant acquiring business.

The agreement enables Nets to service 240,000 merchants across the Nordic and Baltic regions.

The company is also focused on the improvement of payment infrastructure and signed an agreement with Dansk supermar-ket in 2014 to upgrade its POS terminals with contactless technology. <

August 2016 y 13

CASHLESS: SCANDINAVIA

n PAYMENT INSTRUMENT SHARES IN SWEDEN (2015)

Credit transfers89.1%

Cash 1.4%Direct debit 3.3%

Paymentcards 6.2%

Source: Timetric

n REGIONAL BENCHMARKING OF PAYMENT CARDS, 2015

Country Card PenetrationAverage Annual Spend Per Card ($)

Average Monthly Card Transactions

Norway 2.78 6,350.4 11.3

Sweden 1.35 5,540.8 10.4

Denmark 1.68 7,390 14.9

Finland 1.76 5,067.3 12.2

Lithuania 1.18 3,807.2 4.5

Estonia 1.4 2,794.6 11.8

Latvia 1.21 1,965 7.5

Source: Timetric

CI 534.indd 13 19/08/2016 15:30:59

Cards International


Cashless, but not yet contactless

Despite 99.7% of the population aged 15 or above having a bank account and the prolific use of payment cards, the uptake of contactless is low in comparison to Sweden’s European peers. Can banks persuade small businesses and street vendors to change the fortunes of contactless payment platforms?

COUNTRY SURVEY: SWEDEN

Swedish consumers are prolific users of payment cards. The average monthly card transactions and aver-age annual spend per card are higher

in Sweden than in other European markets such as the UK, the Netherlands and Ger-many, although they lag behind Sweden’s Nordic peers of Denmark, Norway and Finland.

Payment card use in Sweden has been driven by concerted government efforts to promote, and consumer willingness to adopt, new technologies.

As a result, payment cards are gradually replacing cash as the county’s primary form of settlement, and are used for small-value

transactions with homeless magazine sellers, at newspaper vendors, and to make church donations.

The Swedish government’s focus on a cashless society – supported by retailers’ reluctance to accept cash – led to an over-all increase in payment card transaction volumes. Kungsaengen, the mobile phone retailer 3, and the mobile service provider TeliaSonera do not accept cash payments whatsoever.

Overall, the Swedish payment cards mar-ket grew at a compound annual growth rate (CAGR) of 8.58% between 2011 and 2015 in terms of transaction volume, and 1.95% in terms of the number of cards in circula-

tion, and a similar trend is anticipated over the next five years.

In Sweden, card-based payments over-took ATM cash withdrawals in 2002. The increase in POS terminals has been paralleled by a substantial increase in the use of pay-ment cards The volume of card transactions at POS terminals increased substantially to 2.8 billion in 2015, accounting for 92.9% of the overall payment card transactions, indi-cating a rising preference for cashless pay-ments among consumers.

The government has also taken initiatives to bring the entire population into the bank-ing system. According to the World Bank’s Global Findex survey 2014, the percentage

n VALUE OF CREDIT TRANSFERS ($BN) IN SWEDEN, 2011–2015

0

500

1000

1500

2000

2500

20112012

20142015

2013

Source: European Central Bank and Timetric

n VALUE OF CHEQUE PAYMENTS ($BN) IN SWEDEN, 2011–2015

0

1

2

3

4

5

6

20112012

20142015

2013


n VALUE OF PAYMENT CARDS ($BN) IN SWEDEN, 2011–2015

0

30

60

90

120

150

20112012

20142015

2013


CI 534.indd 14 19/08/2016 15:31:01

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COUNTRY SURVEY: SWEDEN

of the Swedish population aged 15 or above with a bank account reached 99.7% in 2014. This resulted in the high penetration of bank accounts and products such as debit cards.

Central bank measuresThe central bank of Sweden is using the repo rate to tackle deflationary pressure. The rate was gradually reduced from 1.25% in December 2010 to 0.0% in October 2014; a rate that was maintained until the end of the year. With low repo rate, bank lending grew, resulting in an increase in consumer spending and economic growth.

To combat deflationary pressure, the cen-tral bank decreased the repo rate to -0.10% for the first time in February 2015, and to -0.35% in November 2015, resulting in neg-ative returns on savings and deposits with commercial banks. As of April 27, 2016, the repo rate stood at -0.50%. The move led consumers to spend rather than save money in banks. The rise in consumer spending is expected to further drive payment card trans-action volumes and values.

Contactless technologyDespite consumers being prolific users of payment cards, the adoption of contactless cards is still low in Nordic countries, espe-cially Sweden, in comparison to other Euro-pean countries such as the UK and France.

At the end of 2015, it was estimated that there were only 100,000 contactless cards in Sweden.

According to Timetric, the weak adoption of contactless technology is primarily due to banks not promoting its merits, despite ICA Banken issuing contactless cards and NFC-enabled terminals. ICA Banken plans to issue 560,000 contactless cards by the end of 2016.

With a rising number of small businesses and street vendors accepting payment cards for small-value transactions, the introduc-tion of contactless technology is anticipated to further drive payment card transaction volumes from now until 2020.

E-commerce market offers scope The Swedish e-commerce market grew at a CAGR of 8.44%, rising from $8.3bn (SEK54.1bn) in 2011 to $11.5bn in 2015. A rise in internet and smartphone pen-etration and investments in online pay-ment infrastructure supported the growth of the e-commerce channel during the last five years. Some of the most popular online retailers in Sweden are Halens.se, Nelly.com, Adlibris.com, Bokia.se, Cdon.com and NetOnNet.se.

The European Banking Authority (EBA) published regulations on the security of

online payments in December 2014 to make them more efficient and secure, and these were implemented on August 1, 2015.

The guidelines apply to all 28 EU mem-bers, including Sweden. These include strong authentication measures to verify customer identity, customer awareness programmes and consumer data protection. These meas-ures are anticipated to reduce online fraud.

According to a 2014 central bank study on the payment behaviour of Swedish consum-ers, credit cards were the most-popular pay-ment method for online purchases.

According to a 2015 study by Ecommerce-News, the most popular product categories are consumer electronics, clothing, shoes, books and media.

Swedish consumers still prefer to use tra-ditional payment methods such as payment cards, credit transfers and direct debits to

pay for online purchases. However, emerging payments such as digital wallets and m-pay-ments – including mobile wallets and carrier billing – are also increasingly being used for e-commerce transactions.

In Sweden, quick response (QR) code-based mobile payment (m-payment) solu-tions are available for retailers and online traders, enabling cardholders to pay directly by mobile phone. Seamless, a Swedish pro-vider of payment solutions offers the Seqr m-payment solution for retailers and online merchants.

In December 2012, Seamless launched pilot projects with Max and Axfood to offer QR code-based m-payment solutions.

Following the pilot’s success, the m-pay-ment solution was adopted by retailers such as Max, Axfood, McDonalds and Kjell & Company.<

n SWEDEN’S DEBIT CARD MARKET SHARES BY SCHEME (%), 2015

MasterCard

62.4%Visa

35.8%


n SWEDEN’S DEBIT CARD MARKET SHARES BY ISSUER (%), 2015

Swedbank33.4%

SEB23.1%

Others27.2%

Nordea16.2%


n SWEDEN’S PAY LATER CARD MARKET SHARES BY ISSUER (%), 2015

Others69.9%

Nordea

SvenskaHandelsbanken11.1%

SEB 11.4%

8.6%


n SWEDEN’S PAY LATER CARD MARKET SHARES BY SCHEME (%), 2015

MasterCard72.2%

Visa18.1%

Others4.7%


CI 534.indd 15 19/08/2016 15:31:02


Cards International

Is this the boost that cards needed?

Banks in Iran were reconnected to the SWIFT system in February 2016, as international sanctions were lifted on the country. With the majority of banks now connected, will international card issues and scheme providers open representative offices and kick start the cards and payments industry?

COUNTRY SURVEY: IRAN

Despite international sanctions, Iran’s payment cards market recorded robust growth in terms of the volume of cards in circulation, and transac-

tion value and volume between 2011 and 2015. Growth was primarily supported by the country’s largely banked population, government initiatives to encourage elec-

tronic payments, the country’s improved banking infrastructure, and a consumer shift towards card-based payments.

In 2015, the average number of monthly transactions per card in Iran stood at 3.8 – the second-highest in the Middle East – compared to the UAE (2.9), Kuwait (2.8), Saudi Arabia (1.6), Lebanon (0.9), Bahrain

(0.8) and Oman (0.3). Israel had the highest average number of monthly transactions per card, at 11.7.

The Iranian government has taken a num-ber of initiatives to encourage electronic pay-ments and reduce dependency on cash pay-ments. Consumers are charged a fee for using cash to pay utility and mobile bills. Many banks refuse to accept bill payments through cash, forcing consumers to use cards.

Barcode readers and point of sale (POS) terminals are installed in branches to facili-tate bill payments using cards. Also, many government organisations pay bonuses to their employees in the form of gift cards which can only be used for making purchases and not to make cash withdrawals.

In October 2015, the president of the Cen-tral Bank of Iran announced plans to abolish cash transactions and implement electronic payments in the free-trade zone of Kish Island.

Removal of international sanctionsBanks in Iran were reconnected to the SWIFT system in February 2016, as interna-tional sanctions were lifted. This was based on an agreement reached between Iran and the P5+1 countries in July 2015, including the five permanent members of the Security Council: the US, the UK, France, China and

n VALUE OF CHEQUE PAYMENTS ($BN) IN IRAN, 2011–2015

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600

900

1200

1500

20112012

20142015

2013

Source: Timetric

n VALUE OF PAYMENT CARDS ($BN) IN IRAN, 2011–2015

0

100

200

300

400

500

600

700

800

20112012

20142015

2013

Source: Tmetric

CI 534.indd 16 19/08/2016 15:31:03

Cards International


COUNTRY SURVEY: IRAN

Russia. This allows banks in Iran to resume cross-border transactions with foreign coun-terparts. Almost all banks in Iran are now connected to the SWIFT system; the remain-ders are also in the process of integrating their payment processes with SWIFT.

The lifting of sanctions has also encour-aged international card issuers and schemes to enter Iran’s cards and payments industry. For instance, South Korea’s Woori Bank opened a representative office in May 2016. In December 2015, MasterCard announced plans to enter the Iranian market once sanc-tions were lifted. The company launched a channel on instant messaging app Telegram, through which it sends posts in Persian to attract Iranian consumers.

The Central Bank of Iran is also holding negotiations with international scheme pro-viders such as JCB and CUP. In February 2016, the central bank announced that JCB credit cards would be issued in the country from the second half of 2016.

The increasing presence of international issuers and schemes is expected to bring more investment and competition into the Iranian payment cards market, which will result in higher uptake of payment cards over the next five years.

Debit cards continue to dominateDebit cards remained the most widely used payment card between 2011 and 2015, and accounted for 99.4% of the total transac-tion volume in 2015. Debit card penetra-tion in Iran stood at 269.6 cards per 100 individuals in 2015, which was the high-est in the Middle East followed by Bah-rain (93.9), Kuwait (90.3) the UAE (84.8), Oman (83.1), Saudi Arabia (71.2), and Lebanon (28.0). Israel had the lowest debit card penetration of 7.8.

Debit cards recorded the fastest com-pound annual growth rate (CAGR) of 36.20%, in terms of transaction volume. Growth was supported by the ongoing migration of low-value cash payments to debit cards, government efforts to encour-age retailers to accept card payments, and banks’ promotional activities to encourage retailers to install POS terminals.

Increasing number of POS terminalsThe number of POS terminals in Iran record-ed a CAGR of 18.14%, rising from 2.2 mil-lion in 2011 to 4.4 million in 2015. This was supported by a rise in the number of POS terminal installations at smaller retail outlets, enabling the growth of card-based payments. POS terminals are expected to increase fur-ther to reach 6.7 million in 2020.

To encourage retailers to accept card payments, in 2010, the government intro-

duced 0% merchant service changes; mean-ing that merchants need not pay any fees when accepting card payments at POS terminals. Additionally, money earned by retailers was deposited in their bank accounts on the same day.

As most acquirers in Iran are banks, they make use of the deposited money to gener-ate interest through bank loans.

Retail and corporate prepaid cards There is large-scale demand for prepaid gift cards in Iran, by both the retail and corpo-rate segments. Demand is particularly high during festival seasons.

A popular marketing strategy followed by Iranian banks is to issue cards to non-account holders. Prepaid cards are issued with less stringent conditions, and are often cross-sold. Banks target the unbanked popu-

lation by offering simplified card products. Gift cards for retail and corporate custom-ers can be obtained from banks without an account.

Bank Mellat, EN Bank, Bank Pasargad and Parsian Bank offer prepaid cards for online shoppers, encouraging customers to use e-banking service for the payment of util-ity bills and for online shopping.

Bank Mellat offers such a card with a three-digit card verification value (CVV) code. The card is deactivated if the code is entered incorrectly three consecutive times.

Banks are also targeting foreign tourists by offering prepaid cards. For instance, Bank Melli Iran offers the Tourist Card, which is accepted throughout Iran.

A maximum of $48.30 (IRR14.2m) can be loaded on to the card, and any unused funds are returned to the cardholder.<

n IRAN’S DEBIT CARD MARKET SHARES BY ISSUER (%), 2015

Others56.7%

Bank Mellat13.8%

BankSaderatIran15.4%

Tejarat Bank14.1%

Source: Timetric

n IRAN’S DEBIT CARD MARKET SHARES BY SCHEME (%), 2015

Others100%

Source: Timetric

n IRAN’S PAY LATER CARD MARKET SHARES BY ISSUER (%), 2015

Bank Melli Iran50.0%

BankSaderatIran20.0%

ParsianBank20.0%

Others10.0%

Source: Timetric

n IRAN’S PAY LATER CARD MARKET SHARES BY SCHEME (%), 2015

Others100%

Source: Timetric

CI 534.indd 17 19/08/2016 15:31:04

Greece was severely affected by the eurozone crisis, due to government overspending, tax evasion, and a budget deficit that eventually spi-

ralled out of control. Many banks faced liquidity problems and loan defaults, which had a direct impact on the cards and payments industry.

In terms of transaction value, the Greek payment cards market recorded a CAGR of -8.17% between 2011 and 2015, decreasing from $73.6bn (€52.9bn) in 2011 to $52.3bn in 2015. In view of decreasing profitability

and high operating costs, some banks in the country sold their operations, while others reduced their ATM networks.

Alpha Bank acquired Emporiki Bank in 2012, and Citibank’s retail banking opera-tions in Greece in September 2014. Piraeus Bank acquired Bank of Cyprus and Hellinic Bank in 2013. The volume of ATMs fell at a review-period CAGR of -5.55%.

The government announced a number of initiatives to revive the economy, including cuts in public sector employment, defence, and other government spending. In 2010,

the IMF, the ECB and the European Commis-sion (EC) announced a three-year aid pack-age worth $144.7bn to bail out the Greek economy. A second bailout of $167.1bn fol-lowed in February 2012.

In August 2015, the EU approved a $95.5bn bailout, providing the Greek gov-ernment impose austerity measures includ-ing a tax increase, public spending cuts and efforts to tackle tax evasion by encouraging electronic payments. With the anticipated economic revival and the injection of liquid-ity into the banking sector, the Greek pay-


Cards InternationalCOUNTRY SURVEY: GREECE

Country report: Greece

As Greek consumers turn away from credit in favour of debit transactions, capital control measures are expected to support the volume and value of electronic payments over the next five years. Greece has one of the fastest growing e-commerce markets in Europe. Is this level of growth sustainable?

n VALUE OF CREDIT TRANSFERS ($BN) IN GREECE, 2011–2015

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20112012

20142015

2013


n VALUE OF CHEQUE PAYMENTS ($BN) IN GREECE, 2011–2015

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20142015

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n VALUE OF PAYMENT CARDS ($BN) IN GREECE, 2011–2015

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10

20112012

20142015

2013


CI 534.indd 18 19/08/2016 15:31:05

Cards International


ment cards market is anticipated to gradually shift towards sustainable growth between now and 2020.

Capital-control measuresTo comply with bailout conditions, capital-control measures were imposed by the gov-ernment in June 2015 to arrest the outward flow of money, curb tax evasion and encour-age electronic payments.

Conditions include daily and weekly restrictions on cash withdrawals at ATMs; the compulsory use of debit cards for the withdrawal of salaries, pensions and social allowances; restrictions on the use of pay-ment cards abroad; restrictions on the trans-fer of funds from Greek banks to foreign banks; and the compulsory acceptance of card-based payments by retailers, as well as certain categories of professionals such as doctors, lawyers, electricians and plumbers.

The government also promised incentives for individuals and businesses to promote electronic payments. This is anticipated to encourage a consumer shift towards elec-tronic payments.

Debit card payments continue to growWhile the debit card market registered a decline in terms of transaction value, the number of debit card transactions recorded positive growth during the last five years.

With restrictions placed by the Greek gov-ernment on cash withdrawals, consumers fear that banks might freeze available funds. This has driven debit card transaction vol-umes at POS terminals, which registered a CAGR of 17.55% between 2011 and 2015.

Banks are encouraging consumers to use debit cards rather than cash or credit cards, and are introducing offers such as reward points and cashback to maintain growth.

Pay-later cards recorded a decline both in terms of transaction value and volume. Growing unemployment and uncertain eco-nomic conditions forced many Greek con-sumers to abandon the ‘buy now, pay later’ attitude. Concurrently, banks also adopted a more cautious approach to issuing credit and charge cards, fearing payment defaults.

The country’s biggest banks, such as National Bank of Greece (NBG) and Eurobank Ergasias, experienced significant declines in pay-later card transaction values.

E-commerce market continues to growDespite the financial crisis, Greece’s e-commerce is one of the fastest growing in Europe. It grew from $2.6bn in 2011 to $5.1bn in 2015, at a CAGR of 18.83%. A key factor contributing to the growth of e-commerce in Greece is the financial crisis, which forced online retailers to offer dis-

counted prices.The government imposed capital controls

in June 2015 to comply with bailout condi-tions. A range of measures were taken to arrest the outward flow of money, curb tax evasion and encourage electronic payments.

Consumers can use debit, credit, charge and prepaid cards to purchase products and services outside of Greece with certain restrictions based on purchase limits set by the relevant bank and approved by the Approval Committee for Bank Transactions. While restrictions aim to curb the outward flow of money, they do not apply to domes-tic transactions; domestic online retailers can benefit as a result.

In March 2016, the Greek prime minister announced that the economy is anticipated to recover from second half of 2016, and restrictions on cash withdrawals and over-seas transactions placed by the government

in June 2015 will be completely lifted by the end of 2016. The lifting of restrictions is anticipated to encourage Greek consum-ers to make purchases from international online retailers, consequently driving the e-commerce market.

The preferred mode of payment for e-commerce transactions was payment cards, which accounted for 35% of the total trans-action value. Banks in Greece offer payment cards for online shopping. Piraeus Bank offers the MasterCard Prepaid Virtual Card and the Piraeus Business Prepaid Card, both are designed for internet transactions, tel-ephone and catalogue orders.

These cards can be used for remote trans-actions where a plastic card is not required, such as online transactions, telephone, cata-logue and mail order.

Similarly, NBG offers a Virtual Prepaid MasterCard for online purchases.<

August 2016 y 19

COUNTRY SURVEY: GREECE

n GREECE’S DEBIT CARD MARKET SHARES BY ISSUER (%),2015

Others19.8%

AlphaBank21.7%

NationalBank ofGreece28.0%

PiraeusBank30.4%

Source: Timetric

n GREECE’S DEBIT CARD MARKET SHARES BY SCHEME (%), 2015

Others50.0%

Visa30.0%

MasterCard20.0%

Others

Source: Timetric

n GREECE’S PAY LATER CARD MARKET SHARES BY ISSUER (%), 2015

Alpha Bank38.7%

NationalBank of Greece

22.5%

EurobankErgasias18.9%

Others19.9%

Source: Timetric

n GREECE’S PAY LATER CARD MARKET SHARES BY SCHEME (%), 2015

MasterCard33.3%

Others33.3%

Visa33.3%

Source: Timetric

CI 534.indd 19 19/08/2016 15:31:06

Cards International


GUEST COMMENT: ACI WORLDWIDE

The cards industry needs a proactive approach to the pandemic of fraud

Consumer payment fraud is on the rise, despite the widespread adop-tion of fraud analytics solutions by financial institutions and retailers,

alongside EMV in most countries.The Global Consumers: Losing Confi-

dence in the Battle against Fraud report, published by ACI Worldwide and Aite in July 2016, reveals that almost one-in-three consumers worldwide have experienced card fraud within the last five years.

In total, 17% of respondents experienced more than one incident of fraud during the last five years, compared to 13% in 2014.

The report, which surveyed over 6,000 consumers across 20 countries, warns that fraudsters are becoming more sophisticated and states that ‘the underground economy for user information has matured so much as to be indistinguishable from a legitimate economy’.

What is disconcerting is the fact that card fraud losses globally are projected to rise, from more than $16bn in 2014 to over $35bn by 2020, meaning that the one-in-three consumers experiencing card fraud could easily become one-in-two within the next few years.

Financial services are dealing with a fraud pandemic, a virus that continues to multiply at a truly rapid rate.

Although these figures have to be viewed in perspective – the electronic payments busi-ness is still growing strong – they should ring alarm bells.

It is increasingly becoming clear that the cards industry needs a proactive approach to combating the pandemic of financial fraud and keeping customers on-side.

Why is card fraud on the rise? There is not one answer to this question, but the key contributing factors are simple: changes in how consumers bank today due to technological advances, the mass migration to online shopping, the way we interact with each other and record our lives online.

These are the key ingredients of an envi-ronment which makes fraud all too often easy to commit.

Many banks have invested in technology

to quickly identify card fraud and protect their custumers whereas others remain on legacy systems that are out-of-date and not fit for purpose.

Typically speaking, it’s the latter most like-ly to suffer from fraud losses and consumer attrition rates. Our research indicates that 40% of consumers who experience fraud tend not to use their replacement card. In essence, their confidence has been knocked and they have lost trust in their bank.

Financial institutions that do not provide good aftercare for consumers that have expe-rienced card fraud have a one-in-five chance of seeing that consumer go elsewhere.

During the past 17 years, I have worked with banks all over the world, helping them to prevent fraud. I often ask my clients: “Who is the most important person in your bank?”

Responses often include the chief execu-tive officer, the chief technical officer, and IT department staff. I often remind them that the most important person in the organisa-tion is the customer: without customers, financial institutions do not have a business.

Are banks getting a raw deal?Our figures show a worrying growth in cardholders engaging in risky behaviour when it comes to managing their cards and security credentials. Over 50% of those sur-veyed admitted to practices such as writing down PIN numbers and storing them close to cards. I frequently notice people in the supermarket checkout line reading their phones just before they pay by card. It’s pos-sible they’re dealing with a social media post

but I suspect many are retrieving their PIN!This wouldn’t be a problem if the phone

was regularly locked, but in many countries we found around a quarter of respondents never secure their phone.

Although it is clear that the careless behav-iour of many consumers contributes to the perpetration of fraud, financial Institutions are often stuck between a rock and a hard place when it comes to dealing with custom-ers who have been victims of card fraud due to ignorance.

In many cases, banks favour reimbursing the customer rather than making him or her liable for fraud. This is arguably unfair on the financial institution, and even when their terms and conditions may be able to save them, they tend to side with the customer for reputational reasons.

Unfortunately, once a customer has experi-enced fraud, the belief in their payments pro-vider can be damaged. To the point that 20% of our respondents actually changed supplier as a consequence.

Therefore, for businesses it may not be enough just to focus on the avoidance of fraud, they also need to look at customer care and case management techniques to make sure cardholders are looked after well in the aftermath of crime.

Payment providers must look holistically at the role consumers can play in helping to fight crime. It is a tricky balancing act and many customers obviously don’t want a greater overt responsibility in fighting fraud. But many would welcome the reassurance and possible incentives that would come from closer involvement with setting limits, controls and notifications – all of which can help the overall fight against fraud.

It should not be hard for more card com-panies to offer mobile phone apps to allow consumers to set their own controls and alerts. Businesses should take a proactive approach towards incentives and rewards to help re-establish their position as valued purveyors of trust.

Banks, card companies and indeed govern-ments (through public policy initiatives) need to nudge consumers towards taking a greater role in fighting crime.<

While banks and financial services providers need to do more to counter fraud, in many instances it is customers themselves that are compromising security. Jay Floyd, head of fraud strategy and solutions EMEA at ACI Worldwide, argues that a proactive solution is required

CI 534.indd 20 19/08/2016 15:31:07

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