can we talk?...of its qrpay merchant app to solve these pain points. the service taps into the...

COUNTRY SURVEYS INSIGHT RESEARCHMarket data and analysis of payments in Portugal,

Finland and Kenya

The difference between PoG and PoM, and why it

matters to merchants

Buying is easier than ever, so why are consumers

being so cautious?

CAN WE TALK?

DIGITAL ASSISTANTS AND THE GROWTH OF VOICE-ACTIVATED PAYMENTS

Issue 373 / july 2018w w w. e l e c t r o n i c p ay m e n t s i n t e r n at i o n a l . c o m

EPI July 2018 373.indd 1 06/08/2018 13:46:50

2 | July 2018 | Electronic Payments International

contents

NEWS

05 / EDITOR’S LETTER06 / DIGEST• Flux now live on Barclays Launchpad,

set for new trial• PayPal pockets Hyperwallet in

$400m deal• McDonalds extends integrated

checkout• Multiple CXFS 2018 winners prove

Asia-Pacific is as competitive as ever• Revolut achieves 1 million UK

customers, launches Connect• iBAN set to launch digital wallet• Interac opens innovation lab in

Ontario

13

this month

Editor: Douglas Blakey

+44 (0)20 7406 [email protected]

Senior Reporter: Patrick Brusnahan


Junior Reporter: Briony Richter


Group Editorial Director: Ana Gyorkos


Sub-editor: Nick Midgley


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+44 (0)20 7406 8633 [email protected]

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+44 203 096 [email protected]

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VOICE ACTIVATION

COVER STORY

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EPI July 2018 373.indd 2 06/08/2018 13:48:14

www.electronicpaymentsinternational.com | 3

contents

july 2018

1811 / CRYPTOCURRENCYAssociated with sharp rises and even sharper falls in value, as well as illegal trade, many have stayed away from cryptocurrency. Now operators want to redeem themselves and be regulated. Patrick Brusnahan writes

12 / CONSUMER SPENDINGThere are more ways to shop than ever: high-street retailers, catalogues, online, mobile apps – all are viable. There are more ways to pay as well, so why are customers becoming so cautious? Patrick Brusnahan writes

17 / POS FINANCEUK businesses could be missing out on up to £25bn in sales by not offering flexible payments at the POS. Over three-quarters of consumers would consider POS finance, according to Duologi. Douglas Blakey reports

18 / PORTUGALPortugal was badly affected by the economic crisis, but contactless card numbers and use have since grown strongly. With initiatives by the government and banks, payment cards will grow steadily over the next five years

20 / FINLANDFinnish consumers are strong users of payment cards – debit cards in particular. Frequency of card use is higher in Finland than in other mature Western European markets such as the UK and Germany

21 / KENYAKenya’s payment card market is still developing, with card penetration of 30 cards per 100 individuals in 2017 and 16.0 transactions per card per year – lower than peers including South Africa and Morocco

14 / FICOHow can lenders optimise predictive analytics and machine learning to make the most reliable decisions? Get it right and lenders can reduce default rates and the debt burden, argue Campbell Scott and Hitendra Patel

22 / MYPINPADConsumers are carrying less cash than ever, posing a challenge for the 5 million UK small merchants that are still unable to accept card payments due to the expense of traditional card terminals. David Poole writes

INDUSTRY INSIGHT

COUNTRY SNAPSHOTS

RESEARCHFEATURES10 / BAMBORACanada legalised recreational cannabis in June, but what does this mean for the payments industry? Briony Richter speaks to Ryan Stewart, chief commercial officer at Bambora North America, to find out

13 / VOICE ACTIVATIONIsrael Discount bank wished to offer a simple, comfortable and quick P2P money transfer service based on voice commands. The simple solution: a platform that customers already use – Apple’s Siri. Douglas Blakey reports

16 / SMART TOKENSBy partnering with Token, Sberbank is signalling that it is embracing Open Banking. Briony Richter speaks to Token CMO and co-founder Marten Nelson to find out how Smart Tokens can increase payment speed

2110

11

EPI July 2018 373.indd 3 06/08/2018 13:48:47

Event Highlights :

∤ Two-stream format, with a wider variety of talks and discussions, case studies and keynote presentations

∤ Many issues related to innovation, transformation, regulation and change to be discussed to give a rounded picture of the life insurance market today

∤ InsurTech innovation lab where five of the best insurtech firms can demonstrate their innovative solutions

∤ Oxford-style live debate considering whether advances in robo-advice and D2C insurance will make most financial advisors extinct

∤ Industry thought leaders from the established insurers to those that are up-and-coming along with solution providers

∤ Awards ceremony celebrating the excellence in the life insurance industry

SHAPE THE FUTUREOF LIFE INSURANCE

HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE

Life Insurance International: Innovation Forum and Awards 20187th November 2018 ∤ Waldorf Hilton, London

The 2018 edition of the Life Insurance International: Innovation Forum and Awards will be taking place in London on 7th November at the iconic Waldorf Hilton.

We will once again be bringing together life insurers, insurtechs and solution providers for a day of discussion covering the major issues in the retail banking sector.

For more details please contact:

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editor’s letter

cashless hit for maybank

Get in touch with the editor at: [email protected]

Douglas Blakey, Editor

Maybank QRPay is Malaysia’s first QR payments mobile wallet with direct CASA integration.

Maybank customers – especially those without credit or debit cards – can now make cashless payments digitally for retail purchases using the Maybank App, drawing from their account balance.

Despite the rise in card payments in Malaysia, use of cash remains high – and it has been growing; the ratio of cash in circulation as a share of the country’s GDP actually increased by a full one percentage point to 6.9% in the five years to 2016. ATM withdrawals grew at almost 7% per year in the same period, while around 85% of all payments in Malaysia are cash-based transactions.

Maybank has been on a mission to reverse the trend, and one issue has been the cost to merchants of card terminals. Maybank has tackled the issue head on with the development of its QRPay Merchant App to solve these pain points. The service taps into the increasing use of mobile phones in the country. It also offers a cost-effective alternative to cash due to reduced infrastructure costs.

SMEs can download the app and complete the onboarding process in less than five minutes, avoiding the need to purchase hardware such as mPoS dongles and terminals.

Customers without credit or debit cards had been asking for a way to pay for retail purchases directly from their current or savings (CASA) accounts with the convenience of contactless or NFC payments.

Maybank’s QRPay neatly solves that challenge. Utilising QR codes for payments is not new, and many observers – this writer included, when they first debuted years ago – were doubtful as to their likely consumer appeal. They have, of course, become mainstream for mobile payments due to the widespread adoption of AliPay and WeChat Pay in China, and Paytm in India.

While Maybank QRPay is not the first QR code mobile payments solution in Malaysia, all the other offerings are non-

bank mobile wallets that require top-ups from a bank account. Maybank has done away with the hassle of low balances or topping up by linking Maybank QRPay directly to customers’ CASA accounts via Maybank2u.

Instead of white-labelling or buying a solution from a tech vendor, Maybank developed its QRPay offering in-house. Impressively, the service was developed within just six months. In December 2017, Maybank piloted QRPay across all 33 stalls at the food court in Laman Menara Maybank. The service then launched to the general public in January. The result? Over 100,000 sole proprietors and SMEs signed up to the service in the first five months following the launch of the service.

Looking ahead, Maybank is now hard at work to enhance QRPay to add additional payment methods, including cards and POS terminal integration.

The technology utilised in QRPay has been incorporated into the specifications of PayNet’s national QR standard, which will be the interoperable standard for all banks in Malaysia moving forward.

The service will not move the dial significantly in the short term in terms of cash use. But, in time, it will complement card use as an economical alternative to cash. <

EPI July 2018 373.indd 5 06/08/2018 13:48:52

News | Digest

news digestFlux now live on Barclays Launchpad, set for new trial

Digital rewards platform Flux has announced it is set to trial with Costa Coffee, after going live on Barclays Launchpad.

The technology start-up has integrated its services with Barclays Launchpad, a project the bank set up to test new products and services, to allow customers to opt in for paperless receipts at participating retailers.

The Costa Coffee trial will start its first phase of cashback reward offers via Flux’s integration with Starling Bank and Barclays Launchpad. Costa Coffee is the first international retailer to join the platform.

Users of the Barclays Launchpad app can now join other Flux bank customers, and view itemised receipts with VAT directly in their banking app when they shop at Flux retailers, including all Eat and pod food-to-go stores. Receipts appear in Launchpad when a customer opens that specific transaction.

Ruchir Rodrigues, MD, digital and Open Banking at Barclays, said: “We are thrilled to see a member of our 2017 Barclays Accelerator

programme successfully integrate with the Barclays Launchpad mobile banking app.

“This is yet another sign of our commitment to working with exciting partners to bring new and innovative products and services to our customers.”

Flux founder and CEO Matty Cusden-Ross said: “We are delighted to have launched our integration with Barclays Launchpad to bring them the platform, and honoured to welcome Costa Coffee as the nation’s favourite coffee shop.”

Eric Tavoukdjian, commercial marketing director for Costa Coffee UK and Ireland, said: “We’re delighted to be working with Flux, an innovative supplier giving great value and solutions to customers.”

As customers increasingly look to digital convenience, having rolls of receipts can be inconvenient and bad for the environment. A video released by Flux highlights how the new innovation can support the environment and reduce the use of paper. <


PayPal pockets Hyperwallet in $400m deal

Digital payments business PayPal has agreed to acquire payout platform Hyperwallet in a cash deal valued at $400m.

Hyperwallet, founded in 2000, has operations in Vancouver, San Francisco, Austin, London and Sydney. Its payout platform enables organisations to distribute payments, offering payees options such as prepaid card, bank account, debit card, cash pickup, check and PayPal.

The Hyperwallet platform also incorporates financial management and payment tracking features.

PayPal said the acquisition will boost its ability to offer solutions to e-commerce platforms and marketplaces globally, and make multi-currency payment capabilities in over 200 markets available to PayPal and Braintree merchants. The deal is expected to complete in the fourth quarter of 2018.

PayPal COO Bill Ready said: “By acquiring Hyperwallet, we will strengthen our ability to provide an integrated end-to-end solution to help e-commerce platforms and marketplaces — however large or small — leverage world-class payout capabilities in over 200 markets.” <

mcdonalds extends integrated checkoutMcDonalds is extending its integrated checkout platform, which launched in the US in 2017, to the UK. The fast food operator’s click and collect app, in-store kiosks and Drive Thru contactless payments will all handle contactless cards, Apple Pay and Google Pay.

McDonalds has signed up with Ingenico Group to create a fast and secure payment structure that increases the variety of payment options. McDonalds Apple Pay has become increasingly popular, showing consistent growth across all demographics.

Jon Braithwaite, director of IT at McDonald’s Restaurants, said: “We believe that this payment solution is one of the most advanced in the retail sector and is a critical component to delivering an excellent experience for our customers.

“Leveraging Ingenico’s experience, our teams have been able to deliver the new service ahead of schedule, and with the outstanding performance level we expected.” <

EPI July 2018 373.indd 6 06/08/2018 13:48:57

News | digest


Multiple CXFS 2018 winners prove asia-pacific remains as competitive as everThe 2018 Customer Experience in Financial Services (CXFS) awards saw 17 different banks leave the event with recognitions.

Citibank Singapore took away three awards from the evening, the highest number of any bank, including the prestigious Leadership in Customer Experience – Institution award.

DBS, CTBC Bank and UOB Thailand won two awards each, while Maybank won the hotly contested Leadership in Customer Experience – Team gong.

The CXFS awards recognise the best and most innovative institutions and projects, highlighting initiatives that have established strong footholds in Asia-Pacific over the last 18 months. <

the CXFS winners:STRATEGY AWARDSBest CX Business ModelWinner: RHB GroupHighly Commended: Siam Commercial; Citibank Singapore

Best Product or Service InnovationWinner: Citibank SingaporeHighly Commended: DBS Bank; Security Bank

Best Brand EngagementWinner: DBS BankHighly Commended: Siam Commercial; Citibank Singapore

Best Customer Insight and FeedbackWinner: Emirates NBDHighly Commended: Maybank Malaysia; Taishin Bank

Best Employee Engagement InitiativeWinner: Citibank SingaporeHighly Commended: Taishin Bank

Best Business Change or Transformative InitiativeWinner: Servion – Kotak MahindraHighly Commended: UBS Wealth Management; Maybank Malaysia

channel AWARDSBest Customer Experience – BranchWinner: Union Bank of the PhilippinesHighly Commended: DBS Bank; UOB Thai

Best Customer Experience – MobileWinner: Standard Chartered Bank KoreaHighly Commended: UOB Singapore

Best Customer Experience – WebsiteWinner: CTBC BankHighly Commended: Standard Chartered Singapore; Taishin Bank

Best Customer Experience – Call CentreWinner: Hong LeongHighly Commended: RHB Group; Taishin Bank

Best use of Social MediaWinner: UOB ThailandHighly Commended: Siam Commercial; Citibank Singapore

Best Omni-Channel Customer ExperienceWinner: Kasikorn BankHighly Commended: Union Bank of the Philippines; UBS Wealth Management

technology AWARDSBest Technology Implementation – Back OfficeWinner: Security BankHighly Commended: Union Bank of the Philippines

Best Technology Implementation – Front EndWinner: UOB SingaporeHighly Commended: Union Bank of the Philippines

Best Client Onboarding InitiativeWinner: Standard Chartered SingaporeHighly Commended: RHB Group; Citibank Singapore

Best Use of Data AnalyticsWinner: CTBC BankHighly Commended: Taishin Bank; Standard Chartered Singapore

industry AWARDSBest Customer Experience – BankingWinner: DBS BankHighly Commended: UOB Thai

Best Customer Experience – InsuranceWinner: UOB Singapore

Best Customer Experience – Wealth ManagementWinner: UBS Wealth ManagementHighly Commended: Maybank Malaysia; Standard Chartered Singapore

Best Customer Experience – CardsWinner: Taishin BankHighly Commended: UOB Singapore; DBS Bank

leadership AWARDSLeadership in Customer Experience – TeamWinner: Maybank

Leadership in Customer Experience – InstitutionWinner: Citi Singapore

EPI July 2018 373.indd 7 06/08/2018 13:49:00

News | Digest

Revolut achieves 1 million UK customers, launches Connect

Fintech unicorn and challenger bank Revolut has announced that it has reached one million UK customers, as it continues its global expansion.

The challenger stated that it is signing up 6,000-9,000 new customers every day. Around 400,000 of Revolut’s 2.25 million global customers are weekly active users, and 900,000 are monthly active users.

The company claims it has saved customers over $330m in fees, with users making over 125 million transactions to date. The total transaction value has reached $18.5bn.

In total, customers have saved over $740m in the fees often charged by traditional banks, with Revolut’s data showing that much of the savings have been made as a result of the removal of foreign exchange fees. This affects card payments abroad, global money transfers and international ATM withdrawals.

For a monthly fee, premium Revolut users benefit from free ATM use abroad, free overseas medical insurance, and virtual disposable cards.

Gaining popularity in Europe, Revolut expects to launch in the US, Canada, Singapore, Hong Kong, Australia and New

Zealand in the next few months. The global launches will enable customers to make fast, free payments worldwide.

Revolut founder and CEO Nikolai Storonsky said: “Whilst our organic growth has been exceptional, I believe that we’ve only reached 1% of our potential.

“Reaching one million UK customers is testament to the great product that we’ve built and the incredible savings we’ve offered our customers. However, we are always looking to improve. Our brand awareness is growing across Europe and we’re pressing ahead with global expansion.”

He added: “I don’t believe in financial borders at the expense of consumers. The world is becoming more interconnected, and financial companies should be adapting to this. People should be free to spend and transfer money globally without incurring fees and waiting days.”

Revolut has also launched Connect, an Open Banking platform for businesses.

Revolut users with business accounts will now be able to build integrations with popular business apps such as FreeAgent, Slack and Xero. Users can also access other everyday business tools and apps.

The challenger stated that it is currently opening over 120 business accounts a day across the UK and Europe, with 60,000 having already joined.

Users have sent over $350m in transfers since the service launched last June, which Revolut estimates has saved its business customers over $14m in fees to date. The bank said it aims to provide services more efficiently than traditional operators.

The announcement comes after Revolut recently announced its open API, which enables businesses to automate daily tasks and internal workflows, with actions such as scheduled and mass payments, adding counterparties, as well as webhooks so businesses are notified of new transactions.

Following the implementation of GDPR, businesses using Revolut Connect decide themselves what data can be used or shared. If a business no longer wants a piece of data to be used, it can pause or completely stop sharing it at any time.

Domenico de Fano, product owner for business at Revolut, commented: “Modern businesses work with a multitude of apps and tools that help them simplify their work. Obviously there is accounting, but also other things like payroll, communication, expense management and more.

“Traditional banks have historically been closed to the outside world. At Revolut we want to do the opposite: we want to help businesses safely connect their finances to the tools they love. At the same time, we want to work with developers and innovators that want to build on top of our platform to create useful apps and integrations for businesses. This is why we’ve built Revolut Connect.

“Revolut Connect and our open API are all part of our vision to build the most seamless business banking platform in the world. We are currently working on a developer portal to allow third parties to build apps and integrations that they can then publish on Revolut Connect and open to the thousands of businesses on our platform. It’s an exciting perspective that will change the way businesses manage their finances, saving time and enabling new use cases.”

Revolut aims to make the API available to developers, enabling them to build their own integrations and apps to share with Revolut customers. <


EPI July 2018 373.indd 8 06/08/2018 13:49:02


News | Digest

iBAN set to launch digital wallet

UK-based lending platform iBAN is planning to launch iBAN Wallet as a digital alternative to traditional banking.

iBAN Wallet aims to merge key banking services onto a unified platform that will enable a more seamless banking experience,

and can be accessed securely via smartphone.Marc Hurr, co-founder and CTO at iBAN,

commented: “We learnt a lot from other digital banking alternatives that came before us. For example, we knew we weren’t going to replace existing current accounts straight away, so we made it possible for iBAN users to manage their existing accounts through the platform.”

iBAN eventually aims to replace traditional banks, while iBAN Wallet will compete with established global giants Apple Pay, Google Pay and Samsung Pay.

Hurr continued: “There’s no reason we can’t replace everything banks do with technology, creating a decentralised banking system that will be fairer and more stable.

“We take great care with our investments, only putting money into projects that can provide both social benefits and make a return. That way, our customers know their

money is going to good use and is earning a competitive rate of interest.”

As well as moving money between accounts, iBAN also integrates a P2P crowd-lending platform. Users can fund loan requests from other users, negotiating their own rates of interest. iBAN plans to offer these loan agreements in the form of smart contracts utilising blockchain technology.

iBAN added that it is targeting the millennial and Generation Z demographics with the digital wallet.

Hurr concluded: “I believe millennials and Gen Z, in particular, feel that the financial system is rigged against them. They don’t have the same financial security their parents enjoyed, and many of them may never own their own property.”

Digital wallets enable consumers to store multiple cards and make secure payments with a single device. <

Interac opens innovation lab in OntarioCanadian debit network Interac has opened an innovation outpost and accelerator at Ontario-based tech hub Communitech.

The Interac lab will focus on research and development that will help tackle challenges in the payments industry. The research will also focus on accelerating innovation to create efficient and tailored products and services for Canadian consumers.

The Interac Lab will focus on three key priorities:• Develop new payment capabilities:

Solve problem statements through ideation, research, development and creating proofs of concept, ultimately accelerating time to market;

• Improve the way consumers and businesses move money: Solve new use cases to help Canadians efficiently and immediately move money how, where and when they want to, and

• Explore the future of payments: Test and learn with emerging technologies such as voice, the Internet of Things, artificial intelligence and blockchain, to explore how the Interac suite of products can evolve with new trends.

Debbie Gamble, vice-president of digital product and platforms at Interac Corp,

commented: “Opening the Interac Lab positions us to continue to evolve as the payments sphere changes.”

Communitech CEO Iain Klugman said: “Having a nationally recognised brand like Interac engage with our community and help build technology for today and the future is wonderful.

“As a leader in its industry, we’re excited to have Interac join our ecosystem of labs amongst the most innovative in Canada.”

Interac Lab director Tricia Gruetzmacher added: “The knowledge sharing that comes with being a part of Communitech is invaluable to our co-op students and team, and hopefully to the others throughout the space.”

Gruetzmacher continued: “Collaborating daily with others in the tech community helps us stay nimble and agile as we create and test use cases that will accelerate our product development.” <

EPI July 2018 373.indd 9 06/08/2018 13:49:07


Canada is now in a unique position as the first G7 country to legalise recreational cannabis.

A much-avoided industry in the US, Canadian banks and payment companies now have the opportunity to get into the billion-dollar cannabis industry.

According to Deloitte, Canadians are expected to spend C$7.17bn ($5.48bn) on cannabis products in 2019, with overall consumption up to 35% once recreational cannabis is legalised. It might be a quick turnaround as well, as the new law could come into force as early as October.

KEY THEMESSpeaking to EPI, Stewart explains what has to happen to facilitate this billion-dollar industry in Canada, and how long will it take to create a secure ecosystem.

“Two key themes will drive this: Regulation and collaboration. Regulation sets the rules of the game, and so long as those creating them bring the industry stakeholders to the table, we can drive the industry forward.

He continues: “We now have clarity at the federal level for regulation. The provinces will be responsible for distribution, which is a little trickier as the model is expected to be quite different from province to province.

“Collaboration is now happening across the value chain. Provinces are beginning to engage the banks, who are working with payment processors like Bambora.

“Timing wise, it’s difficult to say. We’ve seen the first provinces make announcements for how they plan to distribute legal cannabis, and

we know who is in the payments flow.”When the law goes live, cannabis businesses

will have access to Canada’s payments industry and banks. Cannabis retailers will need to have the ability to execute modern retail fundamentals just as effectively as traditional retailers to be successful.

“Payments processors like Bambora, and front-end technology providers are one of pieces that makes the Canadian financial markets unique and powerful,” Stewart notes.

“Furthermore, this is a great opportunity for Canada to create long-term jobs and draw talent from other parts of the world.”

INDUSTRY INNOVATIONThe move to legalise has certainly sparked innovation in the payments industry. Creativity in the industry is also set to boom: similar to how consumers continually push for new ways to pay, they also have preferred ways to get high.

According to Deloitte, there is growing interest in cannabis-based edible products. These types of product most likely will not be available until a year after legalisation; however, it enables businesses to develop the desired products, and the payments industry can support the platform to transact securely.

Stewart chats more about payments innovation since the news of the legalisation. He says: “From a payments standpoint we’ve seen a continued push to an API-driven experience. This fosters an environment where we can all move quickly to partner with one another to compliment the necessary pieces of the payments process.

“The ability to authenticate that a consumer is who they say they are, lives where they say they live, and is of a certain age will be paramount in supporting this industry in particular. Furthermore, the authentication can now happen digitally, in real time, on any of the consumer’s preferred devices.”

Stewart believes having a payment solution that specifically suits individual businesses will allow them to have the flexibility to cope with the new cannabis industry.

HURDLESThe legislation creates a number of hurdles. Stewart states that implementing the law will take time, and that regulation could be tricky, noting: “Provinces will need to work with their local municipalities to obtain buy-in and build a scalable model.

“This also creates the very real scenario of different regulation – or interpretations of the regulations – by province. Scale will be challenged with this in the onset.”

However, the new industry will encourage competition across Canadian banks and payment processors. Similar to what the UK is witnessing with Open Banking, while some are jumping on board quickly to get ahead of the game, others are choosing to stay quiet – at least for the time being.

Overall, Stewart highlights that although the legalisation will go through its own trials, the law will create more flexibility, competition and growth across Canada’s payments industry. <

feature | bambora

canadian payments reaching a new highCanada legalised recreational cannabis in June, but what does this mean for the country’s payments industry? Briony Richter speaks to Ryan Stewart, chief commercial officer at Bambora North America, to find out

Ryan Stewart, Bambora

EPI July 2018 373.indd 10 06/08/2018 13:49:18


research | cryptocurrency

Cryptocurrency is going through a rough time. Some countries, such as South Korea, have banned it –

either wholly or for certain transactions.It is not just countries that do not see eye

to eye with cryptocurrency. Lloyds Banking Group and Virgin Money have both banned buying Bitcoin using credit cards.

Similarly, in the US, Bank of America, JPMorgan Chase and Citi have banned Bitcoin purchases utilising their credit cards due to its price fluctuations. In June, Google stuck its hand in and banned online advertising for cryptocurrencies and initial coin offerings.

Scott Spencer, director of sustainable ads at Google, stated: “Digital advertising plays an important role in making the web what it is today – a forum where anyone with a good idea and good content can reach an audience and potentially make a living. In order for this ad-supported, free web to work, it needs to be a safe and effective place to learn, create and advertise.”

However, according to ING Bank, cryptocurrency investment is set to double across Europe. According to research from the Netherlands-based bank, 9% of users currently have cryptocurrency in Europe, but ING reports that another 16% want to invest in the near future.

In addition, more than a third (35%) of respondents believed cyrptocurrency is the future of spending online, and a similar number expect it to be the future of investing.

The potential is huge. Sixty-six percent of Europeans stated that they had heard of cryptocurrency, but fewer than one in 10

actually owned any. With 34% of Europe having not even heard of it, the growth could be exponential.

However, 49% of Europeans do not want to change the way they pay. Some people are comfortable, but a large chunk of Europeans are risk-averse and see cryptocurrency as simply too risky.

Jessica Exton, behavioural scientist at ING, says: “Cryptocurrency remains an abstract investment for many, but there may be more appetite for digital currencies than some might suggest. Based on our survey, ownership of cryptocurrencies could more than double in the future – although we do not know when.”

LEGITIMACYWhile cryptocurrency was originally intended to exist outside the system, many operators now want industry regulation.

According to crypto-friendly payment company Mistertango, 88% of cryptoexchanges want industry regulation, while 24 cryptoexchanges in Europe, Asia, South America and Oceania have revealed that they believe regulation is necessary; this was attributed to the market needing to mature.

On the other hand, the firms stated that, despite needing regulation, caution must be taken, otherwise cryptocurrency could be sent out of existence.

Gabrielius Bilkštys, business manager at Mistertango, says: “The industry is crying out for regulation, and the response from partners has shown this. Uncertainty is the biggest fear, and regulation is critical to provide the stability we need.

“Unfortunately, there is no regulatory consensus – worldwide or otherwise. For cryptocurrencies to move towards the scale and ubiquity possessed by fiat currency, it needs cohesive, considered and comprehensive regulation. Thus, regulation will be a catalyst, not an inhibitor, to the crypto market’s development.”

Other findings from research from Mistertango included:• 17% of crypto exchanges believe

excessively strict regulation is the biggest threat to cryptocurrency;

• 30% say the biggest threat to the market is a significant crypto crash;

• 40% say reducing barriers to funding crypto activity by banks will improve acceptance, and

• 55% say crypto users should be subject to know your customer (KYC) and anti-money laundering (AML) checks, as are users of traditional financial services.

Oleksandr Lutskevych, CEO of multi-functional cryptocurrency exchange CEX.IO, says: “Until now, the industry has not had its say on regulation. It has been widely supposed that crypto companies want to avoid a regulated environment, but this is far from the truth.

“The industry is all too aware that regulation will lead to the maturity of the market and ensure businesses remain free from suspicion of involvement with illegitimate uses of cryptocurrency.”

ATTITUDE CHANGECrucial to the future of blockchain- and crypto-related funds is an attitude change, particularly from banks. Firms such as Lloyds or Chase would need to remove their sanctions to give it legitimacy, and 40% of those surveyed agreed. A further quarter cited increased and positive regulation as the solution. In addition, one-third of respondents said the greatest threat to the future was the perceived criminality of the sector.

Since the beginning of cryptocurrency, anonymity has been an important part of its allure. Over half of crypto exchanges surveyed now say crypto users should be subject to the same checks as those using traditional financial services.

A fifth of respondents said anonymity and lack of transparency of partners was the biggest threat, demonstrating a need for industry standard regulations and stricter KYC and AML rules. <

cryptocurrency: is it the end for the wild west?One thing that has always evaded cryptocurrency is legitimacy. Associated with sharp rises and even sharper falls in value, as well as illegal trade, many have stayed away. However, cryptocurrency firms want to redeem themselves and be regulated. Patrick Brusnahan writes

EPI July 2018 373.indd 11 06/08/2018 13:49:23


How long do you think you spend thinking about what to buy? According to research from

Checkout.com, UK consumers spend nearly a year of their lives deliberating.

Results from the online payments company’s study showed that shoppers spend an average of two and a half hours every day mulling over purchases. That is equal to five days a year, or 340 days over an average adult lifetime.

It is not only large purchases that are causing such anxiety. Shoppers in the UK can take as long as one hour to pick lunch. In addition, it can take an average of two weeks to decide to buy an article of clothing.

When it gets to actually large items, such as a car or holiday, it can take three and a half months before a decision is made. Moreover, nine in 10 consumers wait until something like a washing machine or fridge is broken before investing in a new one.

Nearly four in five (79%) of consumers admitted to being careful or “tight”, and 19% of them hated parting with cash. Furthermore, one in 10 said they felt racked with guilt if they have to invest in something expensive.

However, there are some signs that consumers will still buy, especially if social media is involved: 36% often bought things they saw on social media, and 37% said it would be handy if you could buy directly from sites like Instagram and Facebook.

Asked how they would like to pay in the future, 83% said they would choose a debit or credit card, 21% would utilise Apple Pay, and 15% opted for Google Pay.

Commenting on the caution of the British public, Guillaume Pousaz, founder and CEO of Checkout.com, says: “Consumers are, understandably, careful when it comes to spending money. We deliberate over our purchase decisions – and so naturally, there’s nothing more frustrating than a slow checkout process.”

He continues: “Shopping online should be made as easy as possible for customers, from the moment you open the browser to receiving the confirmation email. Retailers who do not adapt will suffer.

“At Checkout.com we help online retailers meet the needs of their customers by optimising their payments process to keep pace with demand.” <

research | consumer spending

buying has never been easier, but consumers are still waryThere are more ways to shop than ever. The traditional retail outlet on the high street, catalogues, online, via mobile app – all of these are viable. There are more ways to pay than ever before as well, so why are customers becoming so cautious about spending money? Patrick Brusnahan writes

analyse that!On the research, psychologist Donna Dawson says: “Britain is still influenced by the protestant work ethic: work hard, save money and put others before yourself.

“Very British expressions such as ‘saving for a rainy day’ and ‘watch the pennies and the pounds will take care of themselves’ all reinforce our need to be careful with money, and increase our anxiety about parting with it.

“We may even feel guilty about spending money on ourselves; it smacks of self-centeredness, and there is an irrational, subconscious fear that attracting attention to ourselves through a new purchase could bring us bad luck or loss.

“Being an island nation subject to continual invasion during our early history has made us feel insecure about our material assets. We have a need to hold onto things, including our money, as they could be taken away from us.

“We question the motives of others: Are we being ripped off? Is this really a bargain? Should we wait and see? Viewing money in such an emotive way makes us fearful and hesitant, which in turn means it takes longer to make a buying decision than if we had approached the task in a more practical, hard-headed way.” <

18-24

25-3435-4445-5455-64

65+0 20 40 60 80 100

NeverIn the last monthIn the last 2-6 months

%

Age

More than 6 months ago

online Buying by age

Source: GlobalData

Have you ever shopped online?

EPI July 2018 373.indd 12 06/08/2018 13:49:24


It is a first in Israel, and one of the first anywhere: Israel Discount Bank (IDB) has enabled customers to use

voice biometrics to initiate payments using Apple’s Siri.

The bank’s goal was not only to enhance the customer experience and increase engagement levels, the service’s launch has also served to empower the bank’s digital brand.

Basic mobile-based payment and money transfer services tend to be cumbersome, which potentially reduce the user experience and lower engagement. The need to provide numerous details in order to initiate the payment creates unnecessary friction and turns the process into an obstacle, lowering customer usage rates.

IDB has avoided such potential pitfalls. While all other Israeli mobile banking customers must log on to banking apps in order to transfer cash to contacts, or make payments, IDB customers enjoy a wider choice, and can perform the money transfer via a short and simple voice command to Siri. The result, says the bank, meets consumer demands for effortless, instant satisfaction.

Launch of the service created a buzz in both the customer environment and the Israeli digital banking industry, supporting the development of IDB’s digital brand as up to date and highly voice-oriented.

Use of voice technology in mobile banking has also attracted interest from other banks worldwide, with many also considering similar implementations.

So far, the service has been used by thousands of IDB customers, generating very positive user feedback.

IMPLEMENTATIONIDB’s mobile app allows users to transfer money via a bank transfer, or cash via an ATM, to any of the user’s contacts, as long as they are also an IDB customer. All that is needed to make the transaction is the contact’s phone number.

With the new “pre-geared” voice-activated Siri service, the money-transfer process is simple and intuitive: the user activates Siri via the iPhone, and asks it to transfer money to a friend or institution; a typical instruction would be: “Siri, I want to transfer $10 to Mike”. Siri then asks the user which app should make the transfer, at which point the user chooses the IDB app.

Siri locates the recipient’s phone number on the iPhone contact list, and the user is transferred to the bank’s mobile app in order to login – password or biometric logins are available – and reconfirm the transaction details before it is completed.

Once launched, in order to increase consumer take-up levels, an introductory pop-up screen has been embedded inside the mobile banking app.

Of particular note is the project’s speed to market: the bank managed to initiate the peer-to-peer money transfer via Siri service only five months after the project was launched. <

feature | voice activation

technology: siri scores hit for israel discount bank

Israel Discount bank wished to offer a simple, comfortable and quick P2P money transfer service to its customers, based on voice commands. The simple solution: a digital platform that customers already use on a daily basis – Apple’s Siri. Douglas Blakey reports

other siri launchesIn February 2018, OCBC became the first bank in Singapore to enable its customers to use Siri for everyday banking.

OCBC customers can check balances and make instant payments to friends and family via Siri. OCBC successfully launched a similar Siri service for business customers towards the end of 2017.

ING launched a similar Siri service in January. According to ING, around out one in five of its customers are now using voice assistants such as Siri at least once a day.

In India, ICICI rolled out the country’s first voice-based international remittance service to enable non-resident Indians to send money to any bank in India. Customers can instantly initiate a remittance to existing payees with just a simple voice command to Siri via an iPhone.

In March, HSBC’s First Direct launched a payments service using Siri, removing the need for customers to open a banking app or enter a password.

Existing payees and mobile contacts can be paid using Siri, up to a daily limit of £350 ($454). <

EPI July 2018 373.indd 13 06/08/2018 13:49:27


Although the Financial Conduct Authority (FCA) in the UK requires lenders to assess consumers’ ability

to absorb additional debt when making credit decisions, unsecured debt has been rising rapidly across the country since the 2008 financial crisis.

Currently, more than 3 million UK credit card holders are trapped in a state of persistent debt, where the repayments made on a monthly basis are less than the interest and changes on the account.

While this specific issue has been addressed by the FCA, of greater concern are those consumers who, on the face of it, seem to be coping with their current financial burden, but who are under a substantial level of pressure to meet their commitments, which is not reflected in a typical credit score.

Poor lending decisions lead to higher default rates and impair consumers’ lives. How, therefore, can lenders in the UK better identify the consumers who cannot afford to repay their loans, or where the offering or extension of credit will have significant detrimental effect on the lives of that consumer?

Lenders evaluate credit risk based on credit scores, which measure the likelihood that a credit agreement will be repaid. Credit risk models take the data from the application, or the behaviour of the account or customer, to predict payment performance.

However, there is growing awareness that credit risk scores alone do not give a full enough picture to accurately determine the risk of default.

Industry regulators are putting increased scrutiny on ‘affordability risk’ – whether credit commitments can be repaid, or whether taking on additional debt on one trade line may even cause other trade lines to default – as a criterion for measuring consumer creditworthiness, reinforcing the notion that credit risk assessments need to be made more robust.

industry insight | fico

credit decisioning: how to close the affordability gap

How can lenders optimise predictive analytics and machine learning to make the most reliable decisions? Get it right and lenders can reduce default rates and decrease the burden of debt for consumers across the UK, argue Campbell Scott and Hitendra Patel

EPI July 2018 373.indd 14 06/08/2018 13:49:29


THE AFFORDABILITY GAPThe risk of non-repayment is determined by two traits: ability and willingness. The former is the same as affordability – the ability to repay the outstanding lending – and the latter refers to the consumer’s commitment to repay.

Credit bureau scores can only predict the overall odds of repayment for the consumer. They can’t assess which of the two traits is driving non-payment in a particular case. In order to separate out and quantify affordability across the life of a credit obligation, new tools are required.

In addition, it is sometimes necessary to understand how balance increase will impact a consumer’s probability of default – another situation that cannot be assessed with a credit score alone.

Credit risk metrics need to be supplemented by affordability risk measurement tools, as consumers with the same level of credit risk – the same credit risk score – can have different repayment outcomes depending on their affordability risk, if they substantially increase their balances.

CAUSAL ANALYTICSTo gauge affordability, lenders need both simple metrics about the consumer’s current situation – for example, whether they have been making only minimum payments on a credit card – as well as a more complex overview of the overall consumer profile.

This is where analytics are required – to first enable the selection and organisation of the most crucial data points and then to express these outputs as easy-to-use metrics.

In our research, we created a Balance Change Sensitivity Index (BCSI) – an analytic affordability model that was developed to rank-order individuals according to their sensitivity to a sizeable future increase in total credit card balances.

This analytic can help plug the gap of balance sensitivity, a factor that is inadequately considered in current risk metrics. Unlike credit scores, which use associative or correlational models, BCSI relies on a causal modelling approach – if an individual is balance-sensitive and given a sizeable increase in their balance, this is more likely to cause a subsequent increase in default.

Our research finds that credit risk is somewhat positively associated with affordability risk, however, the correlation is only mild. In each risk score band, we find consumers with low and high

affordability risks. This debunks the common assumption that high credit risk equals lack of affordability, or vice versa.

With the additional insight from BCSI, lenders can refine their card limit strategies to extend less credit – or even reduce limits – to balance-sensitive customers and provide more products and obtain increased share of wallet from the more stable customers. Alternatively, the same model could be used to assess a consumer’s ability to pay back a higher minimum repayment, which may be required under the FCA requirements on persistent debt, to understand whether the consumer would need to be treated with forbearance.

Ultimately, BCSI will help identify opportunities to improve the quality of the portfolio, both from the perspective of profitability and from a compliance perspective, treating customers in a manner that does not adversely impact their quality of life.

AFFORDABILITY PROBLEMAlthough lenders can ask consumers for evidence of their income and expenditure during the origination process, it is unfeasible to continually request updated paperwork to determine affordability, and a consumer’s cash flow and affordability do change over time. This makes it difficult for lenders to decide who can afford an increased credit line, or would be ideal to cross-sell new credit products to.

In order to help UK lenders mitigate affordability risk across each consumer’s lifecycle and address compliance requirements, FICO joined forces with Equifax to create the FICO Risk and Affordability Decision Suite (RADS). This uses advanced predictive analytics and machine learning to develop nearly 50 decision keys – including the BCSI and a new customer management risk score – to assess both a consumer’s repayment risk and their ability to handle existing and new credit.

In addition, RADS delivers up-to-date data directly from Equifax to a lender’s decision engine. This enables lenders to make the most reliable decisions to drive reliable, profitable growth in a seamless end-to-end process, without the need for significant IT resources

The creditworthiness of any individual lies at the core of all lending decisions. Affordability risk is the new dimension on the list of requirements for responsible risk management.

The next generation of market-ready credit solutions need to combine data with innovative analytics to help lenders remain compliant and identify both credit opportunities and restrictions.

By considering both credit and affordability risk, lenders can create tailored solutions for each consumer that are fit for purpose, reduce default rates and decrease the burden of debt for consumers across the UK. < Read more about affordability analytics at www.fico.com/en/products/fico-risk-and-affordability-decision-suite-equifax

industry insight | fico

210

200

190

180

170

160

150

2007 2009 2011 2013 2015 2017

unsecured consumer credit

Source: Bank of England

Unsecured lending to individuals has risen above £200bn for the first time since 2008

EPI July 2018 373.indd 15 06/08/2018 13:49:29


feature | smart tokens

The desire for faster payments has become global. This requires all organisations that process payments

to meet that need without compromising on security; this is where Token comes in.

Token is an Open Banking platform provider that supports banks transferring money and financial data, quickly and without friction.

To ensure enhanced security, Token deploys its Smart Token technology, which enables banks to transfer and receive payments as secure Smart Tokens.

Token CEO and co-founder Marten Nelson speaks to EPI about the benefits of Smart Tokens: “A Smart Token is a regular token on steroids. It transmits the value and all information needed to authorise the transaction together in one go, including enhanced counterpart identity and transaction and invoicing data.

“It consists of three layers: an asset, a set of rules, and a state. Smart Tokens are digitally signed by the account holder. This creates end-to-end secure transactions that are also non-repudiated.”

The tokens create a near-infinite number of randomly generated values, which replace sensitive information like card details and numbers, making it almost impossible for hackers to get hold of the actual data.

Banks and financial organisations are waking up to the value of Open Banking and the important role that APIs play in an open digital environment. In order to compete effectively, incumbent banks now understand the need to expand their digital capabilities and build APIs. However, for some banks, building a platform that can foster an open

API ecosystem can be difficult. This is why many have partnered with companies like Token to help them become PSD2-compliant.

Token is not only helping Sberbank in this area, but the bank will also harness the Token iOS and Android mobile apps. This will allow Sberbank customers to enjoy the benefits of Open Banking from their mobile devices.

OPPORTUNITIESSpeaking about the opportunities of Open Banking, Nelson says: “Sberbank Slovenia is implementing Token’s transaction-based open application programming interface [API] for banking infrastructure. This ensures that its banking infrastructure is PSD2-compliant and, as the platform is cloud-based, gives the bank both flexibility and scalability when handling transactions.”

Open Banking is certainly not going anywhere, and to establish a secure position within the value chain, banks and financial organisations should not turn a blind eye to its benefits.

Nelson continues: “Open Banking, if done right, will create a platform from which all players in the digital ecosystem can drive new propositions. A standard API would not just fulfil Open Banking requirements to move data and money, but also deliver extended payments and loyalty solutions that generate smart transactions.”

Nelson also adds that many banks are having problems finalising their compliance strategies, and that the current strategy of using proprietary APIs does not fully embrace the opportunities to make a forward-thinking change in the transfer of money and data.

An open and single API that can support banks and developers will allow for positive interactions between all players in the market. Banks will witness growth through new open banking propositions, and will ultimately be able to deliver more personalised products and services to consumers.

The potentials of Open Banking include greater financial transparency, significantly improved customer service, and positive collaborations, and the concept has been gaining momentum around the world. Nelson identifies some of the key trends: • Bank direct payment: “This is something

we are already seeing significant interest in, such as from Caxton FX and Paymentworld, and will lead to a newly efficient bank-to-bank ecosystem and dramatically enhanced real-time banking system.”

• Data aggregation: “What will be even more interesting is when artificial intelligence or machine learning are used to provide predictive analytics based on aggregated data to provide a better user experience [UX]. Banks that understand that they need to go beyond minimal compliance to true customer-centricity and embrace their role as custodians of customer data and value will offer a better UX.”

• Collaboration: “Partnerships will only continue to grow in importance. Those banks and third-party providers that are willing to partner with each other to get to market quickly will win by creating complementary solutions and a better UX that delivers value.”

Token’s platform allows banks like Sberbank to become PSD2-compliant swiftly and without friction. The potentials of Open Banking are substantial, and it is companies like Token that want to encourage financial organisations to embrace all of its benefits. <

smart tokens: forward-thinking global paymentsBy partnering with Token, Sberbank is signalling that it is fully embracing the opportunities of Open Banking. Briony Richter speaks to Marten Nelson, co-founder and CMO of Token, to find out how Smart Tokens can increase payment speed and convenience

Marten Nelson, Token

EPI July 2018 373.indd 16 06/08/2018 13:49:30


research | pos finance

Consumers are now more willing and able to borrow funds than ever before. With so many retailers very

publicly struggling, they can ill afford not to offer flexible payment options at the point of sale.

Consumer spending is likely to favour merchants that offer POS finance options – helping to boost sales and reputation in a number of key ways. There is, accordingly, an enormous opportunity for UK businesses to boost bottom lines – one that many may not even realise they are missing out on. But what is the level of the market opportunity?

A report commissioned by specialist lending platform Duologi examines the current state of the consumer credit market, and attitudes towards POS finance. The report, entitled Finding the Right Balance, examines a number of sectors from retailers to health providers and travel operators.

Its key findings are:• More than three-quarters (78%) of

consumers would consider purchasing through POS finance in the future – around 39 million UK adults;

• Of these, the average amount that each would be willing to borrow is £620 ($804), representing a potential £25bn opportunity for merchants that implement this payment type into their business model;

• Almost a third (29%) of people would be willing and able to borrow between £1,000 and £5,000, with 27% saying they would be most likely to need around £500–1,000 in credit to make a purchase, and

• Over a third (34%) of people said they would be more likely to spend with a business that offers POS finance options.

With fierce competition throughout every sector as the UK economy fluctuates in confidence, this potential to boost traffic – both online and in-store – could be critical to a brand’s survival.

Customers also stated that POS finance options would be a key factor in deciding where to shop; 20% of people said that if a company did not offer flexible finance options, they would be more likely to go elsewhere.

Moreover, finance options can help to boost brand loyalty, with more than a quarter (28%) of people saying they would be more likely to return to a merchant that allowed them to borrow funds in this way.

A further 26% would be likely to spend more than originally planned if they found they could access a good amount of credit from a merchant.

0% FINANCEThe report finds, unsurprisingly, that 0% finance is the biggest selling point for consumers when buying on credit. Around 75% of people said this is an important consideration if they were to buy on credit. This figures rises to 81% for people who earn more than £40,000.

Flexibility or multichannel spending is vital, with 46% of people saying POS finance should be available both online and in-store.

A range of industries stand to benefit from offering POS finance options: 42% of consumers think the retail industry could do more to offer POS finance options.

According to Duologi, some 20% of people no longer trust in a loan from a bank. Such

scepticism is especially prevalent among the millennial generation – with the figure rising to 24% among 25–34-year-olds.

With banks increasingly concerned about levels of personal unsecured debt, and consumer mistrust towards banks so high, there is potential for a step change in consumer credit.

Over half (56%) of the survey sample reported a bad experience of high interest rates when applying for credit, while 28% have not been provided with full transparency when it comes to their loan.

Many lenders are also falling short in terms of user experience, as 24% people believe their credit application process was too slow. One in five (20%) also stated that the lending decision took too long, and a further 26% were unable to decipher their application, as it was full of confusing financial jargon.

The report finds that only 6% of people would ask a merchant if they offered finance options. So despite a general willingness to spend on credit, consumer awareness levels are very low with regards to its availability.

The report concludes that merchants of all kinds can benefit from offering finance options. They should also work hard to promote them as a key point of difference.

Duologi co-CEO Gary Little says:“Fintech businesses are driving a transformation in the market. Whereas previous incarnations of consumer finance offerings may have been plagued by lengthy application processes or slow procedures, new platforms – built on powerful technology – are making this kind of transaction just as simple as paying on credit card, but with the flexibility to repay the cost in a way that suits customers’ needs.” <

lack of pos finance costing retailers as much as £25bnUK businesses could be missing out on up to £25bn in sales by not offering flexible payment options at the point of sale. More than three-quarters of consumers would consider purchasing through POS finance in the future – around 39million UK adults, according to Duologi. Douglas Blakey reports

EPI July 2018 373.indd 17 06/08/2018 13:49:32


country snapshot | portugal

PORTUGAL

country snapshot: portugal

Portugals’ banking sector was badly affected by the economic crisis.

Amid growing debt and falling profitability, banks were forced to

close operations, triggering mergers and acquisitions which had a direct bearing on the country’s payment cards market. Additionally, profitability in the

payment cards market fell following the implementation of the EU interchange fee cap and an increase in bad loans, which specifically hindered pay-later cards.

0

500

1,000

1,500

2,000

20132016

2021f2017e

$bn

value of credit tRanSfers

Source: ECB, GlobalData

0

50

100

150

200$bn

20132016

2021f2017e

value of cheque payments


Consumer prudence favours debit card transactions

0

30

60

90

120

150$bn

20132016

2021f2017e

value of payment cards


EPI July 2018 373.indd 18 06/08/2018 13:49:42


country snapshot | portugal

However, amid this turmoil, consumer preference for debt-free payments and prudent spending resulted in growing debit card transaction volumes and values. Consumers in Portugal made over 1.5 billion purchases with debit cards at the POS in 2017.

Contactless card numbers and usage have also seen strong growth in recent years, with the vast majority of contactless users in Portugal seeing the cards as helpful. In addition, with various government and bank initiatives, payment cards will grow steadily over the next five years and gradually become more accepted.

HIGH BANK PENETRATIONDebit card penetration in Portugal is high, supported by the large banked population.

The central bank has pushed banks to offer basic accounts with minimal charges to all citizens, offering services including a debit card and the ability to make credit transfers and direct debits. According to the central bank, the number of basic bank accounts rose from 9,646 in 2013 to 34,953 in 2016.

The government is also using digital channels to increase banking penetration. In July 2017, the central bank issued regulations enabling institutions with headquarters or branches in Portugal to allow customers to open accounts exclusively through digital channels. Consequently, banks such as Novo Banco, Millennium bcp and Santander Totta enable consumers to open bank accounts through digital channels.

E-COMMERCEE-commerce is acting as a key driver of payment card market growth. According to a 2016 SIBS Market Report, more than a third of Portuguese consumers prefer payment cards for online purchases.

Many banks offer customised payment cards for online shoppers. For instance, Millennium bcp offers a Visa-branded web card for an annual fee of €10 ($12). Emerging solutions such as PayPal, Masterpass and Seqr are also being used for online transactions.

Consumers most value security when choosing a mode of online payment, with 44% citing this feature. The growing number of online apps such as MB Way and Masterpass is expected to drive

e-commerce in Portugal to record a CAGR of 11% over the next five years.

CONTACTLESS GAINSContactless payments are expected to gain prominence in Portugal, with Caixa Geral de Depósitos, Novo Banco and Banco BPI now offering contactless cards.

Merchants have also started to provide the necessary infrastructure for contactless payments, and overall the number of contactless cards rose from three million in 2013 to 11.6 million in 2017.

Prepaid cards are gradually gaining acceptance among Portuguese consumers, primarily due to prudent consumer spending as a result of subdued economic growth. The number of prepaid cards grew significantly from 1.1 million in 2013 to 2.6 million in 2017.

Banks in Portugal offer prepaid cards for consumer segments such as children, shoppers and travellers. Caixa Geral de

Depósitos, for example, offers Mastercard-branded prepaid cards for children aged over 10 years. The LOL Junior Card can be loaded with funds from $6 to $600 through online banking, at ATMs and branches, or by direct debit.

INFRASTRUCTUREThe number of POS terminals recorded a moderate CAGR of 5.7%, rising from 259,428 in 2013 to 323,931 in 2017.

Retailers are also installing POS terminals that accept contactless payments, as a result of which the potential for card-based payments is also expected to grow.

Service providers are launching new products. In September 2017 the National Association of Road Transport Carriers collaborated with myPOS and the National Digital Taxis Center to equip taxi drivers in Lisbon with myPOS terminals that enable credit and debit card transactions and contactless payments. <

Novo Banco14.4%

Others47.8%

Millennium bcp16.0%

Caixa Geralde Depositos

21.8%

Debit card shares by issuer

Source: GlobalData

mBank21.7%

Others42.3%

BankPekao12.1%

Multibanco100%

Debit card shares by scheme

Source: GlobalData

WiZink13.6%

Novo Banco14.7%

Others58.4%

Millennium bcp 13.4%

pay later shares by issuer

Source: GlobalData

Mastercard29.8%

Others17.5%

Visa54.4%

pay later shares by scheme

Source: GlobalData

EPI July 2018 373.indd 19 06/08/2018 13:49:45


country snapshot | finland

country snapshot: finlandE-commerce drives growth in a mature market

FINLAND

Finnish consumers are strong users of payment cards, and frequency of card use is higher in Finland than in other

mature European markets such as the UK and Germany.

Improved banking infrastructure, new product developments, high awareness of electronic payments, and wide acceptance of payment cards at POS terminals have been the main growth drivers.

Debit cards are the most popular card in Finland, and are used almost six times more than pay-later cards. Given their strong hold, credit card uptake has been slow. However, there has been a significant shift in product and marketing strategies in the last five years, and credit card issuers are now using initiatives to attract consumers, such as no annual fees, payment-free months, reward points, discounts at partner retailers, and cashback.

E-commerce has registered robust recent growth, a trend that is expected to continue, providing growth opportunities. Contactless payments have steadily gained prominence, with all major banks offering contactless cards and mobile solutions.

Debit cards have traditionally been preferred by Finnish consumers, most of whom are banked and have at least one debit card.

Combined efforts by payment operators and government bodies in promoting cash-free transactions have accelerated debit card use. Rising use of debit cards for low-value transactions, and rising consumer preference for contactless cards are expected to drive the debit card market further over the next five years.

Pay-later cards are not popular with Finnish consumers, who tend to prefer debt-free payments and prudent spending. The availability of debit cards with credit functionality has also reduced the need for a separate credit card.

Although pay-later cards represent a small share of the Finnish payment card market, they have registered steady growth with banks promoting card use by offering cashback and reward programmes.

The Finnish e-commerce market posted a CAGR of 13.7%, increasing from €5.8bn ($7.0bn) in 2013 to $11.6bn in 2017. Growth is supported by well-developed online and logistics infrastructures.

The introduction of instant payment system Siirto for e-commerce, and the launch of international payment solutions including Apple Pay and Masterpass, are anticipated to support growth in the Finnish e-commerce market.

Finland has registered a rise in contactless adoption, with 6.5 million contactless cards in circulation at the end of 2017; this is equivalent to around two-thirds of the total payment cards in circulation in the country.

With growing consumer preference for contactless payments, all major banks now offer contactless cards, with many additionally developing contactless mobile payment solutions. <

CARD TRANSACTION VALUES BY CHANNEL ($ BILLION)

ATM POS

2013 17.4 49.5

2014 17.8 51.0

2015 17.1 52.9

2016 16.2 54.9

2017e 15.5 57.0

2018f 14.9 58.9

2019f 14.3 60.8

2020f 13.9 62.6

2021f 13.5 64.3Source: ECB, GlobalData

CARD TRANSACTION VOLUMES BY CHANNEL (MILLION)

ATM POS

2013 150.5 1,246.0

2014 148.3 1,330.7

2015 140.1 1,419.4

2016 127.6 1,535.9

2017e 118.4 1,651.5

2018f 110.7 1,767.0

2019f 104.2 1,879.2

2020f 98.9 1,987.2

2021f 94.8 2,090.1Source: ECB, GlobalData

NUMBER OF ATMS AND POS TERMINALS (THOUSAND)

ATM POS2013 2.2 196.0

2014 2.2 156.9

2015 2.1 153.4

2016 1.9 150.6

2017e 1.9 149.1

2018f 1.8 150.0

2019f 1.7 151.7

2020f 1.7 154.5


PAYMENT CARDS BY TYPE (MILLION)

Debit Pay later

2013 7.1 4.5

2016 7.5 4.9

2017e 7.7 4.9


EPI July 2018 373.indd 20 06/08/2018 13:49:54


country snapshot | kenya

country snapshot: kenyaMobile solutions hold sway in developing market

KENYA

Kenya’s payment card market is still developing, with card penetration of 30 cards per 100 individuals in 2017

and 16.0 transactions per card per year – lower than peers including South Africa, Morocco and Egypt.

The low uptake of payment cards is a result of society’s dependence on cash and limited merchant acceptance. Overall, cash accounted for 88.4% of the total payment transaction volume in 2017.

Advanced security features such as EMV are being adopted to encourage payment card use, and scheme providers have launched campaigns to raise consumer awareness of security issues and the benefits of EMV chip cards.

Visa ran a Security Week event in May 2015, and a chip and PIN campaign in September 2014 to promote the benefits of using cards for everyday transactions. Similarly, Mastercard partnered with card processor Paynet in July 2013 to launch the Great Migration to EMV Chip initiative.

The wide popularity and acceptance of mobile payment solutions such as M-Pesa and Pesapal has been a major obstacle for

payment card growth, as these solutions offer convenience and cost-effectiveness. Unlike banks, mobile payment solution providers offer services to small merchants and charge lower processing fees, making them attractive to consumers.

Overall, the Kenyan payment card transaction value at the POS recorded a subdued CAGR of 0.6% during 2013-2017.

In 2016, to increase traceability of bank transactions and boost electronic payments, the government mandated that all Kenyan individuals must complete a form if they deposit or withdraw more than KES1.0m ($10,000) in cash from a bank account.

Card-based payments grew marginally between 2013 and 2017 due to the

convenience and cost efficiency of mobile-based retail payment solutions. As of March 2017, M-Pesa had 27 million registered users in Kenya, with over 136,000 agents and over 260,000 active retail outlets.

Mobile solution providers typically charge low processing fees; for example, Safaricom charges merchants a 0.5% processing fee on its Lipa Na M-Pesa service – much cheaper than the average service charge for a bank card payment.

The government has taken several initiatives to bring Kenya’s unbanked population into the formal banking system, which helps promote card use. One initiative is the adoption of an agency banking model to provide financial access to individuals in remote areas.

All of Kenya’s major banks now offer agency banking services. According to the Central Bank of Kenya, as of 30 June 2017 a total of 60,102 banking agents from 18 commercial banks and five microfinance banks were operational in the country.

From June 2016 to June 2017, transactions undertaken by banking agents increased by 56.5% in value. <

CARD TRANSACTION VALUES BY CHANNEL ($ BILLION)

ATM POS

2013 13.2 1.0

2014 11.9 0.6

2015 12.9 0.7

2016 13.4 0.9

2017e 14.0 1.0

2018f 14.7 1.2

2019f 15.5 1.3

2020f 16.3 1.5

2021f 17.2 1.6Source: Central Bank of Kenya, GlobalData

CARD TRANSACTION VOLUMES BY CHANNEL (MILLION)

ATM POS

2013 329.0 15.8

2014 258.3 11.6

2015 227.5 13.2

2016 213.7 17.1

2017e 212.7 20.0

2018f 215.1 23.2

2019f 219.7 26.4

2020f 227.7 29.8


NUMBER OF ATMS AND POS TERMINALS (THOUSAND)

ATM POS2013 2.5 21.1

2014 2.6 17.5

2015 2.7 22.2

2016 2.7 30.1

2017e 2.7 36.6

2018f 2.8 43.2

2019f 2.8 49.5

2020f 2.9 55.4


PAYMENT CARDS BY TYPE (THOUSAND)

Debit Pay later

2013 9,543.2 159.4

2016 12,903.7 234.8

2017e 14,338.6 244.0

2021f 20,140.5 294.5 Source: GlobalData

EPI July 2018 373.indd 21 06/08/2018 13:50:03


industry insight | mypinpad

With cashless consumers increasingly abandoning their shopping if the merchant is

unable to accept card payments, merchants risk losing sales and jeopardising their bottom line.

As merchants have begun to recognise this risk, paytech companies now need to deliver a new generation of versatile payment technologies for the purpose of helping merchants overcome the issue.

However, numerous new solutions have entered the market and confusion has crept in, with many misunderstanding the new terminologies or the benefits of different technologies.

Two of the most commonly mislabelled technologies are PIN on mobile (PoM) and PIN on glass (PoG). The two terms are often treated synonymously, as if the technologies they describe are the same. However, although they sound similar, they are noticeably different.

PoG and PoM are distinct technologies, with their own features and benefits. Failure to understand the differences between them could mean merchants may not deploy the payments solution that is right for their business.

What exactly is the difference between PoG and PoM?PoG describes the evolution of POS technology, and has been around for a long time. It refers to traditional payment terminals that have developed from buttons to a glass-based capture mechanism, such as a touchscreen.

These traditional PoG solutions are expensive, and often offer little, if any, additional functionality when compared to traditional button-based POS devices.

Some PoG terminals, occasionally referred to as a smartPOS, are locked-down, purpose-built Android devices that are expensive to manufacture and restricted to one device. PoM, however, is an innovative technology that has been designed to offer merchants a cost-effective avenue to card payment acceptance, while delivering the same security standards of a traditional POS terminal.

PoM enables merchants to use consumer off-the-shelf (COTS) devices, such as smartphones and tablets, instead of expensive specialist POS terminals. With PoM, a simple secure card reader (SCR) is used to read the card chip. A consumer then inputs their PIN directly in to the smartphone or tablet. This is much more cost-effective than a traditional terminal, meaning that it is more accessible for SMEs.

How secure is PoM?In addition to low implementation costs, PoM gives the same security credentials with the recently launched Payment Card Industry Security Standards Council (PCI SSC) standard.

The PCI SSC’s new standard for software-based PIN entry on mobile devices ensure a universally recognised standard for securely transacting via the payment technology.

The PCI SSC point of viewThe Payment Card Industry Security Standards Council has a lot to say about the

differences between PoG and PoM, and has responded with an emphatic “no” to questions about whether the two terms are synonymous.

Commenting on the question and referencing its Software-Based PIN Entry on COTS (SPoC) standard, the organisation stated: “A SPoC standard covers a software-based approach for accepting PIN as the cardholder-verification method [CVM] on a merchant-owned COTS device. The phrase ‘PIN on glass’ is often used generically regarding a variety of use cases, with the commonality simply being entering a PIN value on to a touch screen on a variety of device types.”

A SPoC solution includes a secure card reader – PIN (SCRP), a PIN CVM application, the merchant’s COTS device, as well as back-end monitoring and attestation systems. These elements all work together to ensure the PIN, accepted by a software application on the COTS device, is isolated within the COTS device from other sensitive account data.

The back-end monitoring and attestation systems continuously monitor the entire solution for anomalous activity, and to ensure the solution has not deviated from the baseline through tampering, rooting or physical attacks.

In other words, within a SPoC solution, the merchant-facing COTS device is only one element of the entire solution, whereas a point-of-interaction (POI) device is generally a single device.

There are numerous hardware-based POI devices that are PCI PIN Transaction Security (PTS)-approved for PIN acceptance using a touch screen or, in other words, PoG.

These POI devices are purposely built for payment acceptance, and, as such, care must be taken when using the generic phrase ‘PIN on glass’. For example, a PTS-approved POI device that accepts PoG is very different from a SPoC solution that uses a merchant-facing COTS device to accept PIN.

Improving understandingWith so many new technologies emerging as a result of the demand for a faster, seamless payments acceptance process, it is important to know what technologies offer which services, how they work, and how they may best serve merchants.

For PoG and PoM, the two distinct technologies offer their own benefits and can meet specific merchant needs, enabling them to continue to meet their customers’ changing payment requirements. <

pog and pom: how they differ; why it mattersConsumers are carrying less cash than ever before, and this poses a challenge for the five million small merchants in the UK that are still unable to accept cards due to the expense of traditional card terminals. David Poole of Mypinpad writes

EPI July 2018 373.indd 22 06/08/2018 13:50:03

Key Issues :

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can we talk?...of its qrpay merchant app to solve these pain points. the service taps into the...

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