pole position - verdict · • rcbc bankard and jcb introduce platinum card • mypos to open...

DISTRIBUTION INSIGHT PRODUCTSTaiwan’s CTBC Bank turns the humble ATM network

into a profit centre

Do Not Honour: what it really means, and how merchants can avoid it

Mastercard Canada sees strong expansion in electronic payments

POLE POSITION

POLAND STRIDES FORWARD IN PAYMENT INNOVATION AND FINANCIAL INCLUSION

Issue 554 / april 2018w w w. c a r d s i n t e r n at i o n a l . c o m

CI April 2018 554.indd 1 28/03/2018 14:29:35

2 | April 2018 | Cards International

contents

NEWS

05 / EDITOR’S LETTER06 / DIGEST• NatWest launches ClearSpend to

track company card spending• UniCredit brings Samsung Pay to

cardholders in Italy• Saudi Arabia’s mada taps Mastercard• Atom and Tranwall launch tool for

cards in India• RCBC Bankard and JCB introduce

platinum card• myPOS to open bricks-and-mortar

stores in Europe• BofA allows PayPal account links• Revolut introduces disposable virtual

cards• Malaysian central bank prohibits

additional charges for card payments• UnionPay partners with ACI

Worldwide to grow acceptance• Xinja introduces prepaid card• BBVA trials biometric payments• Mastercard draws up five-year

roadmap• Barclaycard launches contactless

timepieces

16

this month

Editor: Douglas Blakey+44 (0)20 7406 6523

[email protected]

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POLAND FOCUS

COVER STORY

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CI April 2018 554.indd 2 28/03/2018 14:29:49

www.cardsinternational.com | 3

contents

11

april 2018

11 / MASTERCARD CANADAMastercard Canada is seeing strong expansion in electronic payments. Iain McLean, senior VP of market development, gives Robin Arnfield a review of the highlights of 2017, and discusses what is in the pipeline for 2018

14 / CTBC BANKTaiwan’s CTBC Bank was a deserved winner of best ATM innovation at the annual Asia Trailblazer Awards in March in Singapore. As Douglas Blakey reports, its investment has transformed the ATM into a profit centre

s to talk about cracking China, disrupting SWIFT, and leveraging WeChaCOUNTRY SNAPSHOTS16 / POLANDPoland is one of the most advanced and innovative markets in Europe, offering consumers broad access to the latest technology in electronic payments. Nevertheless, cash remains very popular

18 / DENMARKDenmark’s cards and payments industry is well developed, and its consumers are prolific users of payment cards. The country has the highest frequency of use in the world, with 210 transactions per card in 2017

20 / NETHERLANDSThe Dutch payment cards market is mature, with a high penetration rate of 1.9 cards per inhabitant. The market is dominated by debit cards, which users perceive to be secure, cost-effective and consumer-friendly

20FEATURES

18

INDUSTRY INSIGHT15 / ADYEN05: Do Not Honour is one of the most common reasons from credit card issuers for declined e-commerce payments, representing 10-60% of refused transactions, depending on the market. Chris Laumans writes

22 / FICOA decade on from the 2008 financial crisis, levels of consumer credit delinquency are rising worldwide. This should not be a surprise, given that global debt is also soaring, writes Matt Cox, senior director at FICO

10 / SMARTMETRICBiometric EMV card manufacturer SmartMetric is getting ready for the commercialisation of its technology. Robin Arnfield talks to the US-based business’s president and CEO, Chaya Hendrick

SECURITY

CI April 2018 554.indd 3 28/03/2018 14:29:53

Motor Finance europe 2018

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latest innovations, strategies and technologies driving the industry forward. We will bring together the industry’s thought leaders, experts and challengers to discuss the key

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The highlights include:

l the impact of digitalisation on the automotive industry

l complying with regulatory requirements

l understanding your customer and adapting in real time

l preparing to meet the requirements of the GDpr

l Disruptive innovations in car financing

l captives of the future: old world vs new world

l a car retailer’s perspective on the challenges the dealer world faces

l embracing the digital world and innovative distribution models

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editor’s letter

UK credit card debt back in the political spotlight

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

Douglas Blakey, Editor

When even the Financial Times is guilty of sensationalist and arguably misleading headlines on consumer debt, there is reason to

look at the actual figures with extra care.UK credit card debt rises 10% in January screamed the

headline in the FT on 1 March. The headline remains online, uncorrected as CI goes to print. For the record, credit card debt rose by 9.6% in the year to January, an altogether different increase compared to the scaremongering headline.

The same article did at least acknowledge that growth in credit card lending has slowed in recent months as a result of the Bank of England and FCA voicing concerns about UK consumer debt. A quick check of other credit card stats to hand does, however, give ammunition to those arguing that credit card debt is rising too fast. Credit card spend in the UK rose by 8.3% in the year to February, its fastest rate since 2006. Credit card transactions rose by 3.3% year on year to 220 million transactions in February.

The FCA has been rather more proactive than a number of vocal and high-profile politicians care to recognise in taking steps to tackle problem credit card debt. According to the FCA, more than three million UK credit card holders are in what it terms “persistent credit card debt” – defined as cardholders paying more in interest and fees than they repay of their outstanding debt. Such cardholders typically pay interest charges of about £2.50 ($3.50) for every £1 of debt that they repay. A higher figure, about 8.3 million people, is given by the Money Advice Service for those lumbered with problem debt.

New rules kicked in on 1 March forcing credit card issuers to take a series of steps to help credit cardholders with persistent debt. Card issuers are obliged to engage with customers that have been in persistent debt for 18 months; the issuer is required to explain the benefits of increasing their payments, and tell them about where to get debt help and advice.

After 27 months, card issuers must again contact the customer if it looks as if the debt situation is unlikely to improve, and give a warning that the card may be suspended if they do not change their repayment behaviour. After 36 months, the issuer has to offer the cardholder a way to repay the outstanding balance over a reasonable period of say, three to four years. This may involve the offer of a personal loan at an interest rate way below the credit card interest rate.

While the new regulations have been welcomed by UK Finance, the banking sector lobby group, a number of debt charities remain concerned that the new rules do not go far enough. In particular, charities such as StepChange argue that the rules do not address the continuing risk that credit card issuers will allow new profitable customers to accumulate debt for a long period, “only to inflict unattractive compulsory action on them further down the line”.

And now Labour MP Stella Creasy is on the case of the credit card sector. An eloquent operator, Creasy was one of the leading campaigners against the high rates of interest and charges levied by payday lenders. Her campaign resulted in a cap on the payday sector – and now she is going after high-cost credit cards.

Creasy is one of a number of MPs lobbying the government to cap credit card costs – the very measure ruled out as recently as last year by the FCA. In particular, she wants issuers to be banned from charging credit cardholders more in interest and fees than the sum borrowed.

We have been here before. As recently as last September, the UK opposition finance minister John McDonnell proposed what he termed a total cost cap on credit cards of 100% of the original sum borrowed.

There is certainly an argument that can be made that it is unseemly for credit card issuers to be lending to customers who are so likely to be unable to repay, so eye-watering rates of 60%+ are charged to make the credit card product profitable. For this writer, by instinct on the centre-right and wary of political meddling with the free market, there is also the argument that it is not for politicians to attempt to regulate the terms and conditions of bank products.

What the latest lobbying still fails to recognise is the limited number of credit cardholders their proposals would actually help in reality, not to mention the inevitable unintended consequences. To name just a few: credit card account cancellations, sudden demands for repayment of the full debt and customers with poor credit histories turning to doorstep lenders or loan sharks.

The FCA rule changes do not fully come into force until September – they deserve a chance to work. If they do not, the credit card sector can expect the Creasy and co. campaign to intensify and support for her argument to grow. <

CI April 2018 554.indd 5 28/03/2018 14:29:56

News | Digest

news digest


UniCredit brings Samsung Pay to cardholders in Italy

Italy-based banking and financial services company UniCredit has formed a new partnership to launch Samsung’s payment service for its cardholders.

Users of Samsung devices with UniCredit credit cards, and MyPay and MyOne

prepaid and debit cards will now be able to use the Samsung Pay app to make fast and safe in-store transactions.

The payment application is compatible with contactless-enabled POS terminals, as well as magnetic strip cards without NFC technology. Transactions require biometric authorisation using methods such as fingerprint, iris or PIN.

UniCredit general manager Gianni Franco Papa said: “We are living in a world that is increasingly digital, characterised by a speed of change like we have never seen before and where people are constantly looking for personalised and instant services to meet their needs, any time and anywhere.

“For this reason, we are committed to the development of innovative products and services, both leveraging our internal platform as part of the Transform 2019 plan through IT investment of €2.4bn ($2.9bn), and collaborating with external partners to expand our offer with the best solutions on the market.” <

NatWest launches ClearSpend to track company card spendingUK-based NatWest, a subsidiary of Royal Bank of Scotland, has developed a new mobile application in collaboration with US-based startup SpendLabs to allow real-time monitoring of spending on company cards.

The ClearSpend app will now allow NatWest Commercial Cards network clients to manage expenses digitally by directly connecting to the card processor.

The app will provide transaction up-dates on real-time balance and credit limit information. Users can also use the app for account-management activities such as setting credit limits and merchant category blocking.

NatWest’s CEO of commercial and private banking, Alison Rose, said: “Administering a commercial card programme can be inef-

fective and time consuming, as customers do not always have access to the up-to-date information businesses need, and customers are often required to call a helpdesk to make simple account changes. ClearSpend aims to solve that problem.”

The ClearSpend app was pilot-tested last year and improvements have been made based on the feedback received to improve the customer experience.

Rose added: “We will continue to develop the app as we go to make sure it is support-ing businesses in the best possible way and helping them to operate safely and securely.”

In the coming months, NatWest plans to make the app available for members of Royal Bank of Scotland, RBS International, Coutts and Ulster Bank Commercial Cards. <

Saudi Arabia’s mada taps Mastercard

Saudi Arabian domestic payment network mada has announced a joint partnership initiative to facilitate online payments for cardholders and domestic merchants through Mastercard’s Payment Gateway Services technology.

The initiative will also enable all online merchants to accept mada cards as a primary mode of payment.

mada’s payment network in Saudi Arabia facilitates all financial transactions, and links those from ATM and POS terminals to merchants’ and card issuers’ banks.

The Saudi Arabian Monetary Authority’s general director of payment systems, Department Ziad Al Yousef, said: “mada represents the innovative generation of electronic payments in Saudi Arabia, and one of the fastest-growing payment systems in the world.

“Utilising Mastercard’s technology to facilitate online payments via the network will enable Saudi businesses to significantly increase their e-commerce sales by offering consumers more flexibility and convenience, and diversify their available payment options.”

Mastercard Middle East and North Africa division president Khalid Elgibali added: “We are delighted to partner with the kingdom’s domestic payment network, mada, and use our Payment Gateway Services technology to make payments safe, simple, and smart in Saudi Arabia, as we work towards our vision of a world beyond cash.” <

CI April 2018 554.indd 6 28/03/2018 14:30:00

News | digest


Atom and Tranwall launch tool for cards in IndiaIndia-based payments solutions provider Atom Technologies and Australian technology business Tranwall have collaborated to introduce a new software tool, e-shield, to turn debit and credit cards on and off.

The technology is expected to help cardholders to avoid or reduce fraud by providing real-time transaction control, and preventing duplication of card details.

The ability to switch cards on or off applies to both local and international payment card transactions using ATM, e-commerce and POS terminals.

e-shield can be used through a smartphone app or artificial intelligence

(AI)-powered services activated by both voice and chat.

Cardholders can also use the tool to choose preferred real-time transactions, check balances and request status updates on cards and accounts.Smartphone users will be able to

use the advanced transaction-control service via their bank’s mobile app, while non-smartphone users can activate the service using SMS or USSD.

According to Atom Technologies CEO Dewang Neralla, in addition to providing control for customers, e-shield will help banks to reduce costs incurred for security and protection of liability. <

BofA allows PayPal account card links

Bank of America (BofA) has enabled an option on its mobile app that allows customers to directly link credit and debit cards to a PayPal account.

The move is part of a partnership agreement signed between the bank and PayPal in July 2017 to facilitate optimised in-store payments and account linking with BofA cards. Over the coming months, the partners intend to enable the addition of cards within PayPal.

BofA’s head of enterprise payments, Mark Monaco, said: “It’s all about providing our customers the most convenient and secure payments experience possible.

“As the face of money continues to become more digital, Bank of America remains committed to giving our customers the ability to use any major wallet or payment method they choose, including PayPal.”

As well as tokenisation of cards to enable in-store payments through PayPal and account linking, the agreement is set to provide digital representation of cards within the PayPal account.

The companies also plan to use tokenisation technology, data, analytics and fraud tools to ensure a secure and convenient shopping experience in stores, online and within the app. <

RCBC Bankard and JCB introduce platinum cardRizal Commercial Banking (RCBC) has partnered with JCB International to launch the RCBC Bankard JCB Platinum card through its card servicing division, RCBC Bankard Services.

The new product features benefits such as a free airport lounge service, discounts on car rentals, 24-hour access to a concierge desk, and access to JCB Plaza Lounges in selected cities. Cardholders will also receive non-expiring reward points, cash rebates or air miles. They can also earn double rewards on spending in Japan.

RCBC Bankard president and CEO Simon Calasanz said: “The launch of the RCBC

Bankard JCB Platinum card will definitely appeal to accomplished individuals who frequently travel abroad for both business and pleasure.”

“The partnership with JCB enhances the privileges even more since they offer worldwide benefits to the JCB cardbase which our cardholders can take advantage of,” Calasanz added.

JCB Cards are currently available in 23 countries and regions, with more than 110 million card members. The latest launch bolsters the business’s alliance with RCBC Bankard, which began issuing Classic and Gold JCB Cards in 1997. <

myPOS to open bricks-and-mortar stores in EuropemyPOS has announced plans to open phys-ical flagship stores in Europe to offer card payment acceptance devices for small and mid-sized businesses.

Launched in 2014, the company operates a network of promoters in most European markets, and its own e-commerce store.

In an aim to bring its service “closer” to customers, myPOS opened a flagship store at 36 Knightsbridge, London, in February. The business has plans for further expansion over the coming months, which include the opening of a physical store in Amsterdam on 5 April.

myPOS founder Christo Georgiev said: “myPOS is committed to creating value for its customers by offering innovation and operational freedom, and this is reflected in everything we do.

“Having locations in London, Amsterdam and other major cities will facilitate a face-to-face experience with our solutions, help us connect with our customers and better understand their needs.”

The company offers a package of POS devices and free myPOS accounts to manage and transfer funds. The account is accompa-nied by the myPOS Business Visa card. <

CI April 2018 554.indd 7 28/03/2018 14:30:09

News | Digest


Revolut introduces disposable virtual cardsLondon-based digital banking alternative Revolut has launched a disposable virtual card in a bid to tackle fraud and increase customer confidence in online payments.

Users will be able to set up disposable virtual cards in seconds, with details that are destroyed after every transaction and new ones automatically regenerated, adding an extra layer of security to the platform.

The disposable virtual cards will work alongside Revolut’s security features, which include location-based security and the ability to freeze and unfreeze cards.

The technology aims to prevent online scammers from copying card details, and eradicate the risk that card details could be stolen from online databases.

Vlad Yatsenco, CTO and co-founder of Revolut, stated: “While fintechs generally offer a better service than traditional banks, they still have a long way to go in

order to build trust and confidence with consumers.

“Instead of matching what the larger institutions are doing, we are changing the game entirely by introducing disposable virtual cards and promoting existing features such as location-based security and the ability to freeze or unfreeze cards.

“It will take approximately 800 years before we begin to run out of 16-digit card numbers, so we view disposable virtual cards as a sustainable, long-term solution to tackling online card fraud. And by automating this process, the customer experience is instant and stress-free,” he added.

The disposable virtual cards are only available to premium customers.

The disposable virtual card will work for up to five payments per day, with each premium user permitted to create one card per account. <

UnionPay partners with ACI Worldwide to grow acceptance

UnionPay International has entered into a strategic alliance with payment services provider ACI Worldwide to expand its global card acceptance and issuance.

The partners plan to sign up merchants in the finance, aviation, hotel, e-commerce, retail and supermarket sectors to accept transactions using UnionPay Online Payment (UPOP).

Initially, ACI will adopt UnionPay cards and the UPOP solutions into its payment service, which currently services 5,100 organisations, making them available to numerous e-merchants.

In the future, the companies intend to co-promote other UnionPay services such as UnionPay QR code and in-app payments, and cross-border marketing platform U Plan.

UnionPay International CEO Cai Jianbo said: “This c-operation is of great significance: previously, we needed to push our partner institutions and retailers one by one to modify their systems in order to roll out UnionPay payment services.

“Now, with the technological strength of ACI, we are able to respond faster to the needs of our partners, which will substantially enhance the efficiency of our business expansion.”

UnionPay’s card-acceptance network currently overs 168 international markets, and the cards are accepted by more than 10 million e-merchants in more than 200 countries and regions.

ACI Worldwide group president Dan Frate said: “UnionPay’s growth opportunity is considerable, with Chinese consumers now making more than 80 million trips outside Greater China annually – with this number expected to increase substantially.

“Supported by our reach and our strong customer base of merchants and financial institutions, UnionPay can serve the needs and payment preferences of these consumers.” <

Malaysian central bank prohibits additional charges for card payments

Bank Negara Malaysia (BNM), the country’s central bank, has prohibited retailers from imposing surcharges on debit and credit card payments.

“Consumers who encounter merchants who impose such surcharges are advised to lodge a complaint with their respective banks or payment card issuers,” the central bank said.

BNM made the statement in response to an article titled ‘Consumer body: Abolish surcharges on credit cards’ published in Free Malaysia Today.

In Malaysia, surcharges for payments us-ing debit cards are barred under the Payment Card Reform Framework introduced by BNM; a similar prohibition applies to credit card payments under the rules of interna-tional schemes such as Visa and Mastercard.

BNM added that one reason for imposing a transaction fee is to recover costs incurred by retailers during acceptance of card pay-ments, where they are required to pay the merchant discount rate (MDR).

The Malaysian bank launched measures such as the Payment Card Reform Frame-work and the Interoperable Credit Transfer Framework to reduce the costs to retailers of accepting electronic payments. The moves are expected to lower the pressure on retail-ers to impose charges on customers.

A statement from the bank read: “To ben-efit from lower operational costs, retailers are encouraged to accept more cost-effective payment methods, i.e. debit cards and mo-bile payments (instant fund transfers).

“Retailers who cannot afford to pay the higher MDR for credit cards are encouraged to liaise with their respective acquiring bank to accept only debit card payments.” <

CI April 2018 554.indd 8 28/03/2018 14:30:24


News | Digest

Xinja introduces prepaid cardAustralian digital bank Xinja has launched a new prepaid card and mobile app to facilitate everyday spending.

The card, which features contactless capability, can be reloaded through a direct transfer from the user’s bank account, but can be managed only through the new app.

The app allows tracking of spending, instant card blocking in he event of loss, and division of transactions into different spend categories.

The card does not charge ATM fees for local and international terminals, and does not charge international transaction fees for purchases outside Australia.

Initially, the card will be available for con-sumers who have already signed up to Xinja, with plans for expansion in the future.

Xinja CEO and founder Eric Wilson said: “The prepaid card offers users a chance to help bring a revolution to Australian banking, to load their disposable income on a tap-and-go card, track their spending, and submit ideas for the app as we develop.”

The bank intends to utilise user feedback, requests and ideas to add new features and capabilities to its products. Xinja said it is also planning a complete suite of banking services, including transaction accounts and home loans. <

BBVA trials biometrics-based payments

Spanish banking group BBVA is testing a new payment system based on biometric technology at its in-house cafeteria, in an aim to make checkouts and payments “invisible”.

The new mobile app uses a facial recognition system to automatically charge users’ credit cards.

Designed to promote frictionless payments, the app has been developed in collaboration with BBVA’s restaurant partner Sodexo Iberia, while facial recognition is based on a technology by Veridas, a joint venture between the bank and Das-Nano.

The app eliminates the need for checkout and manual bill payment. Customers register and enter their credit

card details in the app only once, and bill amounts are automatically deducted each time they visit cafeterias and restaurants at Ciudad BBVA.

The system uses machine learning algorithms to identify both the faces of users and products on the tray, and charges the card associated with the customer’s profile. It also allows sharing of payments with other users, and provides an option to reserve tables to cut waiting times.

BBVA’s head of global payments, Ignacio Bañón, commented: “With this project, we’re eliminating the friction points for customers when they make a purchase in a store.

“They avoid lines, and have a more digital experience with better information.” <

Barclaycard launches contactless timepiecesbPay, Barclaycard’s wearable technology arm, has partnered with seven designer watch brands to introduce wearable payments. The new Timex, Guess, Mondaine, Kronaby, Suunto, Adexe and LBS products are set to launch at Baselworld on 22-27 March.

According to Barclaycard, spending via bPay jumped 129% in the UK in 2017. It has already launched a line of contactless wearable payment devices, including jewellery, phone cases and keychains, as well as Timex watches.

Adam Herson, business development director, Barclays Mobile Payments, said: “Consumer appetite for wearable payments is reaching critical mass.” <

Mastercard draws up five-year roadmapMastercard has published a roadmap for delivering consistent contactless payments in the coming five years, for consumers, merchants and governments globally.

A new initiative by the business will see upgrades to cards and terminals beginning later this year in the Middle East, Africa, Europe, Latin America and Asia-Pacific to facilitate secure and convenient contactless payments.

While contactless transactions have been enabled in more than eight million locations in 111 countries, the Middle East and Africa experienced a 27-fold increase in such payments in 2017 alone.

Mastercard chief security solutions officer Ajay Bhalla said: “Our vision is a world where everyone can simply and safely tap their card or device when paying in a store, and quickly be on their way.

“This marks a significant step towards greater consistency, security and speed for everyday payments while laying the groundwork for future innovation.”

To meet rising demand for contactless transactions, Mastercard is set to install only EMV chip and contactless-enabled acceptance terminals in the Middle East, Africa, Europe, Latin America and Asia-Pacific after October 2018.

The same capabilities will be applied to cards issued after April 2019, while all merchant terminals will be upgraded by April 2023. <

CI April 2018 554.indd 9 28/03/2018 14:30:31


security | smartmetric

Founded 15 years ago, Las Vegas-headquartered SmartMetric has filed patents on technology that allows it

to embed a biometric fingerprint scanner into an EMV card.

SmartMetric has also developed a biometric-enabled ID card offering physical access to buildings and doorways, and cybersecurity for network log-on. The multifunction credit card-sized device uses a Federal Information Processing Standards-approved contact smart card chip with MiFare secure radio-frequency identification transmission.

SmartMetric has also developed a small, low-cost smart card reader that can be connected via USB to a computer or smartphone, and can be bundled with its cards for secure card-not-present transactions and for remote network access.

“Our biggest development hurdle was to get electronic components that are thin enough to be implanted inside a credit or debit card,” says Hendrick. “We needed a two-layer sophisticated motherboard that would allow the mounting of the components and remain in the tolerance needed for an ISO-compliant payment card.”

Hendrick says almost 50% of the battle was about the size of the components. “The other 50% was about developing our own operating system and power management system,” Hendrick explains. “We had to put over 150 adaptive components onto the motherboard. The lamination process and assembly were other issues we had to deal with to ensure a super-thin board electronic assembly.”

Hendrick claims SmartMetric is the only card manufacturer to have succeeded in this. “We’re the only manufacturer to have

developed a card that not only does the fingerprint scanning itself but is also self-powered,” Hendrick tells CI. “Inside our card is a rechargeable battery that recharges as you use the card in a POS terminal or ATM.”

“Another card manufacturer has developed a biometric-enabled card where the cardholder places their finger on the card to authenticate themselves, but its card doesn’t have an internal power sub-system. It has to get its power from a POS terminal and doesn’t work in the majority of ATMs,” Hendrick adds.

“The feedback we’re getting from banks is that they aren’t interested in issuing biometric cards that can’t be used in ATMs. Even if their cardholders use ATMs infrequently, their cards still need to work in ATMs.”

INTERNAL POWER SOURCEA SmartMetric news release explains that, as its card has an internal power source, cardholders authenticate themselves by tapping their finger on the card before inserting it into a POS or ATM terminal. Wherever the card is used, it will be able to both authenticate a transaction and receive a recharge inside the reader.

“We’re working closely with a global payments network,” Hendrick says. “But we’re under non-disclosure agreements, so can’t say which of the four top global cards networks is our partner.” Hendrick did, however, say the partner is not Mastercard, so CI assumes it must be either Amex, Visa or UnionPay.

“We’ve been appointed as the technology partner for the payments network’s biometrics division, which deals both with biometrics for cards and biometrics for smartphones,” Hendrick says.

In recent years, some ATM vendors have begun to offer ATMs equipped with biometric readers. In addition, the advent of TouchID on iPhones and similar biometric identification on Android smartphones means consumers have the opportunity to authenticate themselves when making mobile payments either at the POS or remotely.

Hendrick says retrofitting ATMs with biometric readers or replacing existing ATMs with biometric-enabled ATMs would be hugely costly. “There’s also the problem of ensuring cross-platform and cross-network biometric authentication,” Hendrick says.

“We need to deploy biometrics across multiple platforms and across banks. Putting biometric readers into ATMs isn’t going to happen on a massive scale because of the infrastructure cost. I think ATM vendors will offer ATMs with biometric readers mainly for PR purposes. Similarly, adding biometric readers to POS terminals isn’t going to happen. Mom-n-pop stores aren’t going to want to spend the money on the technology.”

Also, despite the card networks’ enthusiasm for mobile payments, Hendrick is not convinced that the majority of consumers are going to leave their cards at home in favour of smartphones any time soon. “Consumer behaviour just doesn’t change that fast,” Hendrick says. “People aren’t going to stop using plastic cards.”

“We have appointed two accredited Visa and Mastercard secure card lamination and personalisation manufacturers as our representatives respectively in the US and South America,” Hendrick continues.

“These two firms have decades of relationships with card-issuing banks in the US and South America, and they are presenting our product to banks across North and South America respectively.” The distributors are Colombia-based Hogier Gartner for South America and Protec Secure Card, based in New Jersey, for North America.

SmartMetric’s secure manufacturing plant is accredited by Mastercard, Visa and UnionPay for the initial lamination of payment cards, Hendrick says. “The final-stage lamination and personalisation is done by our two distributors, Protec and Hogier Gartner, or by a bank’s existing bank card personalisation and lamination supplier,” Hendrick condludes.

“We don’t license cards. We actually sell the cards, as we manufacture them ourselves. It’s so complex to manufacture our cards that a conventional manufacturer couldn’t produce them – they would need to be an electronic shop, like we are.”<

smartmetric offers b iometric card authenticationBiometric EMV card manufacturer SmartMetric is getting ready for the commercialisation of its technology. Robin Arnfield talks to the US-based business’s president and CEO, Chaya Hendrick

CI April 2018 554.indd 10 28/03/2018 14:30:32


Feature | mastercard canada

In the year to 31 December 2017, Mastercard posted a 13% year-on-year increase in US gross dollar volume

(GDV) on Mastercard-branded cards in Canada.

This was twice the US GDV growth rate of 6% that Mastercard reported in Canada in 2016; these figures excluded volume generated by Maestro and Cirrus cards.

MOBILE/CONTACTLESSMcLean says Mastercard Canada has enjoyed significant growth in contactless credit card transactions.

“We’re seeing continual displacement of cash by cards, and also seeing double-digit growth in the number of Canadian merchants accepting cards,” he says. “Compared to other markets, we’re seeing good uptake of mobile payments in Canada, because of the high numbers of contactless readers.”

To accelerate adoption of mobile point-of-sale (mPOS) payments, Mastercard Canada works with vendors such as Mobeewave, Dream Payments, and Square alongside its Canadian acquirers, McLean tells CI.

“This year will see further activity in mPOS in the Canadian market,” he says. “We’re also

active in the transit field in Canada. During 2018, a number of Canadian public transit systems will move from closed loop to open loop. For every Canadian transit scheme, open loop is a big focus.”

In April 2017, Quebec-based co-operative financial institution Desjardins launched Canada’s first pilot of contactless Visa and Mastercard credit card payments on public transit buses. The pilot, operated in conjunction with Société de Transport de Laval, involved deploying contactless card

readers on buses in the Quebec city of Laval.“Three other verticals we’re working in are

B2B payments, card payments for property rentals, and P2P payments,” McLean says. “During 2017, Canadian banks started to adopt the Mastercard Send platform to better enable their customers to send money to people abroad.”

“While unable to share specific numbers, we can say that Canada has never been in a better position than it is now to support mobile payments growth,” a Mastercard Canada spokesperson tells CI. “It has the right infrastructure, the latest technologies, and a consumer base that is looking for what’s next when it comes to the retail experience.”

HIGHLIGHTSIn 2017, highlights included the Canadian implementation of Mastercard’s global agreement with PayPal, a partnership with Canadian prepaid card issuer Stack, and the March 2017 acquisition of Vancouver-based NuData Security.

In June 2017, Mastercard Canada opened a Labs as a Service (LaaS) division at its headquarters in Toronto. The division provides innovation consulting services and

mastercard reports double-digit growth in canada

Mastercard is seeing strong expansion in electronic payments in Canada. Iain McLean, senior VP of market

development at Mastercard Canada, gives Robin Arnfield a review of the

highlights of 2017, and discusses the new developments in the pipeline for 2018

canada has never been in a better

position than now to support mobile payments growth

CI April 2018 554.indd 11 28/03/2018 14:30:37



helps Mastercard’s Canadian clients to expand their businesses. It combines two areas of Mastercard: the Labs R&D arm and the Advisors professional service arm.

In 2017, Mastercard rolled out its Masterpass digital wallet at Costco.ca and other online Canadian merchants such as Air Canada.

NUDATAVancouver-based NuData provides biometric behavioural authentication to help businesses prevent online and mobile fraud. It analyses transaction session and biometric indicators

include behavioural attributes such as typing cadence, the angle a device is held, and how the user navigates across a website or mobile application.

“NuData is designed to prevent account takeover and eliminate false positives,” says McLean.

NuData’s NuDetect system differentiates authentic users from potential fraudsters based on their online, mobile app, and smartphone interactions, flagging those representing the highest risk. The technology assesses, scores and learns from each online or mobile transaction to enable merchants and issuers to make near-real-time authorisation decisions.

3D SECURE“3D Secure is a big focus for Mastercard Canada,” says McLean. “We’ve been working

closely with our acquiring bank partners on 3D Secure to introduce risk-based authentication of payment cards based on what is known about cardholders.

“During 2018, 3D Secure will be targeted at mobile users, and so-called ‘selfie payments’ involving facial recognition will become available in Canada this year.”

Mastercard Canada will also introduce end-to-end tokenisation for merchants and cardholders based on its Mastercard Digital Enablement Service (MDES) platform.

“This means that the PAN will never be exposed to the merchant,” McLean says. “Another benefit of our tokenisation platform

will be that card numbers held on file will automatically be updated on expiry through a lifecycle management feature.

McLean adds: “MDES enables a connected device –smartphone, tablet, etc. – to be a safe and secure payment form factor, just like a physical card. MDES is the foundation for secure digital transactions using a Mastercard account for Masterpass, Android Pay, Apple Pay and Samsung Pay. With the acquisition of NuData, Mastercard is building on its layered approach to keep transactions secure in a digitally connected world.”

PAYPALUnder Mastercard’s October 2017 deal with PayPal, Mastercard will be presented as a clear, equal payment option within the PayPal Wallet. Users can select Mastercard as their

default payment option to facilitate checkout.In addition, leveraging Mastercard’s

tokenisation services, PayPal will have the opportunity to expand its presence at the point of sale, the firms say. The collaboration will enable consumers to use their tokenised Mastercard in their PayPal Wallet to make in-store purchases at contactless card-accepting locations. Also, PayPal will allow consumers to cash out funds held in their PayPal accounts to a Mastercard debit card.

“The expansion in the partnership between PayPal and Mastercard creates opportunities for both companies,” McLean explains. “It will now be easier for customers to use Mastercard within the PayPal digital environment.

“We’re working with PayPal Canada to roll out the PayPal mobile app at the point of sale across our Canadian contactless reader estate.”

SMALL BUSINESSESIn February 2017, Mastercard signed an agreement with the Canadian Federation of Independent Businesses (CFIB) to help expand card acceptance among small businesses.

The deal involved Mastercard holding seminars with the CFIB to educate small merchants on the benefits of card acceptance and the need to deploy effective security to prevent card fraud. “The CFIB helps us to reach the small business segment,” says McLean.

The CFIB agreement also involved Mastercard offering the association’s members a better deal on credit card interchange. “Recognising the combined buying power of CFIB’s 109,000 members who generate over C$3bn ($2.3bn) annually in Mastercard sales, Mastercard has agreed to match its top tier rates for CFIB members,” the CFIB says on its website. “This is a 12.5% saving over Mastercard’s electronic rate for core cards, and 22% on some premium cards.”

MASTERCARD-BRANDED CARD GROSS DOLLAR VOLUMES

FY2016 FY2017

GDV transactions by region for Mastercard-branded cards ($bn)

Asia-Pacific, Middle East and Africa 1,480 1,613

Canada 140 157

Europe 1,344 1,476

Latin America 326 383

Rest of the world total 3,290 3,629

US 1,533 1,613

Worldwide 4,823 5,242Source: Mastercard

MASTERCARD CREDIT, CHARGE, DEBIT AND PREPAID CARDS

FY2016 FY2017

Mastercard credit and charge programmes ($bn)

Rest of the world 1,810 1,958

US 724 780

Worldwide 2,534 2,738

Mastercard debit and prepaid programmes ($bn)

Rest of the world 1,479 1,671

US 809 833


The expansion in the partnership between PayPal and Mastercard creates opportunities for both companies

CI April 2018 554.indd 12 28/03/2018 14:30:38


PRE-TAX CHARGEMastercard’s Canadian business was impacted in 2017 by a pre-tax charge of $15m ($10m after tax) in provision for litigation settlements expense relating to a 2011 class action lawsuit by Canadian merchants.

Mastercard and Visa Canada each agreed in June 2017 to pay C$19.5m pre-tax and to modify their No Surcharge Rule to allow Canadian merchants to impose checkout fees on credit cards, subject to conditions designed to protect cardholders.

Mastercard stated that the conditions include a surcharge cap, a requirement for merchants to disclose their surcharging practices, and provisions to ensure a level playing field with cardholders of competing payment networks. “This agreement includes important safeguards around the disclosure and level of surcharge to protect consumers,” it noted.

“All business and rule practice changes will occur after court approval of the settlement, most likely in late 2018,” a Mastercard Canada spokesperson tells CI.

The CFIB applauded Mastercard and Visa’s decision. “For several years, CFIB called on the credit card industry to allow merchants to surcharge some or certain types of credit cards, such as premium cards, in order to provide merchants additional powers to address their rising costs,” it said in a statement.

“The ability to add a small surcharge to accept a credit card payment – particularly for higher-cost premium credit cards – is an important power to have, but it’s not expected to be widely used by smaller merchants,” said CFIB president Dan Kelly.

While expecting limited use, CFIB believes that the ability to surcharge will be helpful in safeguarding against future increases in credit card fees, as merchants could decide to take collective action in the face of larger fee increases.

McLean says Mastercard has seen little adoption of surcharging by Canadian merchants since the June 2017 agreement.

Under the Canadian Code of Conduct for the Credit and Debit Card Industry, merchants are allowed to discount for lower-cost payment methods such as debit cards or cash. “We don’t see discounting being widely adopted in the Canadian market,” adds McLean.

FINTECH PARTNERSHIPSIn February 2018, Mastercard announced a global partnership with Toronto-based Dream Payments, which provides a cloud-based payment platform for merchants and banks.

The two companies will work together to speed up payments of insurance claims to any payment card or account. Northbridge

Financial will be the first Canadian insurance provider to use the Mastercard Send platform through the Dream Payments Hub to send claims to policyholders’ debit cards.

Mastercard says two Canadian fintech startups are participating in its Start Path program which is designed to encourage the development of fintechs. The Canadian participants are Mobeewave and Sensibill.

Mobeewave’s technology enables small and micro-merchants to accept payment on a smartphone from customers’ contactless cards or mobile wallets without the need for external hardware. Sensibill’s platform captures and categorises purchase receipts and

integrates them with the customer’s digital banking app.

PREPAID CARDSMastercard Canada sees prepaid cards as a major opportunity for growth. It partnered with federally charted trust company Peoples Trust, prepaid card programme manager Payment Source, and Canada Post in February 2017 to launch the Cash Passport prepaid Mastercard.

Using Payment Source’s LoadHub network at Canadian post offices, consumers can load up to seven different currencies onto their Cash Passport card.

In September 2017, Mastercard Canada announced a partnership with Canadian prepaid card issuer and program manager Stack. The Toronto-based business offers

a prepaid Mastercard along with a mobile app, and what it claims is instant access to multi-currency and cryptocurrency mobile wallets. Stack members are able to make POS purchases by tapping their smartphones linked to a Stack digital money account.

“Stack is targeting millennials who are looking for new types of banking offering,” says McLean. “It’s been in beta phase, and will ramp up in 2018.”

The gig economy is another important focus for Mastercard Canada, McLean notes. “In Canada, we’re working with a prepaid issuer and programme manager called PayFare,” he says. “It is early days for that programme.” <


PURCHASE TRANSACTIONS BY REGION

FY2016 FY2017

All Mastercard credit, debit and prepaid programmes (millions)

Asia-Pacific, Middle East and Africa 14,754 18,063

Canada 2,027 2,254

Europe 20,012 23,057

Latin America 6,426 7,565


US 24,004 24,859


TOTAL BRANDED CARDS BY REGION

FY2016 FY2017

All Mastercard credit, debit and prepaid programmes (millions)

Asia-Pacific, Middle East and Africa 615 707

Canada 48 53

Europe 432 478

Latin America 165 176


US 391 412


Stack is targeting millennials who are looking for new types of banking offering. it’s been in beta phase, and will ramp up

CI April 2018 554.indd 13 28/03/2018 14:30:38


Feature | ctbc bank

CTBC Bank has been on a mission for a number of years to optimise customer service via the ATM

channel.CTBC’s self-service innovations are not

only helping to reshape the image of the ATM: they are now paying off in terms of improved customer satisfaction scores and helping to boost the bank’s bottom line.

In CTBC’s home market of Taiwan, cash remains a major payment tool, notwithstanding the accelerating trend towards cash displacement.

To meet the challenges of changes in consumers’ behaviour and rising service expectations, combined with the growing influence of novel fintech innovations, CTBC came up with what it terms the community ATM centre. To expand its self-service footprint, CTBC installed community ATM centres with its strategic alliance partner, 7-Eleven, the biggest convenience store chain in Taiwan.

Self-service innovations in 2017 include multi-currency ATMs, video teller machines VTMs), and electronic ticket purchase. The ATM service enhancements complemented other firsts in the local market, including fingerprint biometric cash withdrawal and coin deposit machines.

CTBC has blazed a trail in promoting cardless withdrawal in Taiwan. It was the first – and remains the only – bank in Taiwan to offer ATM finger-vein withdrawals using Hitachi’s VeinID technology. It has also pioneered cardless ATM withdrawals via

smartphone. Its latest cardless drive is the launch of ATM deposits and money transfer via fingerprint at all CTBC branches and at selected ATMs within 7-Eleven stores.

Other ATM innovations include the facility to open accounts via VTMs within CTBC’s first digital branch at DongHu.

FX INNOVATIONAs Taiwan is a foreign exchange-controlled country, there is a challenge for consumers to change money.

In the past, tourists and locals have had to visit banks or authorised agents – hotels or department stores, for example – to exchange foreign currency. However, such institutions only provide the service during office hours.

CTBC’s solution has been to launch a foreign currency exchange machine within a 7-Eleven store in Ximending.

Users need only scan their ID card or passport. The foreign currency ATM provides two-way currency exchange as well as offering cash withdrawals in US dollars, Japanese yen and Chinese renminbi, with trilingual language translation in Chinese, English and Japanese.

INTEGRATED MARKETINGCTBC has also successfully linked ATM transactions to the bank’s loyalty programme to reward customers as an integral part of the bank’s marketing strategy.

CTBC has run a number of marketing campaigns, including campaigns on Facebook, to promote the message: “The ATM is not just a machine; it’s a great partner to satisfy your daily financial needs.”

The bank offers a number of loyalty rewards for what it terms “normal” users, and additional rewards for heavy ATM users. Redemption rewards on offer include movie tickets and partner retailer discounts.

In terms of ATM market share, CTBC leads with a share of around 35% in 2017 – up from 31% in 2013, putting it ahead of Taishin and the Post Office with 13% and 9% respectively.

In terms of customer feedback, the bank’s self-service investments are paying off, with an ATM customer satisfaction rate of 93% in 2017.

CTBC is also enjoying a return on its ATM investment via increased fees revenue from growing third-party interchange fee income and new revenue streams from electronic ticket sales. <

ctbc bank: the atm network as a profit centreTaiwan’s CTBC Bank was a deserved winner of best ATM innovation at the ninth annual Asia Trailblazer Awards in March in Singapore. As Douglas Blakey reports, CTBC’s investment in its network has transformed the humble ATM from a basic financial service to a profit centre

0

10

20

30

40

50

CTBC

Post Office

Taishin

%2013 2017

Others

taiwan atm market shares

Source: CTBC

20142015

201615

20

25

30

2017

atm revenue growth

Source: CTBC

Average CTBC ATM inter-bank transfers per day per ATM

CI April 2018 554.indd 14 28/03/2018 14:30:40


industry insight | adyen

Do Not Honour may be the largest frustration for any merchant that regularly analyses their payment

data, and although it can account for the majority of refusals, it is also the vaguest reason, leaving merchants and customers at a loss about how to act in response.

While there is no easy, single answer on what this refusal reason means, there are several suggestions as to what could cause it.

Insufficient funds in disguiseIn probably half of cases, 05: Do Not Honour is likely just an Insufficient Funds refusal in disguise. Some issuers or processors do a poor job of returning appropriate refusal reasons to merchants – due both to the use of legacy systems at the issuer side, and there being no mandates or monitoring by the schemes, letting issuers continue to use it as a blanket term.

Looking at data from various banks, it is easy to see how Do Not Honour and Insufficient Funds can be used interchangeably. Records that show disproportionately high levels of Do

Not Honour and low levels of Insufficient Funds refusals suggest one masquerading as the other. Through identifying these cases, Adyen can help merchants optimise retry strategies.

Refusal due to credential mismatchesAlthough the words Do Not Honour are not the most telling, other data points can be clues for the refusal. Obvious things are the CVC response, card expiry date, and to a lesser extent, the AVS response. Issuers will frequently default to using 05: Do Not Honour as the catch-all bucket for other denials, even if a more appropriate reason may be available.

In addition to data points at the transaction level, a lot can be learned from looking at aggregated data. In some cases, the 05: Do Not Honour refusal received may be particular to, for example, a merchant’s business line or the type of transaction they are trying.

Adyen’s Inferred Refusal Reason functionality is designed to identify the likely reason for a refusal by leveraging its PSP-wide insights. This enables merchants to respond

more appropriately when a transaction is refused.

Suspicion of fraudThe most appropriate use of 05: Do Not Honour would be to decline transactions due to suspicious card activity. In some cases, although the card is in good standing and has not been reported lost or stolen, an issuer might choose to err on the side of caution due to a combination of characteristics.

For example, a high-value transaction at 3AM from a foreign-based merchant with no extra authentication may trigger too many issuer risk checks. These types of refusal will, again, be put into the 05: Do Not Honour category, with merchants losing out.

While issuers may be able to give specific reasons why a transaction was refused, they have no way to communicate this to the merchant and are forced to pick a response from the ISO 8583 standard.

Some astute merchants might point out that issuers should be able to use 59: Suspected Fraud in these cases. Some issuers may actually be using this reason, however merchants and acquirers do not know this as VisaNet remaps all 59: Suspected Fraud refusals to 05: Do Not Honour. The reason for this is, again, likely legacy – to protect storeowners in the POS environment and avoid uncomfortable situations with the shopper in front of them.

Collateral damageYou are likely not the only merchant that a given shopper interacts with. Regardless of how good your business or how clean your traffic, a shopper’s (recent) history with other merchants will influence the issuer’s decision on a transaction. For lack of a better reason, the catch-all 05: Do Not Honour refusal can, in some cases, be seen as collateral damage.

If the shopper, coincidentally, just made a large purchase on a high-risk website or went on a shopping spree before reaching your store, it is possible the issuer may decline the transaction at that moment. In these cases, again, having again the right billing and retry strategy can be crucial to minimising the number of 05: Do Not Honours received.

05: Do Not Honours represent a large cost to merchants, and anything to reduce their number will go a long way to improving customer satisfaction and revenue streams.

A multi-pronged approach is advised: traffic should be kept clean to minimise the number of suspicious transactions, and a smart retry strategy should be implemented using all information available. <

e-commerce: understanding 05: do not honour05: Do Not Honour is one of the most common responses received from credit card issuers for declined e-commerce payments. This refusal can represent anywhere from 10% to 60% of refused transactions, depending on the market. Chris Laumans, Adyen product owner, writes

Australia

Brazil

UK

US

0% 50%

Spain

refusals by market

Source: Adyen

UK bank 2

UK bank 3

UK bank 4

UK bank 5

0% 20% 40% 60% 80% 100%

UK bank 1

Do Not Honour Insufficient Funds Other

refusals by type

Source: Adyen

Percentage of refusals due to 05: Do Not Honour by market

Refusals by type for five UK card issuers

CI April 2018 554.indd 15 28/03/2018 14:30:42


country snapshot | poland

POLAND

country snapshot: poland

Poland is one of the most advanced and innovative markets in Europe, offering consumers broad access

to the latest technology in electronic payments.

Nevertheless, cash remains very popular, accounting for 61.5% of the total payment

transaction volume in 2017. Payment card use is rising as consumers enthusiastically embrace new technology, moving from cash to payment cards to contactless.

Although cash remains the dominant means of payment in Poland, there was huge growth in the volume of debit card

transactions during the period 2013-2017. The figure more than doubled as consumers preferred debt-free payments and avoided unnecessary expenditure.

Government initiatives to promote paperless and cashless transactions, and the launch of new mobile POS technology will boost the adoption of electronic payments in the country.

The government has also been encouraging businesses to open bank accounts for employees, and salaries are now paid into bank accounts. It is also focusing on using electronic modes of payment to distribute pensions and other retirement benefits.

DEBIT CARDS DRIVE MARKETThe growing banked population has led to rising debit card penetration.

According to the World Bank, Poland has made substantial progress in terms of financial inclusion, with the percentage of the Polish population aged 15 or above

0

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10,000

15,000

20,000

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$bn

value of credit tRanSfers

Source: European Central Bank, GlobalData

0

20

40

60

80

100$bn

20132016

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value of payment cards


Government initiatives to displace cash paying off

CI April 2018 554.indd 16 28/03/2018 14:30:55


country snapshot | poland

with a bank account rising from 75.4% in 2013 to 83.1% in 2017.

The high banked population and consumers’ general aversion to debt have made debit cards the preferred card type in Poland. Polish consumers are gradually switching from cash to debit cards, and used them an average of 117 times for POS transactions in 2017 – almost double the amount for pay-later cards.

The rise in contactless card acceptance has supported this trend. A number of banks including PKO Bank Polski, mBank, Bank Zachodni WBK and Bank Pekao offer contactless debit cards.

PAY-LATER CARDSThe growth of pay-later cards was halted at the end of 2010, as non-performing loans rose.

The T-Recommendation issued by the Financial Supervisory Commission in Poland took effect in August 2010, restricting consumer access to bank loans and consumer credit; consequently, consumers faced more stringent scrutiny when applying for credit cards.

The change in regulation imposed additional requirements on banks to check the creditworthiness of new customers. Issuers also deactivated inactive cards, resulting in a decline in the number of credit cards in circulation.

As the recommendations forced banks to adopt a cautious stance towards card issuance, they turned their attention to increasing credit card use. Consequently, reward credit cards have started to gain traction, with the majority of issuers such as Bank Pekao, PKO Bank WBK, and ING Bank Śląski offering benefits such as flexible repayment options, a 56-day interest-free credit period, discounts, reward points, and cashback offers.

Banks are also offering an instalment facility to convert large-value purchases into monthly instalments. For example, Bank Pekao offers a Mastercard-branded credit card, Flexi, that enables card holders to convert purchases in the range of PLN300–5,000 ($71.70–1,194.40) into three interest-free instalments.

E-COMMERCE GROWTHThe Polish e-commerce market almost doubled between 2013 and 2017, in terms of transaction value.

The relatively low cost of operating is one of the primary reasons attracting several foreign e-commerce giants to Poland.

With the growing availability of various alternative payments such as PayPal, Blik, and Android Pay, and with banks launching exclusive mobile apps and virtual cards for online shopping, e-commerce is expected to continue its robust growth over the forecast period.

LOW PREPAID PENETRATIONWith the growing popularity of contactless cards, especially among the young population, banks in Poland are designing contactless prepaid cards for this segment.

For instance, PKO Bank Polski offers the Mastercard-branded Speeder PKO Junior contactless prepaid card for children under 13. Card holders can also opt for a prepaid contactless sticker. The card can be used to make both in-store and online payments,

and funds can be loaded through online transfer or by paying with cash at any of the bank’s branches.

In view of the growing e-commerce market, banks are also offering prepaid cards targeting online shoppers. For example, mBank offers a Visa-branded prepaid card called Virtual eKarty. Similarly, ING Bank Śląski offers the Visa Virtual card, which can be ordered online and costs $4.80. For customers with a Direct 18–26 account, the card is issued free of charge.

The growth of municipal cards is also expected to drive the prepaid card market. Municipal cards are issued by PKO Bank Polski, in partnership with Mastercard. The municipal card is designed to provide local governments, universities, and other institutions with a convenient means of disbursing benefits. A bank account is not required to obtain the card. Beneficiaries can also withdraw money from ATMs and make payments at any POS that accepts Mastercard in Poland. <

mBank21.7%

PKO BankPolski 23.9%

Others42.3%

BankPekao12.1%

Debit card shares by issuer

Source: GlobalData

Visa55.9%

Mastercard44.1%

Debit card shares by scheme

Source: GlobalData

CréditAgricole

13.3%

PKO BankPolski14.1%

Others59.3%

Santander13.3%

pay later shares by issuer

Source: GlobalData

Visa49.6%

Others7.1%

Mastercard43.3%

pay later shares by scheme

Source: GlobalData

CI April 2018 554.indd 17 28/03/2018 14:30:58


country snapshot | denmark

DENMARK

The Danish cards and payments industry is well developed, and its consumers are prolific users of

payment cards.The country has the highest frequency of

use in the world, with 210 transactions per card in 2017, with use of cash continuing to decline.

Denmark is increasing its efforts to become a cashless society, backed by government support for, and promotion of, electronic payments. Danish consumers are typically very comfortable with payment cards and mobile phones, with Dankort the most commonly used card scheme in the country and MobilePay leading the way in

the peer-to-peer (P2P) payment space.With preference for mobile proximity

and contactless payments gradually growing among Danish consumers, there is an opportunity for providers to emphasise their advantages over traditional payment tools in order to boost interest and increase overall adoption.

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400

600

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country snapshot: denmarkDanish cashless drive on track

CI April 2018 554.indd 18 28/03/2018 14:31:07


DANKORT DOMINANCE Dankort is the national debit card scheme, and accounted for 76% of total debit card transaction value in 2017.

Dankort operates under a zero-interchange-fee model, and has dominated the market since its introduction in 1983.

However, Mastercard and Visa are also strengthening their presences in the country. To facilitate international payments using Dankort cards, banks offer Visa/Dankort co-badged cards, which can be used as a Dankort card in Denmark and as an international Visa card outside the country.

E-COMMERCEE-commerce posted a CAGR of 17% in the four-year period to 2017 to reach DKK115.4bn ($16.33bn) in 2017.

According to PostNord’s E-Commerce in the Nordics report, Denmark has the third-highest percentage of online shoppers in the Nordic region, with 63% of consumers shopping online at least once a month in 2016. Payment cards and bank transfers remain the preferred payment methods, accounting for 76.3% of the e-commerce transaction value in 2017. Digital and mobile wallets account for nearly 20%.

CONTACTLESS EMBRACEDContactless payments are gradually growing in Denmark.

The first contactless Dankort was launched in Denmark in 2015; by the end of 2016, more than half of all issued Dankort cards had a contactless feature, and contactless payments accounted for more than 15% of all Dankort payments according to the central bank.

However, payment providers still need to educate consumers on the benefits and advantages of contactless payments, stressing the technology’s ease of use and convenience compared to PIN-based cards.

SUBDUED GROWTHOverall, Danish consumers are not prolific users of pay-later cards.

Frequency of use per card per year stood at 33.6 in 2017, while Sweden and Norway recorded frequencies of 60.7 and 34.1 respectively. Consumers in Denmark have become more prudent in their spending

habits due to growing debt, resulting in lower usage of credit cards. Household debt in Denmark was among the highest in the OECD according to its 2016 Denmark Economic Survey report. The ratio of household debt to GDP in Denmark was 127 – three times higher than disposable income – with the majority held in mortgages.

Many Danish consumers have an international credit card such as Mastercard or Diners Club, typically as a supplement to a Dankort card, or as a company card. Danes use international credit cards less frequently than other payment cards. In 2016, around four in 10 payments with international credit cards were made outside of Denmark, according to the central bank.

CARD INFRASTRUCTUREThe number of POS terminals fell between 2013 and 2017, from 144,978 to 126,584

at a CAGR of -3.3%. However, a forecast CAGR for the period 2017-2021 of 1.6% will see the total figure climb to 134,707 in 2021.

With a growing preference for contactless payments, the number of POS terminals is anticipated to rise gradually.

The country’s expanding payment card market has attracted new entrants to the Danish POS space. For instance, in September 2016 Dagrofa – one of the country’s largest grocery stores – replaced all its terminals with over 2,000 new Verifone terminals that enable consumers to make contactless card and mobile payments.

Meanwhile Danish startup Shopbox introduced a cloud-based POS solution in April 2016, which provides faster transaction processing at coffee shops, clubs and sports arenas, where transaction speed is an essential factor in maximising footfall. Shopbox’s POS solution runs on both iOS and Windows-based tablets. <

country snapshot | denmark

Danske Bank26.3%

Nordea17.1%

Others46.2%

JyskeBank

10.4%


Source: GlobalData

Dankort76.4%

Visa11.8%

Mastercard11.9%


Source: GlobalData

Danske Bank36.1%

Nordea21.3%

Nykredit16.4%

Others26.2%


Source: GlobalData

Mastercard90.1%

Others9.9%


Source: GlobalData

CI April 2018 554.indd 19 28/03/2018 14:31:11


Country snapshot | netherlands

The Dutch payment cards market is mature, with a high penetration rate of 1.9 cards per inhabitant.

The market is dominated by debit cards, which users perceive to be secure, cost-effective and consumer-friendly.

Pay-later card payments are not popular due to a cultural aversion towards debt. Dutch consumers are very comfortable both with using debit cards – they accounted for 90% of the overall transaction value in 2017 – and online

payment channels, especially local brand iDEAL, which is backed by wide acceptance and a convenient user experience.

Growth in the payment cards market is supported by well-developed infrastructure, with one POS terminal per

0.0

0.5

1.0

1.5

2.0$bn

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100

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200$bn

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country snapshot: netherlandsDebit cards continue to dominate Dutch market



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NETHERLANDS

CI April 2018 554.indd 20 28/03/2018 14:31:22


Country snapshot | netherlands

34 individuals. Growth in the e-commerce market is attributed to high levels of internet and smartphone penetration.

In spite of a high level of consumer comfort with established payment instruments, recent developments in mobile proximity payments and contactless technology by ING, Rabobank and ABN Amro will see these payment options gain traction among Dutch consumers.

DEBIT CARDS OLD FIRMDebit cards remained the most widely used payment card in the Netherlands, accounting for 90% of the total payment cards transaction value in 2017.

The migration of low-value cash transactions to debit cards was a key trend, and according to the Dutch Payments Association, the number of debit card transactions valued at under €10 ($12.45) increased by 17.2% in 2016.

Banks and other financial service institutions signed the Nadere Overeenkomst II agreement in September 2014 to reduce cash usage by 2018, by converting cash transactions to debit transactions.

CONTACTLESS PROMINENCEThe Netherlands has recorded an uptake in contactless payments. According to the Dutch Payments Association, the number of contactless payments in 2016 increased by almost five times to 630 million payments, compared to 135 million in 2015. In December 2016, 24% of all debit card payments were contactless.

ABN Amro replaced all its payment cards with contactless functionality in December 2015. Similarly, ING Bank and Rabobank are replacing older cards with contactless-enabled payment cards.

THE IDEAL ALTERNATIVEiDEAL remains a market leader of Dutch third-party payment services. The company currently serves 10 million customers through 100,000 merchants. The service is offered by 10 issuing and seven acquiring banks as well as 59 collecting payment service providers.

In total, 283 million payments worth €23.7bn were successfully processed through iDEAL in 2016. The average transaction amount in 2016 was €81.40.

SMALL PAY-LATER MARKETPay-later cards form a relatively small market, accounting for only 9.9% of the total payment cards transaction value in 2017, primarily due a consumer preference for debt-free payments. Although banks started issuing credit cards in the early 1980s, the market’s growth has remained low in comparison to debit cards.

In many cases, overdraft facilities have reduced the need for credit cards. ING Bank offers an overdraft facility of between $526.10 and $2,104.50 quarterly; and between $2,631.70 and $26,306.40 on a continuous basis. Similarly, De Volksbank offers an overdraft facility of $2,630.60 for current account holders.

Relatively high transaction costs for merchants previously prohibited retailers from accepting credit card payments; the average merchant service charge was 2.2% per transaction during 2010-2012. However, it started to decline from 2013

and reached 0.59% in 2016; it is expected to remain stable at 0.59% over the four-year period to 2021.

With the implementation of the EU interchange fee cap from June 2015, use of credit cards at merchant outlets is expected to rise.

MODERATE POS GROWTHThe Netherlands continues to report impressive growth in its POS network, with the number of POS terminals recording a CAGR of 19.1% between 2013 and 2017.

Dutch retailers are increasingly installing mPOS terminals. mPOS solution provider iZettle launched the iZettle app card reader in the Netherlands in November 2014. The company also introduced the iZettle Card Reader Lite in February 2015, which enables retail businesses to process chip-and-PIN card transactions. The business launched a mobile contactless card reader in February 2016. <

Rabobank31.9%

Others8.3%

ING36.2%ABN Amro

23.6%


Source: GlobalData

Mastercard98.5%

Visa 1.5%


Source: GlobalData

ABN Amro39.4%

Rabobank23.7%

Others9.8%

ING 27.1%


Source: GlobalData

AmericanExpress 2.8%

Mastercard65.9%

Visa31.3%


Source: GlobalData

CI April 2018 554.indd 21 28/03/2018 14:31:24


industry insight | fico

According to a report in the Financial Times, debt is currently at a record high in the US,

persistently high in Europe, growing in Asia, and rapidly increasing across broader emerging markets.

Americans now collectively owe $1trn in credit card debt, and the average Briton owes £8,000 ($11,310), excluding mortgage debt.

Although this development has stemmed from a combination of factors – including shrinking real wages, poor spending habits and a lack of savings, one has not been given enough attention: fraud.

Collection techniques sometimes fail because they have been applied on fraudulent accounts misclassified as bad debt. Without a fail-proof way of separating fraud from genuine inability to pay, financial institutions must be aware of the latest fraud trends, such as the recent surge in application fraud, to stay ahead of the criminals.

An umbrella term for identity-based fraud, application fraud includes:• Identity theft: The practice of using

another person’s name and personal data to obtain credit, loans and other financial services;

• First-party fraud: First-party fraudsters are applying for credit in their own names, but without any intent of payment. FICO research has shown that first-party fraud losses can reach up to ten times the size of third-party fraud (fraud using someone else’s stolen card details). Depending on factors including region, a bank’s risk appetite, channels, target market, maturity of fraud control measures and portfolio size, first-party fraud can comprise between 10% and 35% of all bad debt;

• Synthetic identity fraud: The making of new identities by blending elements from multiple individuals. Fraudsters will apply for accounts using these fake identities to build validity for their new personas. A survey of attendees at the recent FICO APAC Fraud Forum revealed that between six and ten banks in the region are experiencing synthetic identity fraud.

All these figures point to the escalating scale and severity of application fraud. As prevention techniques have improved to stop activities such as card skimming and card-present fraud, criminals are having to change their tactics to get credit cards.

They are helped by the general availability of profile information on social media, which they are supplementing by penetrating poorly defended mobile apps that collect and store personal information. Furthermore, due to the increase in data breaches over the past year, millions of individual email addresses, passwords, financial data, health history and more are now for sale on the Dark Web.

What should financial institutions be doing to combat fraud and lessen their pile of bad debt? Here are four top tips:

1. Get agileChoose an agile fraud solution that is also able to address weaknesses such as application fraud. This will ensure that you meet customer expectations for speed and convenience while securing payment transactions and loan approvals.

2. Deploy behavioural analyticsFraud rings are gaining in sophistication. For example, half of our APAC Fraud Forum

survey respondents reported a 25-50% increase in card testing, where criminals test the fraud rules of banks to find out what limits and purchase categories will result in a blocking of a card.

An analytic technique that is gaining favour as the fraud environment shifts to one of data breaches and identity theft is the identification of the common point of purchase for compromised cards. Here, analytics is used to link fraudulent transactions and pinpoint the sources of leaked card information.

3. Develop your understanding of customersIdentity-proofing should not stop when an applicant becomes a customer. Financial institutions need to constantly iterate across their customer base to understand how each customer’s identity risk changes over time given the introduction of new data – how they transact, what devices they use to log into their account, and what new applicants they share information with.

By continuously gathering information across each customer lifecycle, financial institutions will gain new intelligence that they might be able to use or act upon in the future, for example, to improve the detection of transactional fraud, account takeover (ATO), and payments fraud.

4. Share intelligence bilaterallyAt present, many financial institutions look at different fraud types in silos, which helps fraudsters take advantage of weaknesses at any point. By looking at fraud in a more holistic manner across the entire enterprise, institutions can be better prepared to stop fraud at all stages of the customer and payment lifecycles. For example, knowledge on transactional fraud detection and ATO root cause analysis can also inform application fraud controls.

With both bad debt and application fraud on a meteoric rise, financial institutions must take full advantage of the tools and data at their disposal. Although it is difficult to determine whether an outstanding payment is bad debt or application fraud, implementing more measures to combat the latter could reduce instances of the former.

Critical to such a strategy is a unified data hub that brings together the key information from all data sources. This will form the foundation upon which a layered and integrated approach to fraud prevention can be built. <

uncollectable: is your bad debt A fraud problem?A decade on from the 2008 financial crisis, levels of consumer credit delinquency are rising worldwide. This should not be a surprise, given that global debt is also soaring. Matt Cox, senior director – fraud, cyber and compliance at FICO, offers four top tips to combat fraud and reduce bad debts

CI April 2018 554.indd 22 28/03/2018 14:31:25

Key Issues

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