Future of Payments

Wearable technology gets fashion-conscious Joanne Frearson on an electronic payments business likely to be worth ÂŁ70billion by 2024 Future

A

of payments

supplement

MAY 2015

Global mobile

The changing world of payments

INSIDE

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Future of payments

Opening shots Shane Richmond

I

F YOU haven’t heard of Venmo yet, there are probably two reasons. First, it’s a USonly service but that doesn’t usually make a difference. The second, more likely reason, is that you are over 30. As a 40-something relic myself, I didn’t hear about Venmo until late last year. Appropriately, it came through an article about how confusing Venmo is for over-30s.

Let’s step back a bit: launched in 2009, Venmo is a payment app that began as a simple way for people to pay their friends. When you make a payment on Venmo the money goes from your bank account to theirs, via the app. That’s not especially unusual or even unique to the world of start-ups: Barclays, a 300-year-old brand, launched one, Pingit, a few years back. But Venmo’s stroke of genius was adding a social network-style activity feed.

This made it perfect for millennials. Now you can get your housemates to chip in when you have to go and buy a pack of toilet rolls – again!

– because nobody else can be bothered. And, what’s more, you can make sarcastic remarks about it in the feed. The result: the app becomes sticky. Some users admit to checking Venmo even if they don’t need to make a payment.

In 2012 Venmo was bought by payment processor Braintree. A year later Braintree was acquired by PayPal, putting one of the hottest payment services in the hands of a company that has become synonymous with digital payments.

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Why banks may be in danger of being left behind by payments apps for the young Along the way, Venmo started allowing small businesses to use the service. A food truck, for example, could take payment via Venmo and would pay a small fee for the privilege. That keeps the service free for individuals.

Venmo is one of the many companies inserting itself into the payments process between banks and their customers. Customers are happy to accept the new entrant because they get a simpler process or a better user interface and, so far, banks have been willing to accept being pushed a step away from customers because these services create more card activity, and thus greater profits.

However, the banks might be taking a risk.

An August 2014 study by financial publisher Bankrate found that more than 60 per cent of US 18 to 29-year-olds don’t have a credit card. They have grown up anti-debt and aren’t looking to change that now. Meanwhile, a March 2014 study

by Viacom found that a third of Millennials (this Twitter: @ time counted as 18-33 year olds) did not think shanerichmond

they would need a bank in the future. Three quarters of those questioned said they would be more excited about a new finance offering from Google, Amazon or Apple than from their own bank.

And, as luck would have it, all three of those tech brands are active in the payments space.

Google recently made it possible to send money via email as an attachment. A novel concept, to be sure, but safer than your gran tucking a fiver inside your birthday card.

The picture is of a generation less open to bank products, less convinced of the need for banks and happy to use third-party services that make it harder for banks to market to them. As the milliennials age they might not need to leave Venmo. They might just find that they can pay with it in more places. And then one day they will get an email from PayPal suggesting they close their bank account and make PayPal their bank. What do you think they’ll do?

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Future of payments

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Report: 27 per cent of online payments now mobile GLOBAL ONLINE payments made using mobile devices now account for 27.2 per cent of the total online payments made in the first quarter of 2015, according to figures from Adyen Mobile Payments Index, with the UK standing head and shoulders above the worldwide averages.

In the first quarter of 2015, 44.4 per cent of online payments in the UK were made using a mobile device, up from 36.9 per cent for the corresponding period in 2014.

Smartphones accounted for 66 per cent of that figure compared

with 64.9 per cent in 2014.

Myles Dawson, UK country manager at Ayden, said: “The UK’s position as the world’s number one in mobile payments speaks volumes for the country’s payments infrastructure, its highly competitive mobile network landscape and the general population’s continued willingness to exploit new payment channels.”

The US market showed impressive growth, with 26.7 per cent of payments online being made on mobile in the first quarter, an increase of nearly 5 percentage

points from the same period last year, while Asian markets for the first time broke the 20 per cent barrier for online mobile payments.

Roelant Prins, chief commercial officer at Ayden, said: “There has been a seismic shift in how and where people are comfortable spending money. All mobile channels in the past 12 months have experienced impressive uplift.”

The average transaction value for the digital goods industry also rose across all platforms over the past 12 months. Digital spend

online increased 28 per cent and 30 per cent respectively for desktops/ laptops and tablets, but the greatest leap was over mobile devices, where the average transaction value rose 37 per cent year-on-year.

Although the average transaction value on smartphones was lower than for tablets, in pure volume terms the gap between spending on smartphones and tablets widened dramatically.

In March 2014, smartphones accounted for 10.9 per cent of online transactions, compared with 9.3 per cent for tablets.

Speed and convenience: the payments industry watchwords

By Joanne Frearson

T

HE WAY we pay for goods and services is changing. It is now possible to ma ke pay ments through wearable devices, watc hes a nd messag i ng apps. Although there are still challenges in implementing new payment systems for some industry players, they are the way forward and will offer consumers a more convenient way to buy things in the future.

Speaking at the Marketforce Cards & Payments Innovation Summit, Daryl Wilkinson ( below), head of g roup innovation at Nationwide, said: “When we think about payments we think about banks. Innovation is challenging these beliefs and these traditions. We can now make a payment anywhere. “ We can make payments

through tweets. We can send a payment through our favourite messaging app. We can do contactless payments through our phones, on our watches and with wearable bands.”

However, despite these innovations, Wilkinson pointed out that there are still challenges being faced by the large institutions in implementing the technology needed for these payment systems. Smaller merchants have been reluctant to take on digital payments.

He said: “There is a lot of investment and effort keeping an IT estate up and running 24/7 and having the resources to be able to mitigate cyber-attacks.

“Last but not least there is significant multi-party collaboration required to innovate when we look at this from the point of view of the merchants, upgrading their terminals or educat ing consumers about how to use these new

payment methods. Within that collaborative spirit there is a lot of work that needs to be done on infrastructure. Payment systems are complex and when you want to change them it is very expensive.”

But despite these challenges, Wilk inson believes new payment systems are the way forward because the current customer experience when it comes to payments is sub -optimal. He said: “What I mean by that is that when I go out I hate having my pockets filled with stuff, my wallet in this pocket, some coins in that pocket and my phone. It is unpleasant to carry around lots of cash and we all know that when we come back from a night out we have got lots of shrapnel in our wallets.

“But also some of the associations with non-cash payments, we spend a lot on credit and debit cards and a month later we see what we spend, sometimes it is difficult to tally up. What is this? I do not recognise what this payment is.”

Research by Nationwide has shown that consumers would like to use new payment systems that offer them more convenience.

He says: “Speed a nd convenience are first and foremost. Speed is because just feels like a bit of drag to take my wallet out and open it up – now I have a nice shiny Apple watch. Increasingly, consumers are looking for faster and faster solutions.”

Research has also shown customers want control over payments by being able to set up automatic top-up and see regular alerts on what they are spending.

“This always comes to the top of the list when we talk about control,” says Wilkinson.

“Consumers want to feel they have authorised something and are keeping track of that. They want security and reassurance, the opportunity to disable payments if they have lost or have had a payment device stolen.”

By March 2015, smartphones accounted for 16 per cent of online transactions, compared with 11.5 per cent for tablets. In the same period of time, desktops dropped from 79.8 per cent of online transactions to 72.5 per cent.

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Future of payments

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How a marketplace boom will foster payments innovation

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014 was a breakout year for marketplaces. With Alibaba becoming the biggest initial public offering in history, and companies such as Über and Airbnb exploding in popularity, marketplace businesses became hot properties for investors and consumers. A quarter of UK adults now use digital technologies to access goods, services, money and knowledge from new people-powered networks.

Confidence in these new business models is such that analysis by PwC found total revenues for the five most prominent marketplace or sharing economy sectors – peer-to-peer (P2P) finance, online staffing, P2P accommodation, car sharing and content streaming – could rise to around £9billion in the UK by 2025, up from just £0.5billion today.

This growth is a result of a perfect storm created by the sheer amount of time and money spent online. More people than ever before are shopping online, pooling goods and services, and creating environments

for people to connect with the best deals.

The £9billion question is how to resolve the unique payment challenges created when buyers and sellers come together online from all over the world.

The £9billion opportunity Online economies have created borderless businesses, with buyers as likely to be from within the M25 as they are from continental Europe or even further afield. This means a marketplace must comply with the regulatory frameworks of multiple countries, including the management of commissions, FX and fee adjustments. Equally important is that the parochial preferences of vendors and customers in each of these markets are met.

Accepting funds on behalf of another party is not an attractive option to many marketplaces as they then, by default, become a financial services company with all the regulation, compliance and investment such a commitment entails. The natural response is to look for a solutions provider that reduces these hassles for the marketplace.

However, providers have not kept pace with ecommerce innovation. Most payment systems were designed for a two-party model, based on the buyer and seller interacting directly. The evolution of marketplaces, however, has created the need for a three-party model that puts a marketplace in the middle, creating a unique payment challenge.

In lieu of an effective three-party solution, many marketplaces are faced with payment solutions that have been cobbled together and will not keep pace with technology or predicted market growth.

In addition, regulation is being updated to align with the ecommerce evolution. In Europe, for example, we’ll see the PSD2 (Payment Services Directive) introduce some significant changes to how transactions should be capped and charged, with far-reaching implications for the industry, and in turn, payment systems.

The result is a huge opportunity for the UK fintech sector.

Parallel growth The online marketplace model cannot thrive without fintech innovation. The reality is that the two sectors will grow in parallel to one another.

Innovation by fintech companies is focused on enabling marketplaces to accept the widest possible range of alternative payment methods per country, and on delivering regulatory compliant payment functions that can be confidently and swiftly rolled out to vendors. There is also a large amount of interest in developing creative solutions for payment systems that facilitate peer-to-peer transactions independent of a marketplace.

At Skrill, we’re focused on payment technologies that give businesses the opportunity to grow, to cross international borders and to create multi-functioning cashflow systems that take care of all regulation and compliance. +44 (0)20 7608 4514 www.skrill.com

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The inner geek

Survey: wider payment options a priority for retailers

Moz & Bradders

Flying High MasterCard’s Ann Cairns talks to Joanne Frearson about the changing world of digital payments

T

HE VIEW over London from Ann Cairns’ office high up in Canary Wharf is truly amazing.

The impressive skyscrapers of the City of London confront me as well as the scenic view of the River Thames.

She points out some photographs to me – pictures of her with famous rugby players (MasterCard sponsors the Rugby World Cup), as well as photos of her in Australia at a “hackhathon”, an event MasterCard promotes to help encourage people to code.

The point of all this seems to be that MasterCard is not just a credit card company, but a huge player when it comes to technology – especially in the payment space.

Cairns is president of International Markets at MasterCard. “We are pretty much at a tipping point, not just here in the UK but various places in the world of transitioning into digital payments,” she tells me.

“To a certain extent MasterCard has been digital for years. We really are a big technology company that has a network of money whizzing around the world.

The plastic is just a physical manifestation of the front end – everything else is digital.

“Ultimately, the consumer is going to choose what they use and when they use it, but the whole electronic side is going to accelerate very quickly here because many things are changing already.”

MasterCard has been designing payment systems for the future. Cairns explains: “We have designed our MasterPass technology to sit on an infrastructure layer so it can work on a browser, it can work on an Apple phone, iPad or it can work on a terminal in a London underground station.

“We want payments to happen seamlessly in the background. If people are in a restaurant like Wagamama they want to order food and they want an easy way to pay for it.”

Early this year, Wagamama partnered with MasterCard to develop an app which allows people to pay for meals on their mobiles – the first restaurant or retailer to offer this service. Although the UK is in the process of transitioning to digital payments, Cairns believes that, for the time being, cash, cards

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and mobile payments will co-exist and ultimately it will be the consumer who will decide what they use and when they use it.

MasterCard is also working with BMW on a contactless credit card that can be used to hire, unlock and operate a BMW or Mini from the DriveNow carsharing fleet. Customers can also pay for services from hotels to tickets for a fun day out through interactive screens in the car itself.

Cairns says: “Imagine if you had that same capability on your card and your phone to unlock your car – you could get into it and drive, park your car, tap to pay your train fare, get into the office and get a coffee on the way.”

Cairns seems to be a big believer in the internet of things, within which all devices have the potential to become part of the transaction process. Your fridge will one day be able to buy and order things, and you will be able to pay for your washing machine incrementally as you use it, like a launderette model.

“We have developed something in our labs in Dublin,” she say. “We worked with Maytag to develop payment capabilities for washing machines, where you just talk to it from your telephone, switch it on

“Imagine if you had the capability on your card and your phone to unlock your car – you could get into it and drive, park your car, tap to pay your train fare, get into the office and get a coffee on the way.” ANN CAIRNS

and pay for the wash as you go. Your telephone would be able to tell you if it is on a spin cycle, or to pop back in to move it into the dryer.

“The Maytag solution is starting to be rolled out in North America. The technology for the fridge is already here. It is going to be a question of creating the ecosystem, the network working with manufacturers and integrating everything into their capability.

We are going to see it in the next few years. I don’t think it is 10 years away. It is more like the next five years.”

But Cairns does not believe society will become completely cashless any time soon. “We are always going to be going back in forth between the digital and physical,” she says. “You and I will never buy all our clothes online. We might buy some things. We are living in a combination lifestyle and you want to have all of those things working in the same way.”

Whether or not people take up these new digital payment methods will also depend on how secure they think they will be, and whether or not they could be subject to fraud.

Cairns explains that tokenisation makes digital payments extremely safe and secure. Tokenisation works by replacing a card’s primary account number with a unique alternative card number or token.

As a person’s card number is concealed, it makes transactions extremely safe. “The card number is not transmitted anywhere. What that means is it is a lot safer,” she says.

Digital payments are changing the way we live and in five years’ time, who knows what type of devices will be using to pay for goods and services around the world.

AROUND 93 per cent of retailers believe consumers want a broader choice of payment tools, according to a survey by ACI Worldwide and technology analysis firm Ovum.

The report also showed payments were widely seen by 75 per cent of retailers as a clear part of their business strategy.

Payments, historically a means to an end for many retailers, are now a high priority. Retailers are investing to speed up transactions at the point of sale, aiming to deepen customer loyalty and creating new engagement mechanisms.

New payment technologies potentially provide not only benefits to consumers in terms of convenience and cost, but also to retailers in terms of engagement and operational efficiencies.

The report stated: “With even small-scale retailers and general merchandise fashion boutiques now active in the online and mobile space, the race is on to introduce a seamless, user-friendly experience, and payments remain a critical part of this.

“In the online space alone, cart abandonment rates remain stubbornly high for many, and payment friction can have significant impacts on incoming revenue.

Across mobile channels as well, the race is now on to introduce new services which can help reduce friction and drive sales.”

Retailers also face growing costs in maintaining and accepting payments and remain nervous about the security implications of further developing their existing payments infrastructure.

The survey showed 54 per cent of retailers cited security considerations as the biggest stumbling block to increasing their payments investment.

But by trying to rely on existing infrastructure it increased retailers’ vulnerability to fraud and security risks in the long run.

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Future of payments

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Are cash payments becoming a has-bean?

Joanne Frearson pops in for a coffee and a chat with Starbucks’ Ian Cranna about the future of payments

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HERE IS no need to take cash or credit cards into Starbucks these days. All you need is a smartphone and the Starbucks app and you can instantly buy your morning cuppa with a mere swipe of your mobile.

Improving the overall customer experience by making payment methods easier for customers is becoming a big focus for retailers, and smartphone apps are becoming a popular solution for retailers.

According to recent research by Barclays, nearly half of all retail sales by 2024 will involve a mobile device in some way or another, with the expected spending to reach £53billion compared with £9.7billion today.

Starbucks first launched its mobile app in 2011 for the US market, and since then use of the app has skyrocketed.

In the US, there are now more than eight million mobile transactions in stores every week, with more than 16 million customers who actively use the mobile app.

In 2012, Starbucks launched a bespoke mobile app for the UK market in response to customers’ everchanging needs, as well as a contactless payments service.

Ian Cranna, vice president of marketing and category at Starbucks

EMEA, says: “We understood that more customers were choosing to pay with card over cash for small transactions, and were looking for faster, more convenient ways to pay at Starbucks.

We’ve learned from customers that speed and convenience are the most important factors when paying for their order.

“Since the launch of the Starbucks app, we have seen it become part of customers’ daily routines when purchasing their coffee. For many customers, it’s the only way they pay with Starbucks.”

By using the mobile app customers save an average of 10 seconds per transaction. They do not have to reach into their wallets to find credit cards or cash. All they have to do to activate the service is to shake their phone to bring up the Starbucks Card in their mobile app.

The payment mechanism is also linked to the My Starbucks Reward programme. Whenever a user buys something with the app, they also get reward points.

Cranna says: “We believe the success of Starbucks mobile payment is down to providing an app which combines rewards, payment and information in one place for our customers.”

The loyalty programme on the app works through a customer earning a star every time they buy something, and after 15 stars they can enjoy a free drink of their choice.

If a member collects 50 stars within a year, they are moved onto a Gold membership, where they can receive free extra shots of espresso, free selected syrups, free whipped cream and a free upgrade to Starbucks Single Origin Espresso series.

In the UK, My Starbucks Rewards customers are also the first to hear about and try new Starbucks drinks, as well as receive bespoke offers.

The My Starbucks Rewards programme has been extremely

popular. In the second quarter of this year, the company announced it had added a record 1.3 million new members, bringing the total active membership to 10.3 million.

Another attraction of the Starbucks app is that users can connect with friends on it and look up store locations and opening hours. Customers can invite friends through the app to meet them at a local store.

Starbucks has been an innovator when it comes to using technology to enhance the customer experience. In April this year, Starbucks chairman and CEO Howard Schultz said: “Innovation is the force that will continue to drive our business and enable us to expand

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New regulations set to shake up payments sector

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SLEW OF new payment systems are likely to enter the market as regulatory changes increase innovation and competition in the sector and add new security measures to products.

Stephen Ley, partner at Deloitte, says: “The payment industry is undergoing quite a lot of change at the moment. There are regulatory changes driven by the Payment Services Directive (PSD2) and the interchange fee cap requirements, as well as new security requirements for mobile and online payments.”

The new Payment Services Directive, when it is passed, will allow new entrants to initiate payments on behalf of customers through their existing payment accounts with banks. That is likely to introduce a whole range of new services and ways in which customers can interact with their funds, initiate payments and interact with people that want to pay.

“The majority of investments in fintech are going into paymentrelated areas” – Ian Footitt, Deloitte

and increase revenues and profits.” In the UK, Starbucks has been one of the first on the high street to roll out free Wi-Fi and launch wireless charging.

Cranna says: “We are constantly looking for ways to use technology to give customers the experience they’re looking for – like including payment

“Since the launch of the Starbucks app we have seen it become part of customers’ daily routines when purchasing their coffee. For many customers, it’s the only way they pay with Starbucks.”

from wearable technology like Apple Watch and the Microsoft Band, giving customers more reasons to visit us.

“In the US we’re building on the success of our app with trials of Mobile Order and Pay, giving customers the chance to place an order in advance and pick it up at their selected Starbucks store.

“We’re also looking into the possibility of Starbucks delivery.”

The way we pay for goods and services is changing. Mobiles have become part of that process, and as new wearable technologies emerge, retailers will be innovating to include them as part of the payment and customer experience.

Ley says: “A customer could have an online relationship with an app provider. Payment could be initiated through the app against any of the customer’s bank accounts.

The payment would leave the bank account through one of the existing payment mechanisms and arrive at the payee of the customer’s choice.

“A retailer could launch their own app that would allow them to offer, for example, loyalty points. The payment could be linked to a bank account cutting out credit card costs for that retailer.”

Regulation change has also lowered the barriers to entry in the payment market – and there are many new fintech players emerging in this sector. Ian Footitt, partner at Deloitte, says: “The majority of the investments in fintech are going into paymentrelated areas. While mobile gets most of the press, there is still quite a lot of interest around improving online payments, while other players are looking to focus on cross-border

pay ments and foreign e xc h a n g e transactions.

Others are looking at it quite narrowly around the customer point-of-sale experience.”

The new emergence of entrants in the payments market is heating up the competition for the existing banks in this area.

Footitt says: “There are lots of smaller players who are probably nimbler, more focused than the banks because they are not trying to provide a mass-market service.

They are pinpointing areas in which they can steal customers from the banks. It is quite difficult for the banks to respond to all of that.

“These players are competing on probably three main dimensions.

One is about cost/price, another is sheer convenience and the third is on the dimension of security. If you look at the fintech attackers they are likely pushing on one or more of these dimensions.

“We will see some banks trying to compete head-on, spending a lot of money investing, innovating and building their own user experience, while other banks will be trying to do that in a more collaborative way with some of the existing bodies.

As new products come onto the market, the security needed to make sure payments are safe will also change. Biometrics is likely to be a big focus in the future payment markets. Ley says: “The PSD2 has lots of requirements focused around security and the way the different parties will have to interact and communicate with each other.

“It is going to move us into a space where customer payment transactions will have to be protected by strong authentication that will actually embed information about the person or company being paid and the value of the transaction.

“That is good from a customer point of view in terms of security, but it could adversely affect the ease of making a payment. This is where potential offerings come in around the use of biometrics. It will be an area of quite a lot of change in the next couple of years.”

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The fashion industry will play an important role in the design of wearable technology, says Mike Saunders from Barclays Joanne Frearson

W

EARABLE technology is becoming the new fashion must-have. Smart watches, fit bands and virtual reality headsets have all exploded onto the market. Now financial companies are getting into the wearable technology marketplace and are using them as a payment device as an alternative to cash or credit cards.

Last June, Barclays launched bPay, the first wearable band in the UK, which allows non-card payments in any outlet that has contactless. The device works by a customer tapping their wristband on a contactless payment system, and has been used at the Barclaycard British Summer Time music festival in Hyde Park, Pride in London and on Transport for London (TfL).

Following on from the success of bPay, Barclays is about to launch a second version of the wristband. The new product will have some improved features added to it based on the feedback received on the original wristband.

Mike Saunders, managing director for Digital Consumer Payments at Barclays who heads up the bPay project, tells Business Reporter: “Over the course of last year we have certainly accomplished everything we wanted to and more in terms of learning about the role payments can play in wearable technology.

“We have come out of the past year being very excited about the future for it. We are using all of that collectively to help us build and relaunch the product.”

After bPay’s launch, Saunders noticed some distinct trends in how people were using it. The most interesting thing he observed was that people started to use their wristbands to pay for travel on the London underground after TfL went contactless.

He says: “TfL and commuting became the anchor use case. We saw the habitual use flow from there. It is a product that lends itself very well to commuting in the morning, as you do not have to reach into your pocket to get anything.

“It is fast, accessible and what we saw is that it created a segment of users that used the product every day from Monday to Friday. Their TfL spend would spill into their morning coffee, which would spill into lunch, which would spill into their evening commute home. It is a product which really is an everyday spend type product.”

The other trends Saunders had to do with the fashion aspects of the band.

“At the time we launched, the chip technology was not as good as it will be moving forward,” he says. “The chip was rather large which forced us to build a large wristband around it. We clearly got feedback from customers that the feel and fit and form of that device were really important.

“What customers told us was that not everyone wanted a wristband. Customer choice is very important. There is a combination of style, choice and factor functionality you have to take into account. Clearly consumers have individual tastes. Not everyone is the same size. Not everyone has the same likes and dislikes.

I think designing products that is universally appealing is challenging. We have been really been working hard to understand what the right mix is.”

One thing that happened which Saunders did not expect was that the wristband attracted a lot of interest on social media. There was a lot of sharing on social media about people’s experiences when they went to use it.

“A lot of people would comment on social media, Twitter, about their experience in how people looked at them and how they thought it was cool,” he says. “It was a product, and although we did not do anything proactively to drive it, we saw a lot of social engagement from the wristband, which was quite interesting to us.

“On social media, we saw a lot of customers talk about how they removed the chip from the rubber bracelet it was in to create their own devices. It comes back

The wearable electronic business will grow to more than $70billion by 2024

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Customer choice is very important.

There is a combination of style, choice and factor functionality you have to take into account to that point of the individuality of people, individual styles and needs. People taped the chip to their watch strap, made rainbow loom bracelets out of it, magic wands and all sorts of things. There was just a creative energy to it that we were quite surprised by, but also very happy to see.”

Barclays sees wearable technology as an opportunity to innovate in the payment space. To make people’s lives easier and more convenient for them to pay for goods and services.

“They are a very nice hook for wearable technology and a reason for someone to continue to use that piece of technology,” he says. “I personally see payments becoming more integrated into many different things.”

According to statistics from IDTechEx, the wearable electronic business will grow to more than $70billion by 2024. Saunders says: “A lot of the things in our mind, which are becoming apparent, are that payments give wearable technology a very good everyday use case. You have got all these things coming out - fit bands and smart watches.”

He believes the fashion industry will also play an important role in the design of wearable technology. He says: “There is no one who knows style and fit better than the fashion community. Part of what we are doing is giving people variety in the types of products we make available and try to find partnerships that create products that appeal to different people. People will have options in the future. They will choose the things that will fit their lifestyle and their style better.

“Ultimately it is going to come down to customer choice. Customers are going to have a variety of options available, they will be able to pick the device and form factor that is right for them. We have looked at the last 12 months as a learning opportunity. Throughout that entire year we have used those learnings to continue to iterate on the product, particularly on the design. That gives us a lot of optimism that we are coming to the market with something that gives a broader appeal than what we had last year.”

According to Saunders, London has been the perfect market to launch the wearable payment device in because it already has the existing infrastructure set up to be able to process contactless payments.

Contactless payments are expanding in the UK and there are already 300,000 to 400,000 UK merchants that have systems in place to accept these types of transactions. Figures from the UK Card Association show that UK consumers in December 2014 spent £380.8million using contactless, an increase of 25.8 per cent from the previous month.

Saunders says: “It was a very simple product for us to launch as we did not have to worry about building a merchant network.”

Next month Barclays will unveil a new version of the wristband. Its new design and features will be focused towards the things that Barclays has learned over the last 12 months.

Although the exact design and features will remain a mystery until launch date, the new wristband is certainly likely to make our lives easier and more convenient when it comes to paying for goods and service.

BARCLAY BPAY BAND FACT BOX THE BPAY BAND was launched in June 2014 at the Pride in London festival and the Barclaycard British Summer Time music event in Hyde Park. It was the first time non-card payments could be made with a wearable product in the UK. The wristband works through a pre-paid account that is linked to it. Customers can set up an online top-up account and link this to their debit or credit card to make secure contactless payments of up to £20.

The bPay band can be topped up either manually or can be set to be top up automatically when funds run low. Customers also benefit from a 100 per cent fraud refund guarantee associated with all Barclaycard products. There is no need to worry that lost or stolen bands could leave customers open to fraud.

The roll-out of the bPay band has been an evolutionary step from Barclaycard’s PayTag sticker, which was launched in 2012 and enables customers to use them at contactless terminals to pay for everyday purchases. More than one million PayTags have been issued to date.

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Cold coffee is too high a cost for trendy payment methods Keil Hubert

W

HEN Apple Inc announced the iPhone 6 and its new digital payments system last year, CEO Tim Cook painted a picture for us of millions of consumers, all energised and joyful over the opportunity to complete transactions with our mobile phones instead of fumbling with cash. His preso was upbeat. “You’re all going to love ApplePay,” the pundits said.

That may well be true… somewhere else. Here in Texas, it really hasn’t caught on yet. I’m not suggesting that there’s anything functionally wrong with ApplePay – it does work much better than Google’s equivalent solution for Android devices. The pay-withyour-mobile system does exactly what it says it’ll do when you’re at a merchant that accepts the service. The problem that I have with mobile-based payments lies in the essential fact that a consumer is fumbling with their mobile phone at the front of the queue instead of paying and getting the heck out of everyone’s way.

I’m not sure why Apple (et al) didn’t see this coming. When Starbucks first introduced the ability to pay for a coffee with their iPhone app a few years back, it frustrated everyone. To be fair, the app did do what it was supposed to do… but it did it slowly. Worse, most consumers using it didn’t use it efficiently. That made for some aggravating encounters.

I watched this happen when their app was new: a rather well-to-do lady approached the cashier, placed her order, and pulled out her iPhone.

She then proceeded to unlock her phone, hunt for the Starbucks app, log into her account (having forgotten her password), pull up the screen that displayed the QR code linking to her plastic payment card, and then hold her phone up

to a barcode scanner at the till to complete her transaction. She ran it back and forth under the scanner eight times before quitting the app… and reloading it to try again.

Meanwhile, my coffee sat forlornly behind the register, getting cold, while the checkout girl struggled valiantly to keep her customer service smile from collapsing.

Behind me, I saw 11 more customers growing increasingly irate. I finally had to volunteer to pay for the ditzy woman’s frothy-whatsit so that she’d put up her phone and go away.

This is the same reason why I won’t use the drive-through window at a Starbucks if there are any other cars in front of me. After waiting ten minutes for one silly twit to figure his mobile phone payment out, I was ready to scream.

I couldn’t leave, either, thanks to the concrete kerbs trapping us all in the vehicles queue. Then he dropped his phone, and was too close to the store to reach it from partially opened car door. AAARRRRRRGH! That, right there, is why I suspect that small commercial payments are still going to be accomplished with cash and charge cards for the foreseeable future. I’d prefer to shift to a digital payment system just for peace of mind. On the other hand, I’m opposed to waiting behind a gormless idiot who does in five minutes what I can do in five seconds with a wrinkled old banknote.

I want ApplePay (et al) to succeed, I really do. It’s just that I also want my leave whatever store I’m in as fast as humanly possible more than I want to be hip and trendy with my payment method.

I expect NFC-based payment systems will catch on fastest where transactions simply can’t be done quickly – at a grocer, say, while you wait for your purchases to get bagged.

Business Technology · May 2015

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Future of payments

Find us online: business-technology.co.uk | Join us on LinkedIn: Business Technology UK

| Follow us on Twitter: @biztechreport

Creating a marketplace for global trade is plugging the holes where banks allow money to seep through the cracks, by n as little as a decade we will look back creating a marketplace in which everyone at the fractured banking and payments can benefit. Designed to empower the sector with utter astonishment at just swathe of fintech businesses seeking how long traditional banking services to exploit the explosion of global digital weren’t challenged – costing businesses enterprises, Saxo Payments is a seamless millions of pounds. conduit for bank transfers; fees are Businesses of all sizes trade negligible (less than 1 per cent rather internationally every day, and have than around 5 per cent with banks), done for many years. Yet still they routinely and transfers occur instantly within accept – or sleepwalk into accepting the community, even across borders, as – high charges from their normal bank if the two companies were neighbours. for paying foreign suppliers or receiving Saxo Payments enables fintech payment from customers abroad. Market businesses with international client bases disruptor Saxo Payments, which is behind to focus on their core activities, while a unique new pioneering communityextending their value chain and product based payment model, believes these offering, allowing them to compete costs are an intolerable extortion and directly with the banks. As direct members is urging businesses to fight back. of the Saxo Payments marketplace, these enterprises create a new revenue stream Creating a payments for their business by using a web platform marketplace in their own name in order to provide Transfer fees mean businesses are their merchants with bank transfer losing money unnecessarily when sending capabilities. It is a solution that is truly or receiving internationally empowering global trade, 16273 Advertpayments for Sunday Telegraph_Layout 1 11/05/2015 16:30 Page 1 while ensuring using a traditional bank. Saxo Payments that financial regulation is completely

I

well for consumers, why are businesses slower to follow suit? The traditional banks are profiting from companies dithering over seeking a better service – and businesses are paying for it.

Businesses seem to be afraid to stand up and demand instant global bank transfers, cheaper international payments, access to low FX rates and a better, more customer-centric service. But that is now set to change.

The long overdue modernisation of the financial industry has begun, with Saxo Payments leading the charge.

Anyone not already on board will be left further behind by the day.

adhered to, without impacting on business success.

This is how payments should be.

Saxo Payments believes it will be the norm in future.

A world not shrinking quickly enough We have all heard the cliché of the internet and/or cheaper travel making the world a smaller place. If it’s been said for long enough to become a cliché, why are payments still lagging quite so far behind? The simple answer is demand.

It appears that consumers are now more willing to switch bank accounts to get the best offer and benefits for their personal needs, forcing providers to respond with better offers. If it works so

+44 (0)20 7961 0812 info@saxopayments.com

IMAGINE A WORLD WHERE...

International bank transfers happen in seconds, rather than days The cost of international bank transfers doesn’t eat into business profits Every box is ticked when it comes to compliance You don’t need to imagine – Saxo Payments is making that possible now

Visit www.saxopayments.com

Saxo Payments. Banking re-defined.

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Future of payments

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Inspector Dogberry

By Matt Smith, web editor

Rebel rebel… with a cause As a born-and-bred London hound, the Inspector is keen to support local industry and communities. That’s why, when he travels to Brixton, he uses the B£ (Brixton Pound).

The currency is used only by Brixton-based independent shops and traders, with the primary purpose to strengthen the local economy and give an incentive to people to use independent local businesses. The currency stays in the Brixton area, increasing wealth to traders and improving community connections.

Research by the New Economics Foundation has shown that money spent with independent businesses circulates within the local

economy up to three times longer than when spent with national chains. Some of the goals of the Brixton Pound are to help protect jobs and livelihoods and build resilience in the community against difficult economic times.

Businesses can even pay their business rates to Lambeth Council using the currency, and there is also a payroll scheme enabling firms to pay a small proportion of wages in Brixton Pounds to willing employees.

Another reason why Dogberry likes using the Brixton Pound is

11

Total Payments because he is a big David Bowie fan – the singer was born in Brixton in 1947, and one of the notes features the music legend. Each note commemorates a local hero celebrating the community’s history, art, politics and culture of the area.

The notes also contain a number of security features, such as watermarked paper by specialist secure printers, customised holograms and embossed numbering.

Payment is not restricted to cash – users of the Brixton Pound can also pay online or by app, and residents have even been piloting contactless systems.

Brixton is the first urban area to have a local currency programme in the UK, but others have emerged, including Totnes, Lewes, Stroud and Bristol.

There are also other areas in the process of developing their own versions, including Exeter, Hackney, Kingston and Oxford.

http://totalpayments.org/ The Total Payments blog brings together the latest news, opinion and infographics from the payments industry, covering everything from the latest mobile technologies to tactics to help prevent fraud. The site also offers downloadable guides and summaries to help you reduce cart abandonment and adopt new systems such as near-field communications (NFC).

Mobile Payments Today http://mobilepaymentstoday. com/blogs Journalists and other industry experts share their thoughts on the future of mobile payments in Mobile Payments Today’s blog section. Recent posts explain why mobile wallets are “spinning their wheels in the mud”, taking a look at their consumer adoption problems and how they might be resolved.

Apple Pay (FREE – iOS)

The benchmark for mobile payments since the launch of the iPhone 6. US customers can pay using smartphones and their fingerprints.

Paym (FREE)

This clever system lets you pay via mobile using only your phone numbers. Sign-up is required, but there’s no need to download an app.

Twitter: @dogberryTweets

PayAnywhere Blog http://payanywhere.com/blog The team behind cloud-based tablet payments solution PayAnywhere discusses industry developments as well as more general digital retail on the firm’s blog. After all, your business needs to make the most of branding and social media to build itself up and make the most of mobile payments.

Talking Payments https://talkingpayments.com/ blogs Specialist payments website Talking Payments has a section full of blog posts from its writers and other experts. Recent posts cover topics including biometric security, in-branch digital banking and the reasons why retailers should continue to invest in security for their payments systems.

Businesses must balance the opportunities and risks of mobile commerce

M

obile commerce has opened up enormous business opportunities.

Thanks to a relentless pace of technological development, shoppers and businesses using little more than a smartphone or tablet computer can now buy goods and services in just a few clicks from retailers and other sellers around the world.

But even as new markets and connected consumers are opening up vast possibilities for the 21st century business, many are not yet doing enough – and perhaps not seeing the need – to counteract the accompanying fraud risks. The

third-annual Mobile Payments & Fraud: 2015 Report, commissioned by Kount, The Fraud Practice and CardNotPresent.com, questioned nearly 1,500 fraud and payment professionals representing retailers, fraud and e-commerce service providers, card issuers and card associations. It found the number of merchants supporting mobile commerce continues to climb, with 68.7 per cent of all retailers already doing so, and a further 20.5 per cent planning to support it from this year.

Most are clear about the opportunity: some 89.1 per cent say the channel is very or somewhat important for their growth plans, up from 83.5 per cent last year.

But there are also barriers. The biggest obstacle, said 27.8 per cent

of respondents, was the need to make transactions easier. Some 19.5 per cent said the sheer complexity of new payment types stood in their way. Against this background, it seems working out how to address the fraud risk is falling in importance – some 11.3 per cent of respondents said this was a key challenge for them, down from 20.1 per cent last year.

“It seems everyone knows that mobile is finally poised to make an impact, but the

urgency to make sure mobile fraud protection is in place is lacking,” said Brad Wiskirchen (inset, far left), CEO of Kount.

“Organisations must ensure IT departments are talking with fraud teams to understand risks and rewards or mobile fraud will grow into a bigger issue.”

0844 293 9764 www.kount.com

12 · Business Technology · May 2015

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INSIDE TRACK Chinese e-commerce to hit $1trillion Navigating by 2019 Chinese e-commerce the trends With giant Alibaba’s recent IPO new heights, it seems affecting reaching the bar has been set high the UK A payments industry

E

volving shopping habits, new technology and regulatory change are just three of the main drivers that are shaping the payments industry now. As a leading payments provider it’s Elavon’s role to help our customers, both large and small, navigate through this rapidly changing and complex industry without distracting them from their core goals of managing and growing their business.

Changing consumer behaviour In the UK alone, the value of credit and debit card transactions in 2014 totalled a staggering £566.6billion.

This resulted in approximately £18,000 being spent every second, making the UK the largest card market in Europe.

In 2015, this growth rate looks set to increase given that consumer shopping habits continue to evolve as alternative ways to pay become available.

Buying goods and services via desktop, tablet or mobile devices is moving customers away from traditional till points and opening up new ways for a transaction to be completed. Thanks to NFC and contactless technology, consumers are on the cusp of being able to turn their mobile phones into payment devices – making the purchasing process quicker, cheaper and more convenient for both customer and retailer.

The key to managing consumer expectation is to embrace the new technological developments as they come to market.

Technology and the digital revolution Digital and mobile have been the most disruptive influences in the history of modern retailing. However, for businesses looking to keep up with new technologies investment costs are high and the choices they make need to be as future proofed as possible.

Emerging technologies such as the cloud, software advancements and apps are changing the type of services customers expect us to provide. Therefore, in today’s world, providing just a payment terminal is no longer enough for us and our customers to be successful.

Complying with new regulation In addition to the onward march of technology, the payments industry is now facing greater regulatory scrutiny. Since April 1, the Payment Systems Regulator (PSR) – the new economic regulator for the UK’s £75trillion payments industry – has been in place. This new regulatory body has an explicit mandate to champion innovation and competition.

“Our approach will bring change to the payments industry, injecting competition and innovation where it is needed most and putting the interests of the people and businesses that use payment systems front and centre,” says Hannah Nixon, managing director for the PSR. With the PSR keen to embrace innovation, the payments industry will be empowered to provide a wealth of new customer propositions and we intend to remain at the forefront of these innovations while navigating the regulatory agenda.

It’s clear that evolving consumer behaviour, new technology and regulatory change are coming together to introduce complexity and the potential to confuse and distract businesses from their core goal, growth. Helping customers to understand how these three factors interlink, and in doing so simplifying the decision process on which types of payment to accept and through which channels, is a critical role for any successful payments provider, and one that Elavon remains committed to for the benefit of its customers.

Andrew Key is president of Europe, Elavon Michelle Tompkins is head of European marketing Michelle.Tompkins@elavon.com

ccording to Forrester Research, total e-commerce spending in China reached $307billion in 2013. Thanks to recent growth and technological development, that figure is expected to mature at a compound annual rate of nearly 20 per cent until 2019, exceeding the $1trillion threshold.

Both mobile and online commerce is statistically growing, thanks in part to a wider availability of broadband across the entire country and into the more rural parts of China.

As of 2013, China has been the world’s largest e-commerce market. Citing Forrester data, TechCrunch reported that Chinese e-commerce hit an estimated $44bn in 2014, or nearly 10 per cent of retail sales in China that year. Alibaba currently holds close to 60 per cent market share; by comparison, its top competitor, JD.com, has a 21 per cent market share.

Logistics will likely play a key role in determining

the future maturation of Chinese mobile and e-commerce. Companies are now promising quicker delivery times to keep up with market demand and customer expectations.

They need the appropriate back-end infrastructure in addition to an accessible payment processing platform. Major players in the Chinese e-commerce market are already working to improve their back-end logistics and delivery models.

What will be your share of the $1trillion pie? When you’re ready to begin marketing in China, partner with companies that know the lay of the land, and with whom you can establish trust and rapport. PacNet Services offers easy access to local currency payment processing including UnionPay, China’s top payment brand, personalised customer service, and clear, easy-to-reconcile reports. +353 61 714360 www.pacnetservices.com

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Understanding the challenges facing the European payments market

The balance of M power has moved into the hands of digital consumers

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early every adult in the UK is now a digital shopper, with many using two or more devices to create their own unique shopping journey (econcultancy.com).

In fact, according to Google Search data approximately one-third of all CPG (consumer packaged goods) searches now originate from smartphones.

The balance of power has moved swiftly and decisively away from brands into the hands of the digital consumer.

But while the shopping experience continues to evolve, retailers who ignore the checkout do so at their peril. An easier-to-use checkout and a feeling that the payment is going to be secure can contribute to a happy, satisfied and loyal customer.

Storing payment details is becoming standard practice, with the adoption of one-click (or one-touch) checkouts and digital wallets to ease the payment process. Using payment data may also help identify any issues within a payment process and can help to better understand customers’ payment behaviour. However, the increased complexity of PCI-DSS compliance may lead many retailers to consider alternative ways to secure their payment data and reduce their compliance requirements.

So with all this change, what are the predictions for how consumers

will pay for their goods in 10 years’ time, and what does this mean for the future of payments?

Current innovations within the payments sector include digital wallets, such as Apple Pay, that combine both enhanced encryption and biometric authentication. A report by Aite Group (The Future Of Voice Biometrics) found that the addition of a fingerprint sensor to the iPhone 5s effectively brings biometrics into mainstream consciousness and acceptance.

The range of biometrics that can be used for payment authentication is varied, from behavioural, signature, and voice biometrics to more interactive biometrics, such as fingerprint or facial recognition.

But while payment options are quickly expanding, so too is the

cyber-threat, meaning that data security will always need to be a priority for retailers regardless of payment type.

Consumers need to be assured that their payment is going to be secure – no matter which device they shop with.

Among UK online shoppers, more than 50 per cent of consumers have security concerns about using their smartphone to make purchases (Dynamic Markets Online Retail Challenges: 2014).

The use of a hosted payment page that dynamically adopts the design of your m-commerce site together with encryption tools that help secure payment data from within mobile enabled websites and native apps, can offer scalability for retailers and additional protection for consumers.

Retailers may not be ready to facilitate a huge move to digital payments, but those who don’t keep up with consumer purchasing habits will risk losing market share to their more agile competitors.

For more information, contact Chase Paymentech Europe 0845 399 1120 www.chasepaymentech.co.uk Chase Paymentech Europe Limitied, trading as Chase Paymentech, is a subsidiary of JPMorgan Chase Bank, N.A. (JPMC) and is regulated by the Central Bank of Ireland. © 2015, Chase Paymentech Europe Limited. All rights reserved.

oney20/20 is creating an entirely new, world-class experience for European innovators. The raison d’etre of Money20/20 Europe is to enable payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology.

With the industry currently going through a massive product development phase, significant collaboration across different verticals is required to develop new winning propositions.

Money20/20 Europe will provide the platform to aid the growth and development of the market, bringing together the community from the leading banks, fintech startups, retailers, mobile network operators, regulators, payments enablers and tech firms.

Who will be there?

Money20/20, scheduled to be held at the Bella Centre in Copenhagen from 4-7 April 2016, will host several thousand delegates from across the globe representing all sectors of the payments and financial services ecosystem.

Speakers at the event are the leaders defining the future of payments and financial services in the context of

connected commerce, and around half of our speakers are the CEOs/founders of their organisations.

We have already confirmed more than 70 out of 400 speakers, including: • Brian Cassin, CEO, Experian • Paul Galant, CEO, Verifone • Nicolas Huss, CEO, Visa Europe • Patrick Gauthier, VP, external payments, Amazon • Pieter Van Der Does, CEO and co-founder, Adyen • Andreas Kubli, managing director, UBS AG • Kristo Käärmann, CEO, TransferWise • Alexander Zumdieck, director, Techstars METRO Accelerator, METRO GROUP • Peter Smith, CEO and co-founder, Blockchain • Marcus Treacher, global head, innovation, payments & cash management, HSBC To find out more visit www. money2020europe.com or email europe@money2020. com to speak to the team

Business Zone

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The future

Why the pursuit of innovation is relentless

Digital loyalty: the new currency G one are the days when a customer would stay with the same bank for 20-plus years, taking out mortgages, loans and making deposits and investments.

Unfortunately, with today’s commoditisation of bank products and services, customers are quick to move.

Loyalty programmes are one of the few areas where banks can truly differentiate, engage existing customers and attract new customers, reducing churn and increasing retention, customer lifetime value and therefore profitability. The more a bank can personalise their loyalty programmes and give customers realtime compelling offers, the better chance they have at retaining that customer.

The most common loyalty programmes being offered by banks today tend to be tedious for the customer to manage, offer no or very little capability for customer personalisation and don’t help the customer build a connection to the bank’s brand.

Traditional loyalty programmes such as discounts, points and cashback promotions used to be the only options, but now there is a better way.

Putting customer data to work Companies like Smart Engine have developed advanced technology making consumer purchase data accessible within the secure firewalls of banks to ensure privacy. For the first time, banks can evaluate customer data from multiple data sources to provide the highest

offer conversion to their customers through personalised targeting. This breakthrough is called Card Linked Marketing and it is dramatically changing customer loyalty programmes.

Card Linked Marketing With Card Linked Marketing your customers will see highly relevant ads targeted to them based on their recent purchase behavior. Predictive analytics identify the most profitable customer segments for merchant target marketing campaigns. Smart Engine integrates SKU data with information from your CRM systems, merchants and social networks to identify buying behaviour and product preferences of your customers.

This type of platform ensures that consumer data will remain private while delivering personalised offers right to a customer’s mobile phone with the highest chance of engagement. One of Smart Engine’s European customers is a payment processor and acquirer running loyalty platforms on behalf of multiple banks. This particular customer issued 10,000 unique coupons with a 79 per cent activation conversion and a 27 per cent rate of conversion into redemption.

Smart Engine is based in Vienna, Austria with offices in New York, Hong Kong and Moscow +43 1 9195041-0 www.smartengine.at

In focus: Why customers need a variety of payment methods Video special

Peter Cheese, chief executive of CIPD, talks about how companies can turn their most valuable asset into a competitive advantage. http://business-reporter. co.uk/videos/2015/04/ how-to-turn-your-mostvaluable-asset-into-acompetitive-advantage

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ayments have come a long way since the advent of online shopping – it’s no longer adequate to offer customers one single way of paying – in-store or online. Customers expect variety in payment methods, to match the variety of goods online – if these options aren’t available to them it’s likely they will abort their transaction.

Because of this, customers are putting pressure on merchants to react and offer a wide range of payment alternatives. By not offering a variety of payment options, potential buyers are abandoning a

transaction before they even start to make the payment, which is the main turn-off for many international shoppers, and may end up on a competitor’s site.

Despite high interest in innovative methods, many businesses remain more

concerned with fraud, regulations and costs than with meeting customers’ expectations. However, if merchants ignore this issue, potential revenue streams and wider customer reach could be detrimentally damaged, along with

their brand reputation.

Merchants need to take a leap of faith and embrace the opportunities presented by offering new payment methods – be it overseas methods or new innovations presented by Apple, Samsung or Google.

By doing so, merchants can ensure customers are able to complete a transaction, once the brand has caught their attention, all of which is a vital part in order to flourish both domestically and internationally.

Simon Black is CEO of wthe PPRO Group www.ppro.com

Cartes Secure Connexions 2015 will take place at Paris-Nord Villepinte Exhibition Centre from November 17-19. The 30th edition of the digital security industry’s most global event will showcase the most comprehensive range of payment, identification and mobility solutions in the world.

The industry has endless capacity for innovation and an unfailing ability to anticipate the needs of professionals and end users alike. As a tribute to this vitality, the main theme of the 2015 edition will be “Unlimited Innovation”, clearly reflecting this energy in perpetual motion.

The upcoming edition aims to bring together in one place all the latest and best innovations from all over the world.

The whole philosophy behind the event will be embodied in an illustration of a Moebius strip, representing infinite dematerialisation. The event strives to keep pace with fast-changing technologies in order to better address the challenges facing the industry, bearing in mind that digital security is an increasingly strategic and high-profile issue.

Next November, 460 exhibitors and 20,000 visitors representing finance, retail, public service, identity and access, telecommunications and transport, from 160 countries, will converge in Paris to explore the way our digital world evolves. Don’t miss this unique occasion to network, acquire expert insight into key industry issues and develop your business and register on www.cartes.com. www.cartes.com

Business Technology · May 2015 · 15

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The debate What payment innovation will have the greatest success in 2015?

Anders la Cour Chief executive officer Saxo Payments The real success in payments in 2015 will be where the barriers to economic growth that many businesses simply sleepwalk into accepting are removed. The innovation has to come from those businesses that facilitate payments using better, faster, more costeffective ways to enable the immediate transfer of funds from one organisation to another, irrespective of geography.

But ensuring that the flow of benefits works in every direction is also crucial. By that, I mean that every stakeholder needs to become part of the same community which has no barriers. Payments should occur instantly regardless of geography, as if the two parties – payer and receiver – were next door neighbours. It’s not a pipe-dream. It’s possible now – and the payment service providers are already buying into it. But to really make it work, the merchants using those PSPs have to join the party. So the payment innovation that will have the greatest success is the one that disrupts the traditionalists the most.

Brad Wiskirchen CEO Kount

Justin Payne Campaign director Lyonsdown

Digital disruption is shaking up the payments industry. However, many innovations will fade away just as fast as they arrived, some will provide a bridge toward a brave new way to pay – the mobile.

No one organisation can be the single owner of the customer – everyone needs to collaborate. For this reason, in my opinion, the most successful payment innovation in 2015 will be Paym. Launched in 2014, Paym is a simple peer-to-peer mobile payment platform, free and intuitive but, most significantly, an industry initiative covering all the big banks.

The biggest digital disruptor is the mobile phone, which is liberating the consumer in a way that’s very natural for “generation mobile”. Paym will ride the wave of mobile payments like no other initiative to date. While it’s not sexy, it’s practical and, like no other recent innovation, it’s pervasive – available to nearly all consumers.

I’m not sure we will see one clear leader in new payment methods in 2015: solutions are so diverse, especially in mobile commerce, that it’s hard for one single innovation to stand out. Rather, this year’s winners will be those payment service providers that make it easier for the customer to use their preferred method to pay. Such approaches also enable customers to try out new methods that might better suit their needs – before going on to use them regularly.

As businesses sell more through digital, merchants will see a more pressing need to face the risk of fraud head on, implementing a strategy that is updated at least once a year. In 2015, they are asking for more than flexibility in payment types from their payment service providers; they also want to know that their transactions are secure.

Adding fraud prevention to the payment and authorisation process is a logical extension, and one that’s being adopted rapidly.

As Apple Pay rolls out globally during 2015, we will see a sharp uptake by the public of this mobile payment platform. What Apple does so well is to create user-friendly services that you can rely on and, most of all, trust.

This will see the public open and willing to embrace mobile payments in numbers not seen before.

Apple Pay will also have a profound effect on changing the public’s negative perception of mobile payments, and this should see the whole industry benefit as the understanding and acceptance of mobile wallets blossoms. The chicken-and-egg scenario of who acts first, the merchant or the customer, has stood in the way of high-adoption levels of mobile wallets up to now.

Apple’s strong brand will create a globally accepted, ubiquitous mobile payment platform that people will trust and use. The leather wallet’s days are certainly numbered…

01904 567999 www.loyaltyconsulting.co.uk

0844 2939 764 www.kount.com

020 8349 6488 j.payne@lyonsdown.co.uk

Mark Bergdahl Managing director Loyalty Consulting UK Ltd

+44 (0)20 7961 0812 info@saxopayments.com

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s payments continually evolve with new mobile methods, crypto currencies and payment formats such as SEPA (Single Euro Payments Area), companies of all sizes are turning to cloud platforms to adapt. Across the board, adoption of cloud-based technology is growing at a compound annual rate of 17 per cent worldwide, according to analyst firm Apps Run the World (ARW). For the corporate treasury market, ARW forecasts subscription software to grow even faster at a CAGR of 23 per cent. This makes sense as cloud-based treasury technology is built for change.

Corporate treasury organisations must be nimble in how they respond to new market requirements. Cloud platforms empower treasuries because they allow companies to evolve with payments innovation and new regulations. They enable companies to standardise processes across the enterprise, become more strategic, and configure technology to fit to their needs as they grow. But even before strategy and growth, corporate treasuries must first get the essentials of payments right. For large companies and mid-sized companies, payment requirements are a matter of differing priorities.

Take connectivity, for example.

Large companies value centralised bank connectivity because they have several hundred bank accounts in many different countries. In a Reval survey of more than 200 financial professionals globally, 47 per cent of organisations said they had up to 500 or more bank accounts, and 42 per cent said they were planning to decrease their number of accounts in 2015. Centralisation allows for consolidation, providing

Spotlight: Getting the future of payments right with cloud platforms

companies control and cost savings.

Mid-sized companies have fewer bank accounts, although they also value connectivity over spreadsheets. They are moving off bank portals to automate a standardised payments process. Whether

companies are involved with centralisation and connectivity or standardisation and automation, control must be in place over payments if they are to look ahead

to plan liquidity more effectively, short term and long term.

Cloud-based treasury systems not only connect companies easily to their global bank partners, but they also streamline the entire payments workflow with all information documented and data secured from initiation to approval and release. All companies looking for payment capabilities need to ensure that data, at any stage, is secured. Cloud-based treasury technology should enable multiple authorisation steps throughout the payments life-cycle, from initial creation through authorisation, confirmation, and encryption of information, even when data is at rest – in other words, not moving through networks.

As companies continue to expand into new markets and add new banking relationships or new currencies, cloud-based treasury systems can offer secure, flexible and scalable solutions for getting payments right. With 67 per cent of respondents in Reval’s survey reporting that their plans over the course of the year include investing in payments technology, and half saying they want to either improve the payments capabilities of their existing treasury management systems or invest in or implement a new treasury management system, the future of payments may very well be riding on the cloud.

Mark Johnson is EMEA managing director at Reval, a cloud platform provider for treasury and risk management +44 (20) 3192 5650 info@reval.com