KEIL HUBERT Young people are turning their backs on cyber security jobs
MONEY TALKS Why digital wallets still have some way to go
COIN ARTISTS How the Royal Mint’s new £1 coin is the most fraud-resistant denomination in the world
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AWARD-WINNING BUSINESS JOURNALISM • MAY 2017
Giving it all FUTURE OF PAYMENTS EXCLUSIVE REPORT How payments technology is helping Comic Relief fight poverty across the globe
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Distrust of financial institutions is turning young people away from careers in cyber security OPENING SHOTS KEIL HUBERT
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HE NEXT time your corporate network gets hacked because of sloppy employee security practices, blame Wells Fargo bank. Specifically, blame the perpetrators of Wells Fargo’s massive fake-account scam, because the criminals responsible for that mess have (as a side effect) crippled many young adults’ faith in banking across the board. This has given many young workers a sense of hopeless fatalism which undermines our information security practices. I think I’ve got some insight into t he A merican young adult zeitgeist. I teach undergraduate university students and recent grads how to find work in the IT sector. I teach citizenship and “personal management” merit badges to Boy
Scouts. I also assess older Scouts for their suitability to be awarded the Eagle rank. These activities allow me to listen to the concerns of workers in the 16-25 age bracket. The most startling thing I’ve seen change over the last ten years – since the Great Recession started – is how young people’s trust in critical institutions has corroded. When I teach Scouts how to balance a chequebook, I often encounter resistance. “Why bother?” they ask. “The banks will just take money out of your account. There’s nothing you can do about it.” When I teach jobseekers how to protect sensitive electronic information, I hear resigned sighs. “Why bother?” they ask. “The banks have all our personal information and abuse it to open false accounts that we pay for.” When I ask Eagle Scout candidates how they’re planning to pay off their student loans, they shrug. “Why bother?” they say. “The banks invent fees and rules to ensure that you can never stop paying them.”
“We pore over the post-event analysis every time a baddie pulls off a major crime because we want to know not just what they did, but why and how they did it”
I’ve spoken at length with students who have carried this sense of resigned fatalism into all aspects of their daily lives. They don’t balance their bank accounts to look for potential fraud or correct errors. They lazily reuse passwords between accounts. They dispense with anti-malware tools and ignore browser sandboxing. Many don’t even keep their phones updated with the latest security patches. Why? Because they’ve been relentlessly trained by thousands of media reports since they were old enough to pay attention that the banks we’re all required to trust in order to function in society are amoral, predatory, criminal enterprises that routinely violate customers trust with total impunity. So, sure. “Why bother?” indeed. I suspect that this defeatism is going to have profound negative ramifications for corporate cyber security departments for a very long time. We can’t not hire these kids – they need jobs and we need their affordable labour. The thing is, their “why bother?” attitude predisposes many of these new
hires against diligently applying required cyber defence practices to keep our information and infrastructure reasonably secure. They don’t see a reason to waste time trying, so they don’t make an effort – thereby leaving our systems and networks dangerous exposed. The solution seems to lie in giving them something worth believing in. Establishing and maintaining our young employees’ trust may be the toughest business challenge of t he next t wo decades.
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Future of Payments
Half of recorded crimes are cyber-related fraud, say official figures
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Online fraud is costing the UK £11bn per year, and Barclay’s has launched a new national awareness campaign. Joanne Frearson reports
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ARCLAYS HAS launched a £10million national digital safety drive to increase the public’s awareness of financial fraud risks. Latest crime figures showed that fraud and cyber offences have cost the UK £11billion and make up half of all recorded crime. Laura Flack, Barclays head of digital safety, said: “Each one of us probably knows someone who has fallen victim to a criminal fraudster. Crooks are using ever-more-sophisticated tactics to trick people into handing over their bank details, or to pay money to a fraudster when they believe they are simply paying their builder or solicitor. “It’s alarming that younger people and those in cities are more at risk. We need to supercharge our digital know-how and talk to our friends and relatives to prevent these crimes from happening. Often, staying safe isn’t rocket science. A few practical steps and a dose of vigilance can boost your safety immeasurably. Remember, if something sounds too good to be true, it probably is.” Research by Barclays has revealed that a quarter of people in the UK have experienced a cyber-fraud or scam in the past three years, 18 per cent of them more than once,
“The need to fight fraud has now become a national resilience issue, and we need to boost our digital safety levels to close the gap” – Ashok Vaswani, Barclays
suggesting that many cyber-crimes go unreported. The national Digital Safety Index survey also found that London, Bristol and Birmingham were the UK’s scam capitals, with the largest gaps in public resilience. London and Bristol also topped the tables for the most reported cases of fraud, with Manchester joining them in the top three. Newcastle reported fewer cases of fraud and scams, while Liverpool reported a particularly high number of impersonation scams. Highly educated Londoners (master’s degree and above) aged 25-34 are the UK’s most vulnerable group, with men slightly more at risk than women. Younger people (25 to 34-yearolds) were twice as likely to be victims of online fraud than older generations, putting to bed the notion that older people are more at risk of being duped by cyber criminals. Nearly a fifth (17 per cent) of people who have been a victim of a fraud or scam took no action to boost their digital defences as a result. Only 17 per cent of people in the UK could correctly identify basic digital threats such as
social media messages intended to trick users into sharing personal details or downloading malware. “Fraud is often wrongly described as an invisible crime, but the effects are no less damaging to people’s lives,” said Ashok Vaswani, chief executive of Barclays UK. “As a society our confidence in using digital technology to shop, pay our bills and connect with others has grown faster than our knowledge of how to do so safely. This has created a ‘digital safety gap’ which is being exploited by criminals. I believe the need to fight fraud has now become a national resilience issue, and we all need to boost our digital safety levels in order to close the gap. “That is why we are launching this new national campaign on digital safety, and we will do all in our power to arm people with the tools and information they need. But we also need to support and encourage the public to take action to protect themselves, such as changing passwords regularly. “I want to help make digital safety as commonplace as locking your front door. I want businesses, the police and the public to unite and stand shoulder to shoulder together so that we can block and frustrate the bad guys at every turn.”
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Leading the payments charge Michael Harty of The Card and Payments Awards speaks to TSYS’s Kelley C Knutson about how the UK’s world-class payments sector is setting the agenda – both now and in the future
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HE CARD and Payments Awards, in its 13th year, recognises and rewards excellence in service, creat iv it y a nd in novat ion in t he payments industry. The awards themselves are heavily subscribed to by the major industry players, with entries being judged by an independent panel of industry leaders and experts. The desire of the collective to recognise the most innovative ideas, the most significant achievements and t he most consumer-centric initiatives across a variety of disciplines speaks volumes for an industry which puts the consumer at the centre of everything it does. The Card and Payments Awards is a microcosm of the industry where commercial rivalries are put to one side for a night, in the interest of identifying the most recent developments and new benchmarks in customer engagement, marketing communication, social responsibility, anti-fraud, product innovation, advanced technology and more. But do people really care how they pay, and is the consumer really keeping apace of an industry that seems to come up with a new way to pay every week? I had the opportunity to sit with Kelley C Knutson, president, TSYS International Issuer Solutions, part of Total Systems Services (better known as TSYS), one of the leading players in the global payments industry. I asked him for his views on the attitude towards, and the adoption rate by consumers of, new payments technology.
50% Payments made in the UK by 2025 to be made using debit, credit or charge cards Source: UK Payments Report 2016 forecast
MH: Surely consumers are worried about increased incidences of fraud and data security – is this not affecting the adoption rate of new payments methods? KCK: While there is still an underlying concern surrounding security and fraud, which will always exist, most consumers seem to be putting convenience, speed and simplicity ahead of their basic fears surrounding their data and personal details being compromised.
Michael Harty: With more and more payment options becoming available, what trends is TSYS seeing in consumer payment behaviour both in-store and on-line? Kelley C Knutson: There is clearly more online commerce occurring and consumers are getting increasingly comfortable with using a variety of payment instruments when making purchases in the virtual world. In-store, consumers are starting to embrace contactless payments and are getting used to the “tap-and-go” concept for certain [sizes of] transaction at certain types of merchants. While there is an assortment of press coverage surrounding “the Pays” [ApplePay, Android Pay and so on], the consumer usage of these types of payments on their mobile devices is still slower than anticipated. Overall, there is an underlying trend in the reduction of cash in the wallet as consumers increasingly use cards and phones for everyday transactions, especially in the younger and more tech-savvy consumer segments.
MH: Can the industry really keep up the pace of innovation of recent years?
Kelley C Knutson
KCK: New payment options, especially online, will continue to emerge and visible brands such as Amazon and PayPal will continue to enhance their services by allowing an assortment of payment options when the consumer wants to pay. The role of the “faster payments” infrastructure, which allows real-time funds transfers, will also come into play in the very near future. In general, it appears consumers have a desire for flexibility and choice when it comes to their everyday purchase behaviour and while the consumer appetite is there for faster, more convenient, more secure payments, the industry will, no doubt, keep innovating and providing reliable options.
MH: All the innovation is impressive, but do consumers really care about how they make payments for goods and services? Surely the consumer will simply adopt whatever payment options are presented? KCK: Actually, if asked the question “do you care how you make payments for goods and services?” the initial answer might be no. However, as one does further analysis around individual consumers (or consumer segments), merchant types, online versus in-store transactions, cards/mobile phones and so on, the answer would probably come back as a resounding “yes, it does matter what payment type I use, how I use it and when and where I use it.” Most consumers (though they might not be conscious of it) tend to mentally compartmentalise which payment instrument (cash, bank transfer, direct debit, debit card, credit card, short-term instalment loan, standing order) they want to use depending on the transaction type and value. Some consumers do this religiously and are very consistent in their behaviour while others are more reactive and driven by their current financial situation, as well as other environmental factors such as location, surcharge fees or incentives. More and more, we will also hear the term “embedded payment” used when
discussing general consumer spending habits. This means that the consumer will have already set a default preference for the type of payment they want to use for a given type of situation or transaction, and the “one-click” concept will apply on a regular basis. In short, our payment options will only grow and the consumer must proactively manage their choices to fit their individual financial situation. We have known for a long time how exceptional, and world-leading, the payments industry in the UK and Ireland really is. It’s all the more impressive when you consider the extent to which this industry puts the consumer at the centre of everything it does. If I wasn’t entirely convinced before speaking to Knutson, I am now. The rate of innovation in the payments industry and how everyday payments are made is critically important to the consumer and will continue to play a vital role in our daily lives as well as setting the tone for consumer-led spending in the British and Irish economies overall. And wherever that perfect balance between convenience and security will end up, I bet someone somewhere will have a new idea. INDUSTRY VIEW
020 7866 8188 www.cardandpaymentsawards.com
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Digital wallets: are we there yet? Olga Masalkova investigates how close the industry is to a genuinely convenient smart payments solution
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“Mobile wallets are just a fantastically convenient way to pay. It’s what people refer to as frictionless – there is no need to reach for your wallet or your handbag” – Ben Wood, CSS Insight
HEN MOBILE wallets were first introduced, the predictions were that the days of cash and credit cards were numbered and the new technology was going to revolutionise our lives. Indeed, a recent study by Mastercard – which analysed more than 3.5 million conversations from the past year across different social media channels such as Twitter, Facebook, Instagram and Weibo – concluded that the use of digital wallets dominated 75 per cent of the tracked discussions. “This year’s study notes a change in the level of interest for new ways to shop and pay that only a few years ago would have seemed far fetched,” says Marcy Cohen, vice president of dig ita l com mun icat ions at MasterCard. Ben Wood, mobile and wireless industry analyst at CCS Insight agrees, saying that mobile wallets such as Apple Pay, Android Pay and Samsung Pay will continue to expand their presence in the market due to their simplicity, security and reliability. “Mobile wallets are just a fantastically convenient way to pay. It’s what people refer to as frictionless – there is no need to reach for your wallet or your handbag,” says Wood. “If you have a smartwatch on your wrist
or your phone in your pocket, you can just get it out and make a payment, and on top of that you have the added security – you have your biometric data stored, you’ve got your fingerprint to confirm that the payment is genuine.” However, some critics point out that, even though people are aware of the benefits that mobile wallets bring, they are still reluctant to use the new technology, preferring to stick to traditional payment methods such as cash and credit cards. “There is always resistance to new technology – it’s the same way that taxi drivers want to stop Uber,” explains Wood. “Some banks are resistant as well, as for them it’s ultimately about the loss of direct control of the customer. So even though the payment ultimately leaves from an account at their bank, with Apple Pay for instance, they feel they are losing control of the transaction”. And not only control. Another issue is the fee that banks have to pay to mobile wallet providers. Apple, for instance, has recently won a major court battle against severa l major ba n k s in Australia, who were trying to negotiate with the giant to allow iPhone users to make payments with their own integrated digital wallets instead of using Apple
75% Percentage of conversations tracked for a Mastercard study on social media that included references to digital wallets
Pay, therefore avoiding having to pay Apple’s fees. Apple’s rival Google, which is behind Android Pay, tells Business Reporter it is trying a different approach to get more banks on board. “We are pleased with the progress we are making, but it’s still a long way to go,” says spokesperson Andrew Brennan. “We want to make it easy – you always have your phone with you, it’s just easy to press a button. We support a number of banks and we are adding more banks.” Banks are not the only obstacles on the way to digital wallets’ conquering the world. As Wood believes, smartphones themselves are often not compatible with advanced technology: “It’s very easy for people in the technology industry to get excited about it, because they’ve got high-end phones that support the technology you need for fingerprint sensors, for example,” he points out. “However, there is only a certain per cent of the population at the moment who have those latest phone models.” Not all places are geared for accepting mobile payments and, even if they are, sometimes those payments take longer to process. “Payments with some of the phones on the London Underground are slightly slower than using an Oyster Card, and it can be rather frustrating,” says Wood.
However, he adds, that situation will soon change as more and more people adopt more advanced and capable smartphones. But even if you overcome all the challenges mentioned above, there is still one major one for digital wallet providers to solve: how do you access your cash when your phone’s battery runs out? At least one digital wallet provider has already solved that problem by introducing the Kerv ring. It looks just like a normal ring and you wear it as one, but you can also pay with it by tapping it on a contactless payment machine, just as you would with your phone or contactless bank card. “It’s a very slick solution – you don’t need the battery all the time, it’s waterproof, so you can even swim with it,” says Wood. “It’s a fantastic way to make payments on holiday.” Wood thinks that ultimately, the required technology is in its infancy and can only improve – and that digital wallets will soon be a common and practical way of making payments for most people. “I think anyone who thinks that cash will cease to exist anytime soon are not being realistic. Cash will continue to exist for a very long time, but alternative payment methods will just make it easier for people to have options in how they prefer to pay,” Wood concludes.
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Blocking out the future of transactions 26-28
JUNE 2017 COPENHAGEN
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SING THE code behind Bitcoin transactions in other aspects of everyday life has been an aspiration for some time, but blockchain enthusiasts say the technology is already transforming the way we store and deal with data and pay for things in the real world. Originally created as a perfect bookkeeping system for Bitcoin, blockchain is a distributed digital ledger that records and tracks Bitcoin transactions. Once a transaction has been accepted, verified and approved, it’s then encrypted into a special code called a hash – a unigue digital f inger print of t hat piece of information. Transactions, therefore, become not only easy to trace, but also impossible to tamper with, as any attempt to modify or change the recorded information means the unique hash will also change and so won’t match the original. The simplicity, transparency and applicability of this digital recordkeeping technolog y have made blockchain go far beyond its original purpose, and are changing the way payments are made. Eddy Travia, a pioneer investor in blockchain technology and a CEO of the first London-listed blockchain investment firm Coinsilium, sees a bright future and potential in the technology. “If only two or three years ago we were talking about potential blockchain applications, now we are actively using this technology in different spheres. So blockchain technology has already as an infrastructure technology, sort of a back-office system. For instance, there is a company in the US which has created a blockchain technology for the mortgage
Olga Masalkova talks to Coinsilium’s Eddy Travia about how the use of blockchain is gathering pace in the payments sector industry. So obviously when you apply for a loan in a bank, they may be using it to track and store all your documents, but you wouldn’t necessarily feel it in any way.” In fact, says Travia, almost every major bank – either on its own or in a consortium such as R3 CEV – is working on developing this technology. Santander believes the technology is fast, minimises errors and could save banks up to $20billion annually by 2022. Other institutions, such as Nasdaq, have started to use blockchain in their trading applications, such as in smart contracts. “A simple smart contract works similarly to a vending machine on the blockchain – the input could be the gold price and the output could be a payment to someone. For example, if you have a derivative contract based on the gold price and you say that party A will receive that amount of cash if a price, for instance, reaches a certain level, then the smart contract will replicate or be programmed to perform that transaction,” says Travia. Blockchain also opens up a whole new market of micro- or nano-payments – transactions involving very small amounts of money. Travia cites the example of SatoshiPay, a Londonbased company currently using the technology to build nano-payment platforms. “It’s a great way to monetise
content – for example, an advertiser approaches you with a survey and, if you fill it out, they will send you a very small amount of money. Sort of like pay-per-view – you will receive a payment on a very simple mobile wallet. It’s a great new tool for advertisers – you are paying people pay per view. With Visa or MasterCard it doesn’t make sense, but with nano-payments it can work,” explains Travia. Other sectors, such as insurance, have started to use the technology. “There is a company in London called Everledger which uses blockchain to track diamonds from the mines all the way until it reaches the retailer,” says Travia. “It’s a way to prevent fraud and a great method to track diamonds in a unique type of application that’s working quite well.” In many countries, blockchain has picked up governmental support along the way. In the UK, for instance, scientific advisers have encouraged the government to use blockchain technology. “In Dubai, the government has famously announced that they want to move all their government documents on to blockchain,” Travia points out. “They are financing some companies we have invested in and are working on government projects with them.”
“If only two or three years ago we were talking about potential blockchain applications, now we are actively using this technology in different spheres” – Eddy Travia, Coinsilium
So the question is, are we there yet? How soon will the technology become mainstream? Travia thinks it will take at least another five to 10 years for the technology to be properly developed. He thinks that technical problems such as speed – critics say that blockchain transactions can take longer than normal bank ones – can be resolved easily. But the real stumbling blocks are not with the technology itself, but the people surrounding it. One of the main problems, says Travia, is lack of talent – a shortage of IT specialists who would create these applications and investors who would support them. “You know that when you open your iTunes or your Apple applications, Apple is not building those applications,” he says. “ It ’s t hou s a nd s of de ve lop e r s around the world that are building them. You need the same with blockchain – you need people to understand it first and built those blockchain applications. Then it will not be difficult to use.” Another thing holding blockchain technology back, believes Travia, is the lack of a universal standard that all blockchain systems would use. “Standards are helpful for when you deal with new technology. A very easy analogy is mobile telecoms – you wouldn’t be able to use another network, or go abroad and use your phone there, because they would all be operating on different standards. The same thing applies to blockchain: if you want it to become mainstream, you need it to be standardised.” Travia is sure that blockchain technology is on the right track, though, and that it’s only a matter of time before it will firmly integrate into our everyday lives.
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info@lyonsdown.co.uk JOANNE FREARSON
Coin artists T This year saw the introduction of the new, more secure £1 coin, the first in more than 30 years
The coin’s 12 sides are a nod to the old thruppeny bit, decommissioned in 1971
HE NEW 12-sided £1 coin, which launched in March this year, is considered to be one of the most secure coins in the world. It is the first replacement of the denomination in more than 30 years, and was introduced to make counterfeiting of the coin much more difficult. The new features include 12 sides, to make it instantly recognisable to the eye as well as touch, a “hologram” that changes from a pound symbol to a numeral one when the coin is turned, and micro-lettering on the lower-inside rim on both sides of the coin. It also has a new design that shows the English rose, the Welsh leek, the Scottish thistle and the Northern Irish shamrock emerging from one stem within a royal coronet. There will be up to four million new coins produced by the Royal Mint in South Wales per day and around 1.5 billion will be distributed to banks and retailers over the next six months. The old round £1 coins will be returned to the Royal Mint, of which some will be reused to make the new coin. Adam Lawrence, chief executive of Royal Mint, said: “It’s been designed to be fit for the future, using security features that aim to safeguard our currency, and currencies around the world, for years to come. Staying ahead of sophisticated counterfeiters remains a constant challenge and this coin helps in that battle.” To help businesses prepare for the change the Royal Mint and HM Treasury have been
Security features of the new coin include microlettering and a poundsymbol “hologram”
working with them for the past three years. Coin-handling equipment like vending machines, car park ticket machines, selfservice checkouts and any other machines that accepts £1 coins have all been upgraded for the introduction. According to Baroness Neville-Rolfe, commercial secretary to the Treasury the 12-sided coin will help save businesses, and the taxpayer, millions of pounds every year through stamping out counterfeit coins. The current round coins will lose their legal tender status on October 15, 2017. The 12-sided pound is the first coin to be upgraded to make it more secure, but the Bank of England has already started replacing notes in the UK in a bid to stamp out counterfeiting.
T he f irst of t hese was t he new polymer £5 note, which was introduced last September and features Winston Churchill on the design. Security features of the new fiver have included a coloured border that changes from purple to green when the note is tilted, a metallic image of the Elizabeth Tower (“Big Ben”), which appears gold on the front of the note and silver on the back, and a hologram that appears on the front which changes from the word “five” to “pounds”. The Bank of England plans to launch a new polymer £10 note featuring Jane Austen into circulation by this summer, and a new £20 note featuring JMW Turner will enter circulation by 2020. There are no current plans to replace the £50 note.
Why sending money overseas is about to become even more difficult 39% The amount by which correspondent banking relationships in Europe declined between 2013 and 2016
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F YOU’VE ever had to send money across borders, either as a business or an individual, you know just how frustrating, time-consuming and expensive it can be. But according to forecasts from financial industry experts, it may soon get worse. Major banks around the world are increasingly cutting ties with foreign partners, leaving organisations to wonder how they will transfer money across borders once the world’s correspondent banking network begins to contract. For those who aren’t familiar with it, correspondent banking is a process whereby one financial institution provides services on behalf of another. It’s through these relationships that banks are able to process trillions of dollars in cross-border payments every year. But there’s one big problem with this model: transparency. Correspondent banking networks offer payers and payees virtually no visibility into the path of their funds transfer, and banks involved in the process don’t know with any certainty that others in the chain adhere to their same standards of scrutiny. Always risk-averse, the financial industry has expressed growing concern that these relationships could unknowingly be exploited for the purpose of terrorist financing, money
laundering and other nefarious activities. As a result, the correspondent banking model is being called into question.
The decline of correspondent banking North America and western Europe have seen the largest reduction of correspondent banking relationships. Data from the Bankers Almanac, compiled by Accuity, shows declines of 46 per cent and 39 per cent respectively. According to a letter to investors from CEO Jamie Dimon, JPMorgan Chase & Co alone terminated relationships with some 500 foreign partner banks last year. This contraction couldn’t have come at a worse time. The rise of two-sided platforms such as Airbnb, Uber and Amazon has increased the demand for a viable method of moving high volumes of low-value transfers across borders. eMarketer reports that these types of digital retail payments are expected to grow from $1.3trillion in 2014 to roughly $3.6trillion by 2019. Emergent platforms have come to rely on the correspondent banking network for the distribution of earnings to their hosts, drivers and sellers. Could the demise of this banking model also limit the global expansion of gig economy platforms?
New technologies and alternative solutions Fortunately, the gig economy has access to another solution. Cross-border payment functions traditionally serviced by centralised banking institutions have been disintermediated by agile fintech firms such as the San Francisco-based Hyperwallet. Hyperwallet, which recently opened offices in London, has spent more than 15 years building a robust network of financial partners beneath its global payout platform in anticipation of correspondent banking’s contraction and tougher regulatory scrutiny. “We knew then that the banks’ correspondent relationships would never evolve,” explains Peter Burridge, Hyperwallet’s chief commercial officer. “Hyperwallet was created to eliminate payout inefficiencies and costs for platforms requiring rapid cross-border transfers.” A “network of networks,” Hyperwallet’s platform is a viable alternative for businesses that have relied on banks to distribute mass cross-border payments. And with the demise of correspondent banking relationships, it might soon become the only one. INDUSTRY VIEW
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A little bit of give and take Business Reporter investigates how payments technology is helping Comic Relief to fight poverty across the globe
EXCLUSIVE JOANNE FREARSON
£1.047bn
The total raised by Comic Relief since the first Red Nose Day in 1985
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ONATIONS FROM this year’s Comic Relief Red Nose Day reac hed a n i nc red ible £73million, and will help fund projects that will transform the lives of some of the poorest communities around the world. The event, which was founded in 1985 by comedy scriptwriter Richard Curtis and comedian Lenny Henry, this year featured a host of celebrities such as Ed Sheeran, French & Saunders, Sarah Cox and James Corden. Plenty of hard work goes into making the show – not just for the sketches and entertainment on the evening itself, but also stories about how donations are helping to give impoverished children an education, reducing the risk of malaria in countries where it is a danger, or improving people’s mental health. But with a constant stream of donations coming in over one hectic evening, it’s behind the scenes where all the work goes in to make sure Comic Relief has the systems in place to process every payment. Comic Relief has been working with Pivotal Cloud Foundry, a cloud computing platform that processes the donations and helps provide resilience when there is a high velocity of web transactions taking place on the night itself. Normally the average number of donations per second is about 250, but the application has been built to cope with 500. Comic Relief has several versions of the system working at all times, so that if one fails another will step in and be able to cope with the demand. Zenon Hannick, CTO at Comic Relief, says: “On the night this year, we had four systems of the platform running – two on Amazon Web Services in two different zones and two on Google Compute. That allows us not just to have redundancy within two different Amazon Web Services regions, but also across two different Google cloud regions. If Amazon had a problem we could still take all of the donations.” So far Comic Relief has not had to use any of these backup systems, and Hannick says the charity prepares for
any potential doomsday scenarios by running failure tests. Comic Relief has also built its system to be flexible and adaptable to new types of payment systems. For example, Hannick is finding mobile payments have become a hugely popular way to donate money. He has seen the use of mobile go from being only 10-20 per cent of traffic four to five years ago to the majority of traffic when compared with that coming from desktop computers. This year Comic Relief launched Apple Pay as a way to make donations for the first time, making it much quicker and simpler for people to donate money. Colin Humphreys, vice president and CTO of Cloud at Pivotal, says: “A long while ago you could basically donate by phone, and then online donations became a thing. Then we had Pay Pal and Apple Pay – the diverse range of channels by which payments can be taken is only going to increase. “A user-centric mentality is proliferating throughout the world. We are not just thinking about how we can take donations, but how users want to donate.” Text donations have also been big for Comic Relief this campaign, Hannick tells me – this year’s event included an option to donate £20 as well as the usual £10. “That has proved hugely
“Data drives the order of the programme in real time. We are able to drive fast feedback in the way they are collecting donations – the peaks and the troughs and how users are interacting with the system.” – Colin Humphreys, Pivotal
popular,” says Hannick. “I think people like paying by text as it is very simple.” The platform also allows Comic Relief to collect data about how people donate, which enables the charity to see how people are interacting with the show. Humphreys says: “That data drives the order of the programme in real time. We are able to drive fast feedback in the way they are collecting donations – the peaks and the troughs and how users are interacting with the system. That data is used to drive the order of the programme. “We are trying to provide a platform on which they can learn about the needs of their customers, rather than focusing on the implementation details of the infrastructure. People expect a certain level of engagement and user experience when they are donating. Our role is really to facilitate that. Our role is to give them the best possible user experience and user journey.” Comic Relief’s broadcast has always been structured in a segmented fashion, a large part of which will involve celebrities on location with the charity’s various efforts on the ground, so viewers will see where the money is going – and Comic Relief is able to monitor the reactions to each part and react accordingly. In a previous year, David Tennant started crying during
Ed Sheeran visits the slums of Liberia during the Ebola outbreak for this year’s Comic Relief
@biznessreporter Call centre volunteers take calls from donors for this year’s Comic Relief
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How much has £110m
raised over the years?
1988 More than 150 celebrities take part in the first Red Nose Day, pulling in 30m viewers
£100m
1993 Tomato noses are introduced, and Comic Relief 4 raises a cool £18m
£90m
2000 JK Rowling writes two special Harry Potter stories, with all proceeds (£18m so far) going to Comic Relief
£80m £70m
2011 The most successful Red Nose Day to date raises £108.4m
£60m £50m
2009 Eddie Izzard runs an incredible 43 marathons in 51 days, raising more than £1.8m in the process
£40m £30m
2005 The year of Peter Kay and Tony Christie’s re-release of Is This The Way To Amarillo? sees £65m raised
£20m £10m
19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 20 15 20 17
1997 A campaign encouraging people to donate their small change results in £27m raised
19 88
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SOURCE: COMIC RELIEF
a piece to camera in a Ugandan hospital, which corresponded to a huge uptick in donations. “We played that again a couple times throughout the night,” says Humphreys, “because from the data we saw how well received that piece was.” This year the big donation moment for Comic Relief was when Lenny Henry and a couple of other presenters were talking about where the money went and the difference it has made. For the next Comic Relief, to be held in two years’ time, Hannick is hoping to include micro-donations in their suite of options. “There is a really interesting space where you combine digital storytelling,” he says. “We are in the generation where we could realistically see the end of global poverty. There are a lot of really good, positive stories that we can tell. If we can plug
“There are a lot of really good, positive stories that we can tell. If we can plug into the micro-donation mechanic I think that can be really powerful” – Zenon Hannick, Comic Relief
Left: Comic Relief’s Zenon Hannick; Above right: Pivotal’s Colin Humphreys
in the micro-donation mechanic I think that can be really powerful.” Instead of someone watching the TV programme and donating £20 via text, a social media platform will have technology embedded in it to allow people to donate small amounts of money throughout the storytelling journey. “It is an interesting space,” Hannick adds. “I have not seen anyone who has really nailed it. I think that could be something interesting for us to explore.” On the night itself, Hannick doesn’t get to watch the TV show as he is busy behind the scenes making sure the donations are being collected without a hitch. So far his diligence has paid off, and the show has been able to take donations smoothly without any problems, helping improve the lives of millions of less fortunate people through thousands of projects across the world.
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As the economy goes global, payments go local I Gregory Vincent
T IS an undisputed fact that we live in a far more global economy than at any time in our history. The chances are that while reading this you are drinking coffee from Brazil, your kids are playing apps developed in South Korea on smartphones made in China that contain lithium mined in Chile, while your journey home last night involved paying a company based in San Francisco for the ride. All the elements of this equation have one thing in common – they involve a cross-border payment. Historically cross-border payments, particularly to emerging economies, have been cloaked in an opaque shroud. Organisations often struggled to predict how much would reach the recipient at the other end of the transaction, encountering steep transfer fees and unpredictable exchange rates, which led to them having to constantly adjust their books retrospectively. It often took weeks for funds to reach their final destination, with little to no transparency due to the multiple banks involved in the transfer process. Even getting proof of delivery could be a daunting task. Obligations were mainly settled in US dollars, although received in local currency, with the recipient suffering the losses inherent in the process. In emerging economies this was not always to the dissatisfaction of the recipient – receiving in US dollars often offset the risks of late payments and swiftly depreciating local currencies. However, in more recent times such an approach no longer suffices.
Going local
6% The annual rate at which global payments revenues are expected to grow over the next few years, eclipsing $2trillion by 2020 Source: Global payments 2015: A healthy industry confronts disruption, McKinsey & Company
Services, payroll, taxes and goods in emerging economies are all increasingly priced in local currency. The local workforce incurs life expenses in local currency, be they miners, coffee producers, software developers or taxi drivers, so they need their income in local currency too. Further contributing factors to this change include both the fact that local currencies are progressively stable across emerging economies (often more stable than the mainstream major currencies, particularly in current political times), while simultaneously many governments increasingly insist on contracts being settled in local currency, both for reasons of national sovereignty and also transparency. Taxes are easier to collect if income is received onshore in local currency, as opposed to being held offshore in US dollars (this is true not just for the emerging economies – just take a look at the Panama Papers). So against this backdrop, how is one to proceed in this instant, globalised world?
Each country has its own regulatory requirements, as well as unique economic and sociopolitical factors that influence exchange rates, adding complexity to the cross-border payment process. Suffice it to say that the challenges facing international organisations needing to deliver funds abroad are considerable. With so many obstacles facing global organisations needing to make payments to the emerging economies, it is easy to wonder how payments to these areas can ever be transacted effectively. So what is the solution? On the surface, it would appear a daunting task for banks to overcome. Financial institutions that regularly make payments to the developing world are often beset with widespread inefficiencies. Burdened by legacy systems and faced with increasingly stringent and ever-evolving regulations, the banks struggle to assign sufficient technology budgets to meet the various demands of both their customers and the
regulators simultaneously. There is a decreasing risk appetite to run their own global payments network, as the behaviour of local banks in target markets can make adherence to transparency requirements of regulators complicated to achieve.
A specialised solution Fortunately, many banks have recognised their internal challenges in relation to such payments and increasingly look to specialist partners to help solve these problems. These banks realise that partnering with a global payments provider that specialises in delivering funds to the developing world is critical, as deep knowledge of a given country’s banking system and economy is essential to ensure the efficacy of these payments. International payroll and foreign exchange are especially susceptible to tumultuous political, social and economic events in a given country. Intelligence on these local market conditions is critical in order to help organisations
make informed decisions when sending funds abroad. It is also vital that any such partner doesn’t just replace the bank’s own infrastructure, but actually represents an upgrade to what existed before. By maintaining multiple local relationships in emerging economies, such a partner can ensure constant competition between local providers and hence generate market-competitive conditions for the business at hand, both in terms of exchange rates generated and the ultimate cost of the payment itself. Further, by cultivating local relationships, such a specialist provider can clear payments across local clearing systems and hence guarantee that the full payment amount will arrive on time and suffer no deductions from correspondent banks along the way. If you can couple such a service to a live pricing stream, enabling customers to transparently price payment transactions, at the point of commitment, in currencies as diverse as the Brazilian real and South Korean won, in an identical fashion to payments in euros to France, or US dollars to America, then a solution starts to emerge. Customers needing to settle their obligations in any local currency can establish the cost of doing so at the click of a button, leaving many of the historic worries behind and allowing them to concentrate on their business, rather than worry about ancillary issues. INTL FCStone Ltd’s Global Payments Division (IFL) is a two-decade pioneer in facilitating cross-border payments to the developing world. As developed-world banks scale back their own payments operations, they increasingly employ the firm’s services to satisfy client demand for access to an increasing suite of currencies. IFL enables clients to execute payments in 140 currencies to more than 175 countries through its global network of approximately 300 correspondent banks, simultaneously leveraging this network to provide industryleading intelligence on local market conditions. Members of IFL’s Global Payments team regularly liaise with global decision-makers and source proprietary intelligence that provides clients with unique insights into local market – knowledge that is critical to ensure efficient and secure cross-border payments. INDUSTRY VIEW
Gregory Vincent is head of Global Payments EMEA, INTL FCStone Ltd +44 (0)20 3580 6000 intlfcstone.com/Main-Channels/ Global-Payments
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Inspector Dogberry is in the market for a new motor, and is considering upgrading to a Jaguar. Not because it’s a classic British marque beloved by other great inspectors – Morse (right), to give one example – but because certain models now enable you to pay for fuel at selected stations through the car’s touchscreen. Energy firm Shell and Jaguar have teamed up to launch the first car-based payment system, whereby owners who install the Shell app can simply drive up to any pump at a Shell service station and use the vehicle’s touchscreen to select how much fuel they require and pay using PayPal or Apple Pay, without having to go into the station. Android Pay is to be added later in 2017. An electronic receipt will be displayed on the touchscreen, which will also be sent directly from the pump to the driver’s email address so it can be added to accounting or expenses software. Peter Virk, director of connected car and future technology at Jaguar Land Rover, said: “In a world where cash is no longer king, customers are increasingly using electronic payments and contactless cards. Making a payment directly from a car’s touchscreen will make refuelling quicker and easier. “With this new system you can choose and pump on the forecourt and pay for the fuel even if you’ve forgotten your wallet or can’t find your credit or debit card. You will save time because there’s no more queuing to pay in a shop, and for drivers with children, it won’t be necessary to wake them up, or unstrap them from their seats to take them into the shop. “Expenses and tax returns will also be made much simpler, with no receipts to lose as these will all be sent electronically.”
Dogberry
The Finanser (Chris Skinner’s blog)
https://thefinanser.com/
Chris Skinner has been named one of the top 40 fintech influencers by the Wall Street Journal. The latest articles on his blog include a piece on a world without money, and one on the banking revolution which discusses the necessity of banks reinventing their products and services for the digital age.
Next time you’re out and about in the sunshine and forget your wallet when you’re queuing for an ice cream, why not pay with your shades? Visa has been piloting a payment-enabled sunglass at the Quiksilver and Roxy Pro Gold Coast World Surf League tour in Australia. The sunglasses, which feature an embedded contactless payment chip, will eliminate the need to carry cash or cards on the beach and allow surfing fans to catch some waves without worrying about spilling their debit cards and change into the sea. Chris Curtin, chief brand and innovation marketing officer at Visa, said: “Surfing culture represents a lifestyle without barriers, and Visa helps fans achieve a life unbound – whether it’s paying with their sunglasses or traveling around the world.” It doesn’t stop at sunglasses, either – Barclaycard’s bPay payment technology will soon be included in high street jewellery and watch
The annual value of global B2B marketplace payments Source: Visa 2013
C
OMPARED WITH widespread innovation in consumer payments stimulated by the digital economy, commercial banking solutions – previously a one-size-fits-all landmass that splintered into separate islands of innovation to address specific needs – has left finance and treasury teams with a cumbersome patchwork of payment services and isolated pools of transaction data. This has been compounded by concerns among businesses of the risk of automating treasury payment processes, including loss of control of the authorisation process, and a perceived risk of working with unproven fintech innovators, meaning solutions to
Jim Marous’s blog is ranked very highly in the payment space. He is co-publisher of The Financial Brand and publishes a subscription-based publication, The Digital Banking Report, that provides insights into the digitisation of banking. There are more than 150 reports which subscribers can choose from.
JP Nichols is a bank innovation consulting expert specialising in innovation, strategy and leadership for the future of financial services. His blog is ranked third in Incisive Edge’s Best FinTech Influences With Awesome Blogs list. One of his latest posts discusses how success can be a poor teacher of future achievement.
Banking4Tomorrow
http://brettking.com/ banking4tomorrow
media community, this innovative new app lets you pay people with things other than cash – ideas, skills, knowledge, services, even crossword answers…
Moven (iOSx, Android) Moven is a smartphone
bank account which eliminates the need for most bank branches – real-time updates make it handy for keeping an eye on your spending.
reconnect these isolated pools into one have been unsuccessful. A sea change might be on the way however. New regulations, such as the EU’s PSD2, will open the payments marketplace to non-bank competitors, forcing banks to reduce charges and innovate. However, it’s not quite Land’s End for the banking industry yet. For traditional institutions with the capacity to adapt to the new conditions, there are significant opportunities. As well as the advantage of a conservative corporate treasury industry that would often prefer to stay with their existing bank. Alan Hawkins, head of commercial cards at ING, says the sector
https://thefinancialbrand.com/ author/jimmarous
http://jpnicols.com
Secco (platforms TBC) Part of the Secco social
New technologies and regulatory change are reinvigorating B2B payments. But despite the opportunities, challenges remain in a diverse and complex sector
The Financial Brand (Jim Marous)
JP Nichols
brands.Tami Hargreaves, commercial director of digital consumer payments at Barclaycard, said: “bPay was designed to meet customer demand for a new, easy and convenient way of paying for everyday goods and services. “Thanks to the huge growth we are seeing in contactless payments, consumers are looking for even more convenience when it comes to paying and these partnerships show how the worlds of fashion and technology can combine to provide consumers with quick, easy and convenient ways of making secure payments for £30 and under.”
B2B payments – fintech’s next big thing?
$100tn +
BY CIARA LONG, ONLINE REPORTER
A collection of blogs from Brett King which he has been writing since 2009. It follows his journey from his time working at HSBC, Standard Chartered, Citi and Amex to disruptive financial services start-up Moven. He is also a best-selling Amazon author and was voted American Banker’s Innovator of the Year in 2012.
is booming. “Our traditional business is still growing,” he comments. “[But] our virtual cards for corporates – the capacity to pay safely online without using a physical card – is growing at more than 50 per cent a year.” For some in the commercial payments sector, though, a change is long overdue. Alex Mifsud, CEO of Ixaris, a commercial payments technology provider, refers to what he calls the three Cs – “Cost, Control and Convenience – structural inefficiencies in current payment technologies which are being addressed by retailers, but given less attention in the commercial sector.” As the digital economy continues to drive crossborder commerce and electronic payment integration, companies large and small will need help in navigating safely toward this new world of treasury innovation. INDUSTRY VIEW
dropusaline@ixaris.com www.ixaris.com
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Business Zone
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Seamless payments: reinventing the digital journey I “Harnessing the full potential of payments can help businesses create a frictionless checkout experience.”
N THE converging world of ecommerce and payments, building a frictionless omnichannel experience for customers has become a must. Whether online, mobile, in-app or mail/phone purchase, customers need a consistent and reassuring service to help drive conversion and boost profitability. According to a report from Payments UK, the number of cash payments will continue to fall as consumers turn to alternative payment methods in the UK. As a result, cash will be used to make only 27 per cent of all payments in 2025 compared with 45 per cent in 2015. But it’s not just payment methods that are undergoing transition – channels are converging too. According to a digital payments report by Visa, the number of Europeans regularly using a mobile device for payments has tripled since 2015. In other words, consumers are becoming smarter and more convenience-focused: they are used to shopping wherever and whenever they want. To keep pace with what shoppers are
doing, payments have become an almost invisible part of the online purchase. So how can businesses take advantage of this shift and build a clearly differentiated digital customer experience?
Frictionless payments To provide customers with a consistent experience, checkout processes are becoming truly seamless. There are numerous products and features supporting frictionless payments, including card and alternative payment options, one-click payments, highly customisable checkout pages and 3D Secure 2.0 solutions that support mobile and in-app shopping. The result? Increased transaction success rate and conversion, thereby driving repeat business.
Consistent experience across channels Customers interact with a retailer, not single channels. While the features in each channel are important, it’s the interactivity between them that makes the real difference. Customers expect to browse online but pay on mobile, and
then refund in-app. Mapping the customer journey across your channels and ensuring a consistent payment experience across multiple touch points is key.
Data-rich analytics Another key component behind a seamless payment journey is data. End-to-end analytics about how customers shop and pay are an invaluable source of insight, and help businesses optimise the checkout experience. That means higher success rates and repeat customers.
End-to-end payment services Harnessing the full potential of payments can help businesses reinvent their digital journey. Businesses don’t realise it, but there can be up to ten different players involved in enabling a single transaction. Each extra
link in the value chain increases the cost, complexity and risk of payment services. This is where Kalixa can help. We are a global omni-channel payment platform and we own our ecosystem. With our smart solutions we can help merchants solve their challenges and eliminate all the costs and issues that come with a fractioned payment experience. Kalixa’s strategy is to leverage our platform to enter new markets, with special focus on expansion into Asia, and further explore the fintech space. This way we can foster innovation, make payments easier and help businesses grow. In short, we support our customers’ needs wherever their business takes them. INDUSTRY VIEW
contact@kalixa.com www.kalixa.com/contact
The world’s largest trust-based technology event is back for 2017
T
RUSTECH IS the largest international event dedicated to trust-based technologies, with unprecedented networking opportunities and not-to-be-missed keynote speakers. After a successful first edition, TRUSTECH Pay, Identify, Connect & Secure will once more climb the steps of the famous Palais des Festivals in Cannes, on the French Riviera this year. TRUSTECH, which gathers more than 13,000 attendees from 120 countries, 300-plus exhibitors and sponsors, more than 40 startups and fintech companies and 250-plus speakers, will offer excellent content and unrivalled networking opportunities.
Be2bill, Dermalog, Ingenico, Matica, NBS Technologies, Next Biometrics, NXP Semiconductors, Otto Kuennecke, Spire Payments, ST Microelectronics, Thales E-Security, Verifone and many more have already confirmed their presence. At TRUSTECH 2017, industry thought leaders will share their insights on the most current trending topics: artificial intelligence, blockchain, open innovation, IoT, data management, fintech, mobile payments or e-ID and e-governments. Chris Valasek, security lead at Uber, has confirmed his keynote. New this year, TRUSTECH will provide to all its participants, free of charge, targeted business meetings
organised by Business Beyond Borders, a new European Commission initiative. The goal of this initiative is to help small and medium enterprises develop internationally. More than 3,500 international buyers will be personally contacted before the event so that they can benefit from personalised planning
of qualified and targeted face-to-face meetings with the attendants of their choice. INDUSTRY VIEW
To register for a conference pass, a free visitor pass or to exhibit/sponsor, please visit www.trustech-event.com
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Bridging the payments gap for buyers and sellers alike T HE FUTURE of payments will be driven by providers who understand real-world pain points for buyers and sellers, and who can then build delightful, seamless solutions that address those needs – creating new payment utilities. “It is about looking at opportunities to make payments more convenient, frictionless and even enjoyable for consumers and businesses,” says Danny Chazonoff (inset, below), COO of Paysafe Group. “It is about building up a good user interface between the consumer and the business. It is about finding ways where value can be added. A lot of our competitors, for example, are only providing services for businesses and don’t necessarily have the experience in learning about the behaviours and the needs of the actual consumers.” In contrast, Paysafe provides services for both consumers and businesses, giving them an understanding of what the two sides want from each other. By understanding the pain points between the two sides, says Chazonoff, Paysafe can provide the market with tailored products that can add value. A particular area Chazonoff believes Paysafe has found a specialist relevance in is in situations where a person wants to buy something online, but does not have the means to pay – whether using a debit or credit card. “How can a payment get made if there is no ability to hand over cash or to take a piece of plastic?” he asks. “How do you bridge that gap between consumers who want to pay with cash and consumers who want to buy goods and services online? Filling this gap in the market is Paysafe’s paysafecard, which enables consumers to use cash to buy goods and services online – paysafecard vouchers can be purchased from stores, then used at any online merchant that accepts the payment method. Chazonoff says: “Consumers who may not have had the chance to buy goods and services online because they don’t have a card can now do so.” Another pain point that Paysafe has developed a product to solve is in the area of mobile wallets. The company has developed an app called Go Local (GOLO), which enables consumers to buy things from stores in their neighbourhood at the touch of a button. “There has been a lot of disruption when it comes to payments in the marketplace,” Chazonoff points out. “As the payments landscape becomes more crowded, with brands
“We want to enable merchants that are not necessarily the size of Starbucks to have the same opportunities to access consumers and mobile payments.” – Danny Chazonoff, Paysafe
like Amazon, Google and Facebook entering the space, we continue to look for opportunities where we can add relevance via our technology and products. “For example, increasing numbers of consumers at Starbucks are using their mobiles to pre-order and to pay for their coffee in the morning. “We want to enable merchants that are not necessarily the size of Starbucks to have the same opportunities to access consumers and mobile payments.” The Go Local app gives local shops in the neighbourhoods that do not have big IT budgets to build payment products the chance to have a mobile wallet similar to those the big players use, explains Chazonoff. The only charge for the merchant is a fee once a transaction takes place. “Our focus for the app has been on small neighbourhood shops – flower shops, grocery stores, restaurants, pet stores, pharmacies – where people typically go in once a week to buy their flowers, toothpaste, pizza, coffee or whatever,” he says. “It’s good for the customer to have a convenient way of making payments and ordering or picking up or delivering. They don’t want to go in walk around, fill up the shopping cart, wait in line
and wait to be served. And it’s also good for merchants – all of a sudden they have a more convenient way to serve customers, and perhaps generate some more business. By super-serving an underserved market in this way, we’re putting these merchants on the same playing field as the big players.” The product has just been launched in Montreal, Canada, and Paysafe plans to expand GOLO to the US and UK markets. The response so far in Montreal has been strong, with several hundred merchants already signed up. “All of a sudden you have shops that have been around for a very long time who have been offering commerce in a very traditional old-fashioned way, who are now able to leverage off some of the modern technologies that the big guys out there use to compete with,” explains Chazonoff. “Places which typically did not think about offering their products or services through mobile or having customers pay in advance of pick-up can now do so.” Larger companies aren’t left out, of course – bigger retailers can also use a white-label version of GOLO, which they can brand as their own. Chazonoff believes the future of niche products for the payment marketplace will be about looking beyond the technology itself and towards services that add value and enhance the interactions
between consumers and merchants. “For example, one of the areas where we spend a lot of time building up solutions for our customers is how to deal with risk management or fraud,” he says. “There are concerns that customers have when buying things online about whether they are dealing with a legitimate business. “It is very important for us to give customers – both consumers and businesses – the tools, the comfort, the techniques and the technology to know that their transactions are going to be safe.” Paysafe has also been adding value to businesses through providing them with analytic reports, whereby they can examine customer trends and patterns, to see whether they are getting orders from a typical kind of consumer or a certain time of day or neighbourhood, Chazonoff says. By understanding the behaviours of customers, Chazonoff believes businesses can market to them in inventive and intelligent ways – and Paysafe’s carefully engineered tailored products could be just the tools to create a better experience for customers and merchants alike. INDUSTRY VIEW
www.paysafe.com www.gololocal.com
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The future of payment methods in Latin America
T Steve Jobs’s secret recipe for creating a successful bank
A
PPLE… $78.4BILLION in revenue and $17.9billion in net profits for fiscal Q1 2017, with $246billion in cash. The numbers speak for themselves. Apple’s highest-margin business is also its fastest-growing business, with 40 per cent year-on-year growth, generating 21 per cent of Apple’s gross profits in 2016. The name of this business? Read on…
A paradigm shift Ten years ago, the mobile phone market was dominated by large players such as Nokia and BlackBerry. They relied on a slow communication infrastructure and proprietary ecosystems and their customers accepted that. On January 9 2007 Steve Jobs presented the iPhone. Fast forward 10 years and the results speak for themselves. Today many banks find themselves in the same situation as Nokia in 2007. Their business is built on an expensive, outdated infrastructure with everything developed in-house, and the world is suddenly changing rapidly. How did Apple come to dominate the smartphone market, and how can the banking industry replicate Apple’s runaway success?
Apple’s core principles First let’s consider the core principles that lead to Apple’s global success: 1 Own the customer and offer great customer service 2 Keep things simple, uniform and easy-to-use 3 Stick to what you are good at Apple designer Jonathan Ive stated it brilliantly: “Our goals are very simple, to design and make better products. If we can’t make something that is better, we won’t do it.”
Apple’s core offering. And this is exactly what the banking world must do today. Here are some rules to build a successful ecosystem: 1 Banks must own their customers, control the Know Your Customer (KYC) process and be an excellent single-entry point 2 Offer a great user experience and control a compliant environment for their partners 3 Partner up with fintech companies such as Inpay.com for products that are not core to the bank’s business – for instance, cross-border transfers and bill payment 4 Ensure partners have a strong risk and compliance regime and a proven track record to avoid reputational damage A successful ecosystem will create new revenue streams, increase customer satisfaction and reduce churn, as customers now have one point of contact for all their financial needs.
A banking partner example Inpay is a Danish fintech company with 50 employees that enables banks to offer fast, easy, safe and cost-efficient cross-border payments. Inpay provides apps for international retail and corporate payments that can be used immediately in a banking ecosystem. Inpay also provides a SWIFT gateway for easy access to Inpay’s fully regulated global payments network that covers more than 60 countries. With INPAY as a partner, cross-border payments simply become as transparent, fast and easy as domestic payments.
The fastest-growing revenue stream And the source of Apple’s fastest-growing revenue stream? The profit share that Apple receives from its App Store partners.
Applying Apple’s principles to banking Apple secured its future by creating the App Store – a secure ecosystem for partners who provide solutions that are complementary to
INDUSTRY VIEW
To learn more about App Stores for banks, please visit inpay.com/finapps
HE ADVANCE of e-commerce around the world has created a challenge: how can payment methods be adjusted to include everyone in the digital marketplace? Will the technological solutions currently available in the market be able to meet the needs of online consumers in all regions? SafetyPay, a technology company focused on financial services (fintech) has been facing this challenge for more than ten years. We seek to develop alternative payment solutions, with real-time confirmation, that can complement the use of credit cards and promote the inclusion of all consumers in the digital marketplace. We operate in 21 countries and many of them have different realities, such as the important market of Latin America, where just over half of the adult population (51 per cent) has a bank account according to data from the World Bank. The volume of clients who do not have a bank account or do not wish to use credit cards to make purchases online is an obstacle to the growth of online sales. According to the Quarterly E-Commerce Report and US Census Bureau, in the second quarter of 2016, e-commerce reported revenues of US$97.3 billion in the world, with Latin America and Europe accounting for 17 per cent of the total online sales each, behind North America (23 per cent) and China (65 per cent) of the total online sales. Although the rate of customers with a bank account has remained stable, there is much more room for growth in online sales in Latin American countries, which makes it necessary for companies that sell online to seek alternative payment methods in local currencies. As for the platforms, it is necessary to achieve a deeper understanding of each market and develop appropriate solutions for each segment. Establishing partnerships with local players is of utmost importance, as they
allow us to understand their needs. Real-time payments, either through a wire transfer or in cash at authorised agents, are one of the highlights. We therefore analyse the local needs of each new market we enter, both in terms of the continent and the country itself, so as to provide more appropriate solutions either for mobile, web or call centres. We do not want people who do not have a credit card or a bank account to be excluded from e-commerce. This is why we have developed new functionality for our products and incorporated tools into our portfolio over recent years. The future of payment methods lies in the innovation of the financial services industry through an understanding of the consumers’ needs and the offer of easy-to-use alternatives. By thinking this way, we see that our technology can attract a large number of clients who do not have a bank account. However, in order to achieve this, companies need to expand the offer of secure payment methods and be able to confirm transactions on a real-time basis. In 2016, SafetyPay recorded a growth of 500 per cent in its revenue from strategic deals and partnerships in Brazil alone, compared to a growth of 80.4 per cent worldwide in 2015. In countries such as Chile, Peru and Ecuador, our solutions are already strong, and we now want to expand into more Latin American countries. What is the conclusion we can draw from this? That both retail companies and clients need to find a way to bridge the gap between payment methods and the possibility of closing more sales. INDUSTRY VIEW
Gustavo Ruiz Moya (inset, above) is CEO of SafetyPay www.safetypay.com www.safetypay.com/en/contact-us
May 2017
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The debate What is the biggest innovation in payments for 2017? Joel Leonoff
Ralf Germer
President & CEO Paysafe Group
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INDUSTRY VIEW
INDUSTRY VIEW
www.paysafe.com
crm@pagbrasil.com www.pagbrasil.com
HE DIGITISATION of commerce continues to be the biggest innovation in payments and the catalyst for an accelerating shift in financial consumption habits, from traditional payment formats to new, digitally enabled platforms and mechanisms. This move is creating entirely new business models and transforming user expectations and behaviour. Whether buyer or seller, consumer or business, the expectation is that paying, managing, sending and receiving money should be frictionless and empowering. This is most keenly felt in e-commerce, where the lines between online and bricksand-mortar are being blurred by 2.1 billion smartphone users globally powering a move to mobile transactions and alternative payment methods. Companies that want to succeed in this environment need to invest in technology and services that support omnichannel experiences, and balance buyer convenience with heightened security parameters to protect both consumers and businesses against fraud.
Nelson Holzner
Michael Harty
CEO and co-founder PagBrasil
CEO AEVI
Managing Director The Card & Payments Awards
HE BIGGEST innovations in payments are still to come, with financial inclusion, digital inclusion, micropayments and cryptocurrencies being the four main innovation drivers. Today, two billion people worldwide don’t have access to financial services and around five billion don’t have a smartphone. Innovative digital solutions combined with smartphone adoption will drive financial inclusion and help improve people’s lives. On the other hand, micro and M2M payments alone are estimated to boost the number of financial transactions by a factor of 1,000. Imagine your electric car’s AI deciding to charge based on price and battery level at charging stations. This is not sci-fi anymore. Blockchain-based cryptocurrencies will feature the necessary security, cost efficiency and scalability to finally make micropayments work. Consequently, the forthcoming disruption of the traditional banking sector will not only change the financial world, but also offer an immense growth potential for the industry.
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HE CARD and Payments Awards seeks each year to recognise the most significant developments in the Card and Payments Industry in the UK and Ireland. For 2017, Best Industry Innovation of the Year was awarded to The UK Cards Association for its role in the Contactless Transit Framework. This truly game-changing innovation, involving three contactless transit models, will potentially revolutionise how we pay for travel, as it will allow any transit operator in the UK to implement payment by contactless devices for travel. Consumers will benefit from increased convenience and interconnected journeys using a single payment device across the UK. Innovation is critical to the progression of any industry, and while any innovation is impressive, those that make a difference to our daily lives are surely what really count – and the Contactless Transit Network certainly does that.
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HIS IS something that I get asked a lot. Payments will continue to be a fragmented and complex space through the lack of simplicity in the industry. This is why AEVI is so interesting, as our focus is on reducing complexity and simplifying payments. Over time, there will be two major trends. The first is that payments will become invisible – soon you won’t even realise that you are completing a transaction. When you use a service like Uber, the payment just happens when you leave the car. The experience becomes less about payments and all about the service. The second big trend is the opposite, but just as vital. We will see a focus on enhancing the checkout experience through value-added apps and services that put a smile on the face of the consumer. AEVI is shaping both trends. We are providing an environment for secure, simple transactions, plus a unique marketplace for B2B apps.
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020 7866 8188 www.cardandpaymentsawards.com
INDUSTRY VIEW
info@aevi.com ww.aevi.com
Payments innovation: the key to unlock opportunities in high-growth countries and markets 40% The number of people in India who don’t have access to a bank account
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HE PAYMENTS innovation taking place in high-growth emerging markets is often underestimated. Yet countries such as India, parts of Africa and Latin America are home to a new wave of disruption that is fundamentally changing the financial services landscape. In these markets, technology is breaking down the barriers that prevent consumers from accessing financial services. By introducing modern payment models that open access to services such as credit and ecommerce, economies can prosper. High-growth markets are unencumbered by the legacy of old technology and entrenched consumer behaviour. They can more easily adopt mobile-first, digital financial services than more established payment infrastructures. Payments innovators such as PayU are driving consumer access to digital-centric
payment technology in highgrowth markets. The adoption and rise in popularity of mobile money networks in Africa, for example, is enabling millions across the continent to gain access to safe and secure banking solutions. And with reports claiming that a 10 per cent increase in digitisation of the economy could increase GDP per capita growth rates by 40 per cent, there is a strong business case, as well as an ethical one, for the
importance of innovation in these markets. Better payments systems and services result in increased ecommerce and the ability to conduct business across country borders. Indeed, as companies such as PayU enable all corners of the globe to take advantage of digital financial services, aspiring international businesses can now access markets around the world that were previously too operationally challenging to enter.
Yet it is these markets that offer the biggest growth opportunity for businesses going global. According to the IMF, economic growth in emerging markets are likely to increase consistently over the next five years, while growth in developed economies looks set to remain depressed. In India, 40 per cent of the population doesn’t have access to a bank account. The majority don’t have a credit rating. This has naturally stifled economic
development in the past. However, technology can help to reach more people and measure creditworthiness in novel ways. Digital apps and services that enable customers to pay later, pay in instalments or only use credit when needed are increasing the number of consumers able to access payment services, and therefore increase participation in the economy. Unburdened by legacy infrastructure, innovative businesses are implementing new types of payments models in high-growth markets. As an increasing number of consumers are able to access financial services and economies continue to prosper, more international businesses and brands will be able to tap into these markets and enjoy the opportunities on offer. INDUSTRY VIEW
sales@payu.com www.payu.com
May 2017
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Fostering inclusion is essential for the future of payments in Brazil
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IGITAL AND financial inclusion are essential for the future of payments. While developed markets see an almost universal penetration of internet and banking services among their citizens, emerging countries, such as Brazil, still face considerable challenges in these areas. Research is producing mounting evidence that the fostering of digital and financial inclusion is vital for getting people out of poverty. Digital payment systems are crucial because they enable people to store, transfer and collect money in an inexpensive way and over long distances. At the same time, such inclusion is also an important growth opportunity for the payment industry. Mobile devices have become a gamechanger in emerging countries. Thanks to their wide use, internet access, online banking and e-commerce is being democratised. Currently, 89 per cent of Brazilian internet users are browsing with their smartphones. Among lower income classes, up to 65 per cent of users are connecting exclusively via mobile devices. Brazil has nearly 140 million internet users and more than 76 million smartphone owners. Despite that, just over 65 per cent of the population has access to the internet.
20m The number of adults in Brazil with no access to traditional banking facilities
It is undeniable that there is a lot of innovation in the payments industry, but the unbanked population is often not considered. Overall, we seem to be moving towards a cashless world, but in Brazil and other emerging countries, cash is still king. The heavy use of cash is motivated by both the vast number of unbanked people and security concerns. Therefore, finding ways to include individuals that either prefer to use cash or do not have another option is essential for a more democratic future of payments. Even with almost 90 per cent of Brazilian adults having some type of banking relationship, the country still has 55 million unbanked adults and more than 20 million without access to any banking service. For
this reason, Boleto Bancário, a push payment method created by the Brazilian Central Bank in the early 90s, is still one of the most important means of payment in the country. A Boleto Bancário can be paid electronically or in cash by anyone, even unbanked people. It currently accounts for nearly a quarter of all Brazilian e-commerce transactions. But despite being the second most used online payment method, banks have not worked to modernise the system. In light of this, creating a solution for the millions of Brazilians who pay with Boleto Bancário and use their smartphones to browse the internet is a way of fomenting their inclusion in the current digital and online trend. “With this in mind, PagBrasil
has created its Boleto Flash™, a payment method that enhances the characteristics of the popular Boleto Bancário, lifting it onto the next level with a fully responsive version for mobile devices and an accelerated payment confirmation, while preserving users’ familiarity with it,” explains Ralf Germer (inset, left), PagBrasil’s CEO. He continues: “We truly believe that the payment industry, as well as the e-commerce sector and the overall economy of an emerging country, will only reach full potential with the inclusion of all social groups.” INDUSTRY VIEW
crm@pagbrasil.com www.pagbrasil.com