PCM Volume 3 - Issue 3: Mobile Payments by PCN Magazine

Vol 3. Issue 3 | March 2017

YOUR GATEWAY TO THE WORLD OF PAYMENTS

Mobile Payments Waiting is no longer an option

MAXIMIZE YOUR DATA VALUE

CONNECTING YOU WITH THE PEOPLE TO POWER YOUR BUSINESS EFFICIENCY

Contents STORIES Amir Abdin Editor-in-Chief

Mobile Payments? Sure! But NFC first, and eCommerce second?

Taking the pulse of mobile payments in 2017

Still at the start of the mobile payment revolution

amir@paymentsandcardsnetwork.com https://nl.linkedin.com/in/amir-abdin-21365683

Duc Dang Production Editor duc@paymentsandcardsnetwork.com https://nl.linkedin.com/in/ducdanghh

Layla Durani Editor

Mobile on the move

Start-up Spotlight: Payr

The Tale of a Merchant: The Payment Challenge

Hot Jobs

Industry Events Calendar

THANKS TO OUR PARTNERS

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PCM is designed by Duc Dang, Payments & Cards Network. Art and photos © Payments & Cards Network, picjumbo.com and Shutterstock.com, excluding advertisments and company logos. PCM™ is property of Payments & Cards Network, Herengracht 576, 2nd Fl., 1017 CJ, Amsterdam, The Netherlands. All material contained within PCM is the property of Payments & Cards Network. All other product and service names may be trademarks of their respective companies. ©2017 Payments & Cards Network. All rights reserved. Reproduction of any kind is strictly prohibited without express prior written consent of Payments & Cards Network. ADVERTISING INFORMATION For details, please contact amir@paymentsandcardsnetwork.com

Thought Leaders Corner

Mobile Payments? Sure! But NFC first, and eCommerce second? by Henrique Di Lorenzo

The NFC Obsession

ver the past few years, I’ve attended various conferences on Mobile Payments, such that I can now recognize a certain pattern in most presentations. To start with, the speaker needs to convince the audience that mobile is important. He or she would show two photos of the Vatican Square. One from 2005, during the announcement of Pope Benedict XVI and another for 2013, during the announcement of Pope Francis. One could notice that most traditional photo cameras in 2005 have given place to mobile phones and tablets in 2013. The speaker would continue sharing some statistics about mobile usage among millennials. How much time they spend on mobile. That they check their mobile as soon as they wake in the morning. Finally, they would share some case studies, ranging from M-Pesa (again…), virtual shops in South Korean subways, and more recent studies comparing Apple Pay and HCE. I wonder, is there anyone who still doubts that mobile is the cornerstone of a digital bank? Having accepted the mobile first mindset, there’s an obsession with “NFC payments”, even though this is not the most relevant part of the story. I don’t believe that mobile will fully replace cards anytime soon. The majority of merchants still don’t accept contactless. And although this landscape is improving fast, it will take a while until people won’t need cards anymore. Yet, banks still need to invest on it. Why? Because an increasing number of customers expect to have this alternative. Quite

often, I hear the following questions from banks: “Ok, what is better then? Should I go Apple Pay or Samsung Pay? Should I deploy my own HCE wallet or just rely on Android Pay?”. In the end, the discussion should not be about what to do. But what to do first. A bank should be wherever their customers expect it to be. The true nature of the so-called Digital Enablement, is to enable all customers to be digital, regardless of their preferences. And I can guarantee you – customers nowadays are very much spoiled with the idea of having a choice.

The Tokenization (R)Evolution An extremely valuable spin-off of all recent developments in the NFC space, is the introduction of Tokenization as an enabling technology. Its powers go much beyond proximitypayments and it will change the payments landscape more than one would expect. We all know that tokenization is, in fact, not new. It has been used for more than a decade in the merchant / acceptance space (to reduce PCI compliance end enable use cases like 1-click buy). Its recent introduction in the issuing domain however, brings a change of mindset: namely, the psychological (and technical) split between a funding account and the channel or device used to initiate a transaction. The fact that we’re devaluating the “PAN” (Primary Account Number = card number) to a point where the customer does not even know that there is a number behind this transaction. This effect is more noticeable in the web-based payments space (the so-called, CNP = Card Not Present). This is in my opinion the most exciting and promising space for mobile payments.

Thought Leaders Corner Let me explain why. Plastic cards have been introduced more than half a century ago to enable physical PoS (Point of Sales) payments. With the advent of the internet and the growth of eCommerce, the payment industry had to find a quick solution, a dirty work around known as CNP. This was intended to be just an exceptional case, where the card (which is supposed to be present), was not present for this transaction. It’s finally time for a change. With tokenization, cards will lose its status quo in the eCommere arena. We can finally move from CNP to NCP (non-card payments)! Therefore, I would strongly recommend focusing on solutions in this space, such as in-App and in-Browser payments, the W3C Payment Request APIs, and eCommerce schemes that are based on bank-to-bank transfers, including those that will be enabled by PSD2 in Europe.

(Auto)mobile Payments and Beyond A strong tokenization strategy will enable not only mobile payments, but all sorts of device-based commerce. For example, the automotive industry is heavily investing in digitization, integrating intelligent voice assistants that can help you with your groceries shopping while you’re stuck in traffic jam. Expect all sorts of interesting use cases from different industries. Can we call it a “mobile payment”? Well, probably not (at most, an auto-mobile payment… Sorry for the bad joke). But there are few components that are common to all these emerging ecosystems (1) tokenization (2) a device or hardware used as an authenticator (3) the need for simple transaction APIs and non-payment APIs, for additional services. Implementations of mobile payments that are future proof, will be able to abstract these components and use them as needed. Again: Tokenization, Authentication and Collaboration (through APIs). In the end, payments will not be something that you do. It will be something that happens. Also in the acceptance side, we see the mobile revolution. Traditional, old fashioned point-of-sales terminals are giving place to mobile-like terminals that run on open OS (operational system), such as Poynt, Albert, and others, which operates on Android. These solutions mean to bring the smartphone revolution to the merchant space. More than payment devices, these terminals are connected to a marketplace, where 3rdparty developers are invited to create powerful Apps for merchants. Such marketplaces leverage the same principles of openness and collaboration – a recognition that a huge creative power exists outside the walls of the bank. Financial institutions working on the acceptance / acquiring domain, need to be ready to drive these changes as well.

Henrique Di Lorenzo

Head of Innovations at UL Transaction Security His group is responsible for prototyping new products, exploring new lines of business and supporting customers with the implementation of emerging payments technologies. Henrique holds a PhD degree in Quantum Physics from Leiden University.

UL Transaction Security UL guides companies within the mobile, finance, retail, transit, ehealth, and data security domains through the complex world of electronic transactions. UL is the global leader in safeguarding digital assets and ensuring compliance with standards, global interoperability between products and systems and security for all components in the ecosystem.

Back to Simplicity Finally, technology always has fascinating twists. During the Mobile World Congress earlier this month, among dozens of high-tech announcements and flashy new handsets, what conquered the media attention was the comeback of Nokia 3310. In the other side of the world, in China, traditional QR-codes are taking over various payment and non-payment use cases. I strongly recommend reading an interesting article about how WeChat founder’s obsession with QR codes is reshaping the Chinese commerce, recently published in The Wall Street Journal. In the end, there’s an absolute truth, declared by Leonardo da Vinci more than 500 years ago: “Simplicity is the ultimate sophistication”!

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Thought Leaders Corner

Taking the pulse of mobile payments in 2017 by Oren Levy

Untapped potential: Mobile payments in the US

he fintech industry has been abuzz about mobile payments for at least a decade, but in 2017 mobile wallets are still struggling to gain real traction in the US market. Significant strides have been made, with the introduction of Apple Pay, Android Pay, and Samsung Pay, among others, and “eMarketer estimates US mobile payment transactions will total $62.49 billion this year, up 125.8% from 2016.” The potential for market saturation is certainly there, with the number of exclusively mobile web surfers rising every year: eMarketer reports that 40.7 million mobile-only users (as opposed to other channels like laptops and computers) are expected in 2017, and the figure will likely rise “reaching 52.3 million [by] 2021.” Today’s typical mobile user is inseparable from his or her cellphone. Mobile devices follower their owners anywhere and everywhere, nevertheless, mobile wallet adoption in many Western countries has been sluggish at best – confounding fintech experts.

Who is adopting mobile payments While mobile payments adoption has been lackluster in many Western countries, their popularity has exploded in Asia, Africa and Europe, with hundreds of mobile wallet systems in use. The use of mobile phones for payments in emerging countries is booming. Below we will examine the different mobile

payment methods in various developing countries and the reasons for their popularity:

Africa The largest and most widespread mobile payment service in Africa is M-Pesa, a mobile phone-based money transfer, financing and micro-financing service. M-Pesa allows users to deposit, withdraw, transfer money and pay for goods and services. Few Africans have bank accounts or credit cards. Mobile money originally targeted rural customers making small personal payments, or cash withdrawals from kiosks. Today, mobile payment methods give millions of people access to the formal financial system. It is evident that this type of branchless banking is now being used as a separate payment channel strategy that forgoes bank branches.

India According to Deloitte India, mobile and digital payments will overtake physical card payments as the predominant non-cash payment mode in India in 2017. India features various types of mobile payment services such as Paytm and Mobi Kwik. The reason for the proliferation of these providers is that while in Western countries, desktop PCs and laptops were the first webenabled devices, in India nearly 60 percent of users accessed the internet for the first time via their mobile phones. Indian consumers are ripe to conduct payments via their mobile phones. However, due to the fact that 2G bandwidth still prevails there, connectivity is often poor. While there are at least 13 million retail establishments spread out all over the

Thought Leaders Corner

About Oren Levy CEO @ Zooz Oren Levy is an experienced professional with over 15 years’ experience in payments, commerce, and global business. Prior to Zooz, Oren was an executive director at Brookline (USA) for 11 years, managing its worldwide sales efforts and strategic partnerships initiatives. Before Brookline, Oren held marketing, business development and technical positions at BATM, Fundtech and L.G.E.S.

country, at this stage there is still little incentive for merchants to acquire costly POS terminals.

China There are several highly popular mobile payment methods in China including AliPay, TenCent’s WePay, and WeChat. One of the main growth drivers in the Chinese mobile wallet market is the rapid upsurge in the Internet penetration rate of the country, which is driven by the growing adoption of smartphones. The Chinese distrust unfamiliar foreign payment providers, and newcomers like Apple Pay and Samsung Pay haven’t had an easy time penetrating the market. The average Chinese lacks trust regarding banks and money handling in general, and their payment preference is COD, so they can check out their purchases before laying out money. Mobile payment wallets inspire a feeling of security among Chinese consumers.

Russia The Russian Federation features several widespread mobile payment methods. The leading wallet is the QIWI Wallet, which is similar to a debit card and enables client self-service and payment via QIWI terminals. WebMoney is an international settlement system that offers users an online platform for e-commerce. Yandex.M a deep-seated lack of trust in banking institutions due to unfavorable past experiences. Here, too, local mobile wallets provide a sense of security among users.

Mobile Wallets in the West While adoption has been slower than in emerging markets, there are mobile payments and e-wallet users in the Western world, as well. Payment industry veteran PayPal is accepted on thousands of mobile sites and apps, enabling users to pay from any location without sharing personal financial data. Apple Pay is a tap-and-go service that allows iOS users to perform payments with NFC-enabled credit card terminals. Samsung Pay enables payment not only via NFC tap-and-pay but also on magnetic stripe terminals. With Android Pay, users load their debit or credit cards into the Android Pay app only

once, and subsequently pay using a smartphone in the store. Retailers like Starbucks and Walmart have successfully launched their own closed-loop mobile payment apps, which make it easy to award customers for loyal purchases.

It all comes down to need The difference between mobile payment usage in developed and emerging countries stems from the actual need for additional payment modes. In Western countries, there is a wide variety of payment forms including cash, debit cards, alternative payment methods, and a wide range of credit cards. So Western consumers will start using mobile payment methods only when they feel that mobile payment means offer a significant advantage over existing ones. Currently, this is not the case. However, in developing countries, where banking infrastructure often does not exist or in regions where consumers lack trust in the government and banks, mobile payments offer a secure and immediate tool for payments that will undoubtedly continue to multiply and prosper.

Zooz Zooz provides a payments platform designed to maximize merchants’ payments performance. It offers the flexibility to connect with multiple financial institutions, seamlessly integrate payment and technology providers, and intelligently route transactions through the entire payment process. Zooz provides merchants access to granular transaction data, enabling them to analyze and optimize payments.

Thought Leaders Corner

Still at the start of the mobile payments revolution by Liam Spence

iam Spence, Head of Product at Pay by Bank app, VocaLink’s mobile payments service, takes a look at some of the trends that the business has factored into its new online mobile payments products and where he believes the future of mobile payments is heading.

that already exist today - such as Request to Pay and push payments using secure customer authentication. Only when these have been adopted and the basic hygiene factors have been significantly improved, can we look to deliver on the long-awaited promise of secure mobile payments.

Despite the industry fanfare, we are still at the start of the mobile payments revolution and the designing of the winning solution for the future must take into account a significant number of factors, behaviours and trends. It is a revolution that we have been following for a while at VocaLink and we are very excited about its potential. For example, the number of mobile transactions as a percentage of all in-store transactions has grown by 247% in the UK over the last year, analysis by payments processor Worldpay has found. And online, the percentage of retail sales made on mobile devices, which accounted for 1% in 2010, now accounts for 56% (IMRG). Retail sales through Smartphones last April were up 83% YOY (IMRG).

Real time for the real world

Basic hygiene factors in payments There isn’t a new mobile payments solution that isn’t marketed as ‘more convenient’ and ‘more secure’ than the last, but we believe these are just basic hygiene factors for payments. As an industry, we need to innovate beyond people’s basic expectations. But is this really happening? I would argue that it is not. An example would be the reliance on the card scheme rails for remote purchases, or card not present (CNP) where stolen payment card details are used to make a purchase on the internet, over the telephone or via mail order. According to Financial Fraud Action (FFA), in the UK alone, there was a 31% increase in fraud losses in the first half of 2016 compared with the same period in 2015. While the use of payment card details obtained in data hacks contributed to the increase in remote purchase fraud (Yahoo! being the latest one in the news), the growth of online retail has also given fraudsters more opportunities to use compromised personal information and card details on websites which use less secure systems. E-commerce card fraud totalled an estimated £156 million, up 46% compared to the first six months of 2015. So, whilst there is a lot of talk about payments being ‘more secure’ in reality fraud is increasing significantly on certain user cases. The payments industry should be promoting payment methods, in existence today, that reduce the likelihood of fraud occurring and therefore reducing the cost of payment acceptance across the industry, most importantly for the merchants who bear the brunt of these costs and the consumers who are the victims of this kind of activity. As an industry, we should be embracing the superior models

The world moves at real time and we have seen this trend adopted across so many digital industries, music, media, social – and now it is the time for mobile payments. Real-time technology offers benefits to all parties within the payments value chain. By delivering immediate value, realtime facilitates a higher level of service, creates new revenue streams, and enables new payment channels, all whilst boosting efficiency, reducing costs, and mitigating risk. For instance, in May 2008, the U.K. banking community launched the Faster Payments Service (FPS), which heralded a new era in payment processing. We see a number of opportunities for mobile payments to create innovative new products leverging the real-time payments network rails.

Opening doors with open API’s Across the payments industry there is a lot of talk of ‘regulation vs innovation’. In the UK, the government is calling for the creation of an open banking standard that makes it easy to share and use financial data, arguing that the move would promote competition, stimulate innovation and most importantly improve choice for customers. I see this as ‘regulation for innovation’. What we are seeing from the banks, as they move to an open API world, is them getting more hands on in regard to mobile payments, enabling new services to be built using bank and customer data. An open API will remove any information barriers for challenger and neo-banks enabling them to lead the technology charge and push the industry forward - whilst at the same time providing secure and controlled access. Whilst Open Banking is still being defined and there is a lot of talk about technology companies having access to the data, some of the banks have started to expose these APIs (and even plan to have hackathons) to bring new ideas to life. Banks have been written off in the open banking world, but I would not underestimate their role and the fight they have in them.

Breaking down barriers to adoption There are many barriers to the adoption of new payments methods and I have already discussed security. Another key

Thought Leaders Corner

Liam Spence

Head of Product @ Zapp With over 15 years’ experience within payments and product development, Liam has a breadth of payment solution experience along with deep industry and technical knowledge. Previous roles include working with some of the largest financial institutions in the world, including PayPal and TSYS. As one of the founding members of Zapp, Liam has been driving the development of the Pay by Bank app product since 2012. In his role as Head of Product, Liam leads his team in its day-to-day activities, working closely with banks, acquirers, PSPs and gateways to ensure Pay by Bank app delivers key business benefits across an entirely new digital payment ecosystem.

one is usability. How many ‘mobile wallets’ does a consumer really want, need or have to download? After all, if you can use the same payment card almost anywhere, why should you have more than one mobile wallet? Given that one of the most popular ways to keep on track of your finances is your mobile banking app, I would argue that it should be the ‘one stop shop’ for all your financial activities, including mobile payments. Allowing people to use their trusted mobile banking app to make both online and in-store payments directly from their accounts, using the app they already have and use regularly and without their personal information ever leaving their bank is a compelling proposition that helps keep the banks brand at the centre if the payment. And whilst it is noted that some people don’t necessarily like their banks, the bank is always the most trusted entity when it comes to looking after your money and keeping you in control of your finances. You can even view your balance whilst paying!

The future and where are mobile payments heading? Unfortunately, in the payments world, nothing happens very quickly. Despite the recent extraordinary growth in contactless payments in the UK, it has actually been 10 years since the

first contactless payment. So despite all the disruption and innovation that is talked about, I have a more balanced view. Card based mobile payments across various wallets will continue to form the majority of mobile payments in the short term, but account to account payments will gradually increase in volume and value, spurred on by several trends such as open API’s, real time value adding services, better fraud prevention, request to pay and new digital user cases such as chat bots and IoT. I am very excited about the potential of all these trends and one thing is for certain, the future of mobile payments will be an interesting topic to follow.

Zapp Pay by Bank App enables payments directly from your existing mobile banking app. It’s safe, easy and convenient to use. You’ll always know your current balance when you pay and your personal details never leave your banking app. It’s built by VocaLink and backed by the UK’s leading banks.

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expert interview

Mobile on the move John Gessau is Director of Product Management at ACI Worldwide, with specific responsibility for mobile payments. John’s focus is on enabling ACI’s merchant customers to accept and integrate mobile payments into their in-store, mobile app and browser channels. His expertise covers mobile wallets, P2P payments, NFC and other contactless technologies, wearables, and integration of loyalty and targeted advertising.

ot hing is dr iv ing more growth in commerce than the mobile channel – so how can merchants take advantage of this growth opportunity, and what role do payments play in enabling the ‘mobile-first’ approach?

PCM: Mobile is currently the priority for many businesses – why is this is the case? John: Simply put, because nothing else is driving more growth in commerce. There are now 8.6 billion mobile devices worldwide, which is 1.2 devices per person. Mobile devices have become incredibly powerful; as an example 2016’s iPhone is more powerful than 2006’s iMac, has similar screen resolution, and a much faster internet connection. Nearly 80 percent of mobile users in developed markets are now using a smartphone, and analysts expect that 70 percent of the world’s population will have a smartphone by 2020. Mobile commerce notched only a single digit contribution to overall eCommerce (desktop plus mobile commerce) in 2010, but it now accounts for more than 50 percent of eCommerce in the U.K. and

China, 33 percent in the U.S., and over 20 percent in many other European markets. It is anticipated that mobile will continue to outgrow desktop-based eCommerce into the future, so it is clear that this trend is only going one way. Since many, or in some cases, most customers will be shopping on a mobile device, it is strategically important for businesses to put their best foot forward in optimizing the mobile experience.

PCM: What challenges do merchants face in taking advantage of this growth opportunity? John: Although many of the principles gleaned from traditional desktop eCommerce do extend to mobile commerce (especially when conducted on a mobile web browser), the main challenge is that merchants need to adapt the customer experience and operating model. There is a lot more to it than making an existing interface mobile responsive. The unique form factor of mobile is a challenge, but also an opportunity. For example, mobile wallets can enhance payment security by authenticating all transactions with a PIN or by leveraging biometric and other sensors. Payments security can be

increased, but at the same time deliver the convenience that consumers are demanding through contactless in-store payments or one-click online payments. But there are unique challenges. Not only is the screen smaller, but hover-over design elements, pop-up windows, fixedsize iFrames, and other elements that are based on desktop eCommerce may not work well on mobile and can undermine checkout conversion. Shoppers are also more likely to be on the go or multitasking, which means they are more distracted during the shopping and checkout process. All of this results in checkout completion rates that are about 40% lower on mobile than desktop.

PCM: It would seem then, that increasing checkout conversion rate is key to fully realizing the growth opportunity. Given the challenges that you have described, how can this be done? John: There is no magic bullet when it comes to the challenge of low conversion rates on mobile, but native mobile apps are one solution. Apps allow merchants to design optimized experiences and unlock unique capabilities such as device functions

expert interview

(e.g. biometric scanner). Native apps are typically able to leverage data more effectively than mobile websites, and this in turn helps merchants to deliver a more personalized experience. When done well, targeted marketing using in-app push notifications can be extremely effective. One challenge with apps, however, is how to incentivize consumers to download and habitually use them. Whether a mobile-optimized online shop or an app, strong design and a smooth checkout process are critical when it comes to raising conversion rates on mobile. This extends to payments – many merchants think that supporting card payments is enough, but consumers also want to pay with mobile wallets they have enabled on their device, such as Apple Pay, Android Pay, Alipay or Samsung Pay. Some merchants choose to enable PayPal on their mobile sites, in order to avoid external validation factors such as 3D Secure, but exclude it on desktop because of the higher payment acceptance costs. The message here is that merchants’ payments strategies need to evolve in lockstep with their mobile strategies, and in fact we are seeing a trend towards ‘mobile-first’ payments strategy.

PCM: Are there certain sectors or verticals that are particularly impacted by these trends? John: There are definitely some sectors – including gaming, digital goods, and travel – that tend to be mobile by nature. The travel sector provides an

interesting case, because the way in which we plan and book travel has changed so dramatically in such a short period of time. In 2014, around a quarter of leisure travelers used their smartphone to book travel, up from only 15% in 2013. By 2015 that proportion had grown to 31%, according to Google, with 54% of business travelers having booked travel on their smartphone. Since then, the trend toward mobile has continued, in part driven by improvements in both native apps and mobile websites that have accompanied ever more powerful smartphones. According to Google, 94% of leisure travelers also switch between devices as they plan or book a trip, and it’s not as simple as “research on mobile, book on desktop.” There are many potential customer journeys that travel marketers need to account for, and can influence the final purchase decision – and they need to be able to process the payment wherever and whenever the consumer makes that decision. As consumers become increasingly comfortable using their mobile device to not only book but also pay for travel, there is an opportunity for merchants to capture a bigger market share by delivering the most seamless checkout experience. Additionally, merchants in the travel sector have myriad opportunities to cross-sell – whether it’s insurance products, rental cars, inflight meals or extra legroom. Those that can best incorporate these ‘impulse’

offerings into their mobile interface will benefit the most. This means offering one-touch payments, a range of suitable payment options (including mobile wallets) and a suitable mobile fraud strategy that lets through genuine shoppers. The security aspect should not be overlooked, because despite the desire for simplicity, consumers also need to feel safe – especially when completing big-ticket orders.

PCM: You highlighted that the vast majority of travelers are switching between devices as they plan and book travel – does this create any specific challenges? John: Cross-channel visibility and data integration is the biggest challenge that merchants face. Sticking with the travel sector, a huge number of the apps we use and websites we visit can influence the purchase decision; from review sites (TripAdvisor etc.) to social media (such as Instagram) and tools such as Google Maps. Those merchants that can integrate data and provide a smooth and seamless experience across platforms – allowing consumers to start a booking on one device and finish on another – are going to enjoy a bigger slice of the pie. Competition is particularly fierce in native apps, where growth significantly outpaces that of mobile websites.

PCM: Are the challenges around delivering a seamless mobile experience impacting the way that merchants work with payment providers and vendors, and the sorts of technologies that they are using?

expert interview John: AAs is usually the case in payments, what appears simple on the surface is anything but in reality. The complexity – and the speed of the change – mean that merchants are asking their PSPs and technology vendors to deliver the tools and the services that will allow them to pursue a ‘mobile-first’ strategy. Technology such as mobile software development kits (mSDKs) are one such solution that allows merchants to quickly embed a range of payment methods into their native apps, and create checkout pages that deliver the kind of seamless experience that consumers are demanding. Larger merchants also see the checkout experience – including payment – as an opportunity to differentiate their offering and strengthen their brand. Although merchants want control, the complexity of payments means that third-party vendors typically have a better ‘toolkit’ to enable the innovation that merchants are demanding. There is also the ever-present risk of fraud, and merchants are increasingly looking to experts to help them find the optimal solution to prevent fraud while maximizing checkout conversion rates.

With so many payment providers and vendors to choose from, what advice would you give to merchants? John: Merchants should carefully evaluate the capabilities of these mobile-enablement technologies, and ultimately work with those that are developer-friendly, saving them time and development effort, and also secure, reducing fraud but still letting through genuine shoppers. In addition to offering simplicity and security, solutions also need to be global. Certain sectors – i.e. travel or gaming – are global by default. And many merchants who are domestic today realize that their future growth may well lie in cross-border sales, and quick access to new markets is a key consideration. Merchants should also take time to look beyond the immediate payments functionality and features, and understand the technology that in the future will be the backbone of their payments strategy. Connected cars, wearables, VR… there are a number of trends starting to converge that are going to create countless new customer

journeys and payment experiences, and merchants need to adapt quickly. It is important to remember that the mobile ‘tipping point’ – while significant for retailers – is only a waypoint on the path towards the IoT (Internet of Things) and a vast array of connected, paymentenabled devices (estimated at nearly 21 billion by 2020). This explosion in the number of connected devices is going to create space for new forms of payment and new partnerships within the payments ecosystem.

ACI WorldWide ACI Worldwide powers electronic payments for more than 5,100 organizations around the world. More than 1,000 of the largest financial institutions and intermediaries as well as thousands of global merchants rely on ACI to execute $14 trillion each day in payments. Through our comprehensive suite of software and SaaS-based solutions, we deliver realtime, immediate payments capabilities and enable the industry’s most complete omni-channel payments experience.

Spotlight You think you have what it takes to start a business in a super-hot market? PCM takes a close look at some of the most innovative and promising startup companies in the payment industry.

startup spotlight

“PAYR IS THE NEXT GENERATION PAYMENT PLATFORM APP EMPOWERING CONSUMERS TO PAY INVOICES IN FLEXIBLE AND SMART WAYS” Espen Grimstad , Co-founder & CEO

or this month’s Startup Spotlight we spoke with Espen Grimstad, CEO & Co-founder of Payr. Starting his first tech company at the age of 18, Espen is a serial entrepreneur with a proven track record building tech companies in Norway, New Zealand, Australia, and the US. He has accumulated deep marketplace and fintech experience, working as a founder and an advisor at leading IT-consulting firms. Espen is part of the 500 Startups alumni from Mountain View and has 3 previous exits. We got to know about his venture into the Payment space and where it’s heading.

PCM: Tell us about Payr. How did the idea come to be? “You could say that the idea for Payr came out of falling in love with a very sympathetic business model. Ever since I watched Aaron Patzer pitch Mint.com in 2006, I have had the idea of building a third party online banking service. But, in addition to Mint´s business of aggregating bank and credit card transactions into one easy-to-use dashboard, Payr will go several steps further. Our goal is to offer a full-fledged global online banking service collecting all your financial accounts into one place”, says Espen Grimstad, CEO at Payr. “Imagine having a dashboard of your entire financial life, including bank accounts & card transactions, air miles, PayPal and e-money and even bitcoins. And then being able to manage that money, open accounts, transfer money and pay bills from all those accounts at once and instantly. Not to mention getting personalised recommendations on how your finances can be

best utilised and optimised. This is what we are aiming for at Payr”, explains Grimstad. We have been waiting for this time where technology, infrastructure, regulations and the market maturity all combines into a perfect storm. After exiting an international tech-startup named Transfercar two years ago, it seemed like the right time to get into the Fintech scene. So, we went all in and starting building our first product. Payr One is a mobile payment app that makes it very easy and fast to pay bills, with flexible payment methods including credit & debit cards, e-money or any bank account. Based on data from paid invoices, we make it easy to compare and switch to better or cheaper providers of electricity, mobile subscriptions, loans, insurance and a number of other areas.

PCM: Why is it called Payr? First of all, we needed a name that would work in most countries as we have global ambitions right out of the starting block. Also, Payr is short for Payroll in many English-speaking countries, and with Payr you can both pay and save so this is a good match with your monthly income and account balance. And, we like the way that it’s an active form, almost like a verb. Short and sweet, and it pretty much means the same in all countries we roll out in. Pay with Payr!

startup Spotlight

PCM: Why is Payr needed? There has been too little real competition in the financial space, and this is still very true for personal banking and finance management. Incumbent banks have been dominating the space, moving very slowly and not listening to what their customers really want. The legacy players have been trampling all over their customer relationships and decimating trust, overcharging for everything and anything they can and so forth. For most people paying bills is boring and takes time and effort. Payr offers a faster, more convenient and independent way to do this. And we even let people save while they are paying! Similarly, to the way peer to peer payments have made it much more convenient for people to send money between friends, we want to empower consumers and businesses to efficiently pay their invoices while acting on and improving their financial situation through product & price comparison. “In short, Payr customers can pay invoices any way they want, whilst save money and get better services. All this in a faster and more convenient way than before, independently of their existing banking relations”

PCM: What makes Payr different? Our big advantage is that we are able to give truly independent and actionable advice in a market dominated by the big banks. As we are not a bank or a large incumbent financial

player, we are free to give objective advice and help people improve quality and cut costs on expenses that really matter, like mortgage, insurance and a whole series of utilities and services such as electricity, internet connection and mobile phone plans. To put it this way: Your bank won’t suggest that you move your loans to a competitor that offers better terms. Ever. We make it our business to do just that. Simply put; Our independent position as a non-bank and our business model makes us able to combine payments and savings in the same mobile app.

PCM: What were some of your biggest challenges for launching this business? We first began validating our hypotheses and concept, building the team, started work on design and UX etc, and this was pretty much a normal lean startup process. But as soon as we initiated the process of navigating the regulatory minefield and applying for the necessary payment operator licenses from the Financial Supervisory Authority, it was clear that this would be consuming lot´s of time and a good deal of money. Also, to be able to operate in the payments space, one obviously needs to connect to and use many of the legacy infrastructure platforms and components. This is not straightforward and required us to negotiate partnerships and contracts with large banking infrastructure companies, that are not exactly moving at the speed of light. We also needed to learn a long list of different regulatory and

startup spotlight

Team Picture at the Payr Office

compliance topics, and putting in place strict security and internal control procedures, that are not the core skillsets of most tech startups.

PCM: Tell us about your expansion plans and how you go about choosing the next region to expand into. We are launching in our home market of Norway, where we will remote control most of the tech, product development and other functions that need not be localised. This way we can ensure that we build a strong core team that is aligned at all times. For each market, there will need to be some sales, marketing, legal and support roles, but we are basically following the roll-out strategies as the best of breed rapid scaling companies of today, running as lean as possible. As all the different metrics, features and revenue streams will be validated and optimised in the Norwegian market during

2017, we will roll out to the Nordics and UK, starting 2018. From that point, we progressively attack Europe. The main drivers and elements we look for when evaluating which markets to go to and when are technology and banking infrastructure readiness. We also look at other factors like digital maturity, smartphones prevalence, online and mobile banking adoption and credit card usage.

PCM: What are the 3 things you want people to know about your platform? 1. Payr is made by people, not a bank. 2. Payr will radically improve the way you do daily banking and payments. 3. Payr is fundraising, get in touch.

Payment Collective To get a more complete view on the developments but also challenges of other businesses in the payments ecosystem PCM showcases merchants approach to payments and fintech challenges in this rubric.

Payment collective

The Tale of a Merchant: The Payment Challenge

roviding a complete picture of the payment landscape is not easy. Therefore, we decided to include and showcase merchants in our brand new rubric Payment Collective.

PCM: As a merchant, how do you stay up-to-date with the latest trends and developments to counter fraud, reduce risk and improve your offerings? Kai: My colleagues and I try to attend relevant conferences and trainings to keep ourselves on the cutting edge in payments. In addition to this, we follow the business area news, publications and market insights. We also meet local authorities, payment experts and our partners & service providers to exchange information regarding new requirements, threats & possibilities. Neste is a member of a consortium of Finnish oil retailers and we meet several times a year to discuss openly about fraud, risk and other topics like EU regulation changes. PCM: What are the most important factors from a merchant PoV in regards to payment experience? Kai: The payment experience should be convenient and intuitive for any customer to use. This is especially important in unattended environments. In addition, a payment transaction should be something that the customer can trust into. Since cost is always a factor, the payment experience should be also cost effective for the merchant. PCM: What are the challenges faced by merchants when implementing a new payment system? Additional cost of buying new equipment (if needed) and software development for POS & cash registers is of course one big factor. With both HW & SW, nobody usually wants to be the minesweeper with an unproved product. If you have brand new payment system, there is a big risk that there are glitches in the system. Failing payments are not the thing what the customers want to experience at our stations. There should be a relevant business case for the merchants as well. This means enough users or at least foreseeable increasing user base to justify the effort to bring a new payment system into the market. I would also say that any new payment system should be faster, easier to use and hopefully also less expensive

than traditional debit/credit card transactions. PCM: How do you make sure you stay compliant in an ever changing payments landscape? Neste works closely with our acquirer, PSPs and payment terminal providers to make sure that all parties are on the same level in compliance requirements. Neste has also a service contract with a company, which provides Neste security services, including sys-tem audits and consultancy in PCI-DSS and other requirements. PCM: How important is payments to Neste, besides it being your source of income? Since most of our stations are unmanned, our POS terminals are the most important things for us at the station, in addition to the fuel tanks and pumps of course. Without the payment terminals Neste couldnâ&#x20AC;&#x2122;t sell our products to our customers. So therefore we do our utmost to provide reliable services which function 24/7/365. Our aim is to provide our customers easyto-use user interfaces to make their experience at our sta-tions as pleasant as possible. Neste has its own fuel card issuing business and the transactions made with those cards actually make up well over 50% of all fuel purchased from our stations. The fuel cards are extremely important for us as a method of providing better service especially to our B2B customers. Neste wants to be the most innovative oil retail company in the Baltic Sea region and this applies also to payments. We want to offer our customers a possibility to pay with payment methods they prefer to use - be it cash, cards, NFC payments, remote pay-ments or something totally new & different. PCM: For all merchants out there, can you please give us a piece of advice as to how you can stay ahead of the game in merchant payments? Follow the publications and news regarding the payments business area. By doing that you will understand better what is happening out there and what kind of new payment methods are being introduced. Not all of them will fly though, so donâ&#x20AC;&#x2122;t waste your mon-ey on the marginal ones. Common sense and

PAYMENT COLLECTIVE

Kai Lindström Head of Payments & Payments Systems @ Neste Kai is working for Neste, a global oil refining and oil retail company that is headquartered in Finland. As a Head of Payments and Payment Systems, Kai is responsible for all things related to payments in Neste’s oil retail business in Finland, Baltic countries and Russia. His team takes care of development and management of Neste’s outdoor payment terminals, cash register systems and other acceptance methods and participates in development of Neste’s own closed loop payment instruments. Kai has worked in payments business since 2004.

patience should prevail here. Make sure that you choose such payment terminal and/or e-commerce platform service providers who have resources to continuously develop their products and services. They should be 1. always compliant with the compliance requirements of the schemes and authorities and 2. able to provide you new features and functionalities like support for mobile payments, new schemes, dynamic currency conversion, etc. which will enable you to serve your cus-tomers better.

transactions you bring in, the better price per transaction you should get. Ask for ICF++ pricing to see transparently what you are being charged.

Neste “Neste is a global oil refinery and oil retail company. It is the world’s largest producer of 100% renewable diesel and innovation leader in the use of renewable materials for fuels. The company issues its own closed-loop fuel card for both consumer & corporate customers.”

Always try to consolidate all your volumes under one acquirer. Since acquiring is purely a volume business, the more

Hot jobs

Hot Jobs SALES MANAGER

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These are the latest job opportunities we have on offer! For more information please visit www.paymentsandcardsnetwork.com or check out our international Job Board at www.payment.jobs 22

events

Events The Hague, Netherlands EuropeanPaymentSummit (EPS) offers a unique 2 day dual program featuring key developments ‘for-by professionals’ in the payments/ transaction space combined with a key sessions on international Security & Fraud in a special collaboration with Hague Security Delta (HSD). These two program sections will be programmed in parallel to enable delegates to switch and select key sessions to attend.

8-9

Tallinn, Estonia

Participants will discuss Blockchain solutions in governance (Govtech) as well as developments of various business spheres: banking, trading, notary services, healthcare, logistics, retail. The list of speakers is being formed but organizers – Smile-Expo Company – promise as notable experts as in Kyiv, Moscow and Prague. Every segment (business, developments, governmental regulators) will have its representatives.

Dubai, UAE Rotating around the central theme of “Gateway to explore New Opportunities”, Insurance Innovation 2017 aims to engage in in-depth discussion on progressive topics such as Insurance Aggregators, Telematics, InsurTech Options, Digital transformation, product innovation and much more.

13-14

events

Las Vegas, US

13-16

MRC Vegas is the largest MRC event focused on payments, fraud and risk for connected commerce at the intersection of mobile, retail, marketing services, data and technology. This event focuses on the discussion of crucial industry trends, solving business challenges and engaging with industry leaders.

London, UK The Retail Banking Innovation conference aims to develop an industry leading innovation strategy informed by the latest regulatory and technological influences to execute customer-centric, digital transformation. Topics that will be addressed during this event include concepts of Open Banking and API Models, various models of internal and open innovation and much more.

14-15

Cape Town, SA Seamless is the key meeting place for this brave new world of commerce. It is a new event built on 20 years of experience â&#x20AC;&#x201C; a seamless continuity from Africaâ&#x20AC;&#x2122;s largest and longest running conference focused on cards and payments, to a dynamic summit and large scale exhibition bringing together the converging worlds of ecommerce, retail and payments.

14-15

events

Las Vegas, US Shoptalk is an unprecedented gathering of individuals and companies reshaping how consumers discover, shop and buy, Shoptalk provides a platform for large retailers and brands, startups, tech companies, investors, media and analysts to learn and collaborate. Shoptalk will be held on March 19-22, 2017 at the Aria in Las Vegas. For more information, visit www.shoptalk.com. Follow @shoptalk. Like facebook. com/shoptalk.

19-22

London, UK

21-22

The Internet of Things possesses the ability to greatly enhance the ways in which retailers are engaging with their customers. This 2nd Annual Internet of Retail event will present case studies from some of the worldâ&#x20AC;&#x2122;s leading retailers who have overcome implementation pitfalls and are successfully harnessing IoT to heighten the customer journey.

Singapore SME Banking Asia Summit series will continue to place great emphasis on unsecured lending through addressing its conventional business risks characterised by lacking credit data, potentially high NPL rates, sophisticated segmenting strategies, challenging processes of products development & relationship management, as well as high operational expenses (OPEX) that are pressing senior commercial/ SME Banking decision-makers determined and committed to refining benchmarkable practices.

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Payments & Cards Network Driving Innovation through knowledge Get involved now!

We value your feedback and ideas! If youâ&#x20AC;&#x2122;d like to discuss a specific topic, donâ&#x20AC;&#x2122;t hesitate to contact us. Get in touch today and maybe you will be featured in the next edition: Amsterdam Office Herengracht 576 1017 CJ Amsterdam The Netherlands Email: info@ paymentsandcardsnetwork.com Tel: +31 20 3030 257 Fax: +31 20 8208 295