1. March | April 2013 | paymentscardsandmobile.com
Advanced Payments
The future of m-payments
in this issue
Card Notes
Continued growth in
ATM withdrawal volumes
Cash displacement benefits
Why the delay?
Issuing and Acquiring
MPE 2013 highlights
m-payments
The Way We Pay
4. 12. Payments innovation report
highlights driving forces
The recently-released Payments
Innovation Jury Report 2013, from Ixaris
and Anthemis Group, has highlighted how
the payments industry is undergoing an
intense period of innovation. ■ China
m-banking on the rise – Celent. ■
payments cards and mobile | March | April 2013 paymentscardsandmobile.com4
contents
8. Continued growth in ATM
withdrawal volumes
The global ATM market is set to continue
to grow, largely as a result of huge
projected growth in demand for cash
withdrawal services in the coming years.
■ Spanish interchange study called into
question. ■
10. UK holiday card spend
rise in 2012
FICO has released its quarterly UK cards
data showing that average total sales per
classic credit card hit a two-year high.
■ iDEAL continues on strong growth
trajectory. ■ Payments M&A activity
heats up. ■
12. African mobile money
adoption soars – GSMA
More than 30 million people around
the world carried out mobile money
transactions in June 2012, according
to figures from the GSMA. ■ US EMV
migration called into question. ■ PayPal
co-founder launches m-commerce firm. ■
newsinbrief
6-7. The payments world in 60 days
cardnotes
16. Cover story –
The future of m-payments
This year’s Advanced Payments Report,
put together by Edgar, Dunn & Company
in conjunction with PCM and First Data,
shows that while the mobile payments
opportunity looms bright, there are still
some hurdles to overcome.. ■
20. Cash displacement benefits –
Why the delay?
The economic crisis has highlighted EU
governments need to reduce the unofficial
cash economy and increase tax and VAT
collection. Many believe cash displacement
by payment cards can make a significant
contribution. But due to a four year delay in
the EU approving an incentive programme,
banks are unsure. ■
24. Microcredit –
Soft finance getting tougher
Microcredit, a booming sector since
the ‘90s, is the latest to feel the pinch
in the wake of the global financial crisis
according to a report by Baird’s CMC
Financial Services. ■
12
20
16
features
Number of registered and active customer accounts by region (June 2012)
Western Africa:
7.8 million registered accounts
720,000 active accounts
South Asia:
13.3 million registered accounts
3.8 million active accounts
East Asia and Pacific:
4.3 million registered accounts
1.8 million active accounts
Eastern Africa:
48.5 million registered accounts
9.7 million active accounts
0%
20%
40%
60%
80%
100%
Regulations
Access to existing payment infrastructure
Costs
Security
Acceptance network
Partnerships / Ecosystem
Business model
52%
63%
69%
73%
79%
82%
83%
Key concerns of stakeholders around mobile payments
Key concerns of stakeholders around mobile payments
5. contents
paymentscardsandmobile.com payments cards and mobile | March | April 2013 5
30. Paydiant and Menusoft launch
mPOS and wallet service
Paydiant, provider of a cloud-based mobile
wallet and offer redemption platform, has
announced that Menusoft has integrated
the Paydiant mobile wallet solution.
■ Banco Santander and iZettle form
partnership. ■ ValidSoft SMART solution
selected by Spindle. ■ Visa introduces Visa
Ready Partner mPOS services. ■ MobiWire
showcases MobiPrint². ■
posterminals
contactless
mobilepayments
38. Mobile World Congress 2013
showcases mobile horizon
conferences
28. Visa and Samsung sign global NFC
alliance agreement
Visa and mobile handset manufacturer
Samsung have formed a global alliance
to further mobile NFC payment services.
■ China and Canada roll-out SIM based
NFC payment service. ■ NXP highlights
expanding NFC ecosystem. ■ Dutch banks
launch mobile NFC payments trial. ■
29. Payment players partner for MWC
contactless payments
This year’s MWC event also brought
together CaixaBank, Gemalto, Telefónica
and Visa Europe who teamed up to
deliver a payments application offered
to the 3,500 delegates who attended the
event. ■ Gemalto, Banco Itaú and TIM
launch Brazilian NFC project. ■ France
gears up for mobile NFC. ■ OpenWay,
Lukoil and LICARD promote contactless
payment. ■ Visa Europe expand UK
contactless payments. ■
35. NFC Forum validates latest
Clear2Pay test solution
■ Applus+ obtains EMVCo L1 accreditation.
■ VeriFone and SK C&C team for mobile
wallet acceptance. ■ Oxygen8 Group’s
mobile payment solutions set to go
global. ■ SPS launch enhanced chip
card operating system. ■ Jumio unveils
Netverify Mobile to combat fraud. ■
32. MasterCard launches MasterPass
digital payments service
The war of the digital wallets is heating
up with the news that MasterCard has
unveiled MasterPass. ■ PayPal and
Lenovo aim to eradicate passwords. ■ UK
e-commerce levels boosts payment card
usage. ■ Servebase launches ANYpay
payment platform. ■ Ingenico to acquire
Ogone. ■ Quarter of Indian consumers
shop online. ■
37. SIX and Diners Club sign
merchant acquisition deal
■ Skrill completes acquisition of
paysafecard.com. ■ WorldPay and Vindicia
partner for international payments. ■ TSYS
acquires NetSpend for $1.4 billion. ■
products
e-commerce contracts
24. MPE 2013 highlights changing
acquiring landscape
The Merchant Payment Ecosystem 2013
event, held in February in Berlin, is proving
to be one of the most important events in
the global payment landscape. ■ Equens
processes billionth SEPA transaction. ■
25. Social media improves engagement
with UK credit cardholders
According to new research from the
Auriemma Consulting Group, credit card
issuers have been seeking new ways to
drive cardholder loyalty and engagement.
■ PFS forms prepaid partnership with
Deutsche Card Services. ■ WorldPay
acquires YESpay. ■ Barclaycard and Amex
sign new UK card issuing agreement. ■
issuing&acquiring
26. Spire Payments acquiresThyron
Spire Payments has announced the
acquisition of Thyron Payments Systems,
which specializes in mobile payments. ■
PayOne files patent infringement lawsuit
against Home Depot. ■ Mobile payments
offer big opportunity for Vending industry.
■ Mobile payments offer big opportunity
for Vending industry. ■ Stripe begins UK
beta trial. ■
27.TheWayWe Pay –
Payments Council
According to a new report from the UK
Payments Council,“The Way We Pay”, over
the past decade, UK consumers have
significantly changed their purchasing
behaviours. ■ Banks must drive UK digital
payments innovation. ■ Companies
Struggle to Popularize Mobile Money. ■
Visa launches mobile managed service. ■
6. Cheque usage may be on the
decline elsewhere in Europe but in
Ireland they are still a popular payment
instrument, according to the country’s
central bank. At the cheque’s peak in 2005,
131.5 million were used, or around 32 per
person, during the year. However by 2012
the figure had fallen to 75.1 million or 19
per person. This compares to an EU aver-
age of nine per person per year, with 20
out of 27 member states using just two or
less cheques per annum. France is the only
country with a significant lead on Ireland
– a massive 46 cheques for each person
each year.
Cyber-criminals managed to steal
nearly $11 million from ATMs around
the world using prepaid cards, according
to security blogger Brian Krebs. Hackers
gained access to issuer authorisation
systems and card parameter information.
In an alert sent to issuers, processors and
ATM acquirers, Visa warned that further
attempts are expected, and is urging
increased vigilance.
Online retailer Amazon is to launch
its own virtual currency for purchas-
ing apps, games and in-app items on its
Kindle Fire tablet device. Amazon says it
will give customers tens of millions of dol-
lars’ worth of free Amazon Coins to spend
on developers’ apps on Kindle Fire from
the tablet’s Appstore when it launches
the new currency in May. Amazon
Appstore developers will earn
the standard 70% revenue
share when customers make
purchases using Amazon
Coins, whch are pegged to
the US dollar, with one Coin
equivalent to one US cent.
The rising popularity of hackathons
has caught the attention of financial
giantsincludingJPMorganandBarclayswho
are all staging their own events in order to
attract the cream of the IT crop. Hackathons
involveprogrammersandcodersdeveloping
APIs and services before demoing them to
company executives and entrepreneurs.
An altruistic ATM in Spain is giving
out free money to customers – but
only if they promise to share the money.
The ATM, known as the “happiness dis-
penser”, is part of a publicity initiative
with drinks giant Coca-Cola, which has
taken the ATM around various parts of the
recession-hit country.
After being forced by the Bank of
Italy to suspend card payments over
its failure to comply with anti money-
laundering regulations, the Vatican City
has re-commenced processing card
payments. Swiss card payment specialist
Aduno has taken over from the previous
processor Deutsche Bank Italia – the Bank
of Italy does not need to approve the
arrangement because Aduno is based
outside of the EU.
news in brief
payments cards and mobile | March | April 2013 paymentscardsandmobile.com6
Is an iATM on the
way? Tech giant
Apple has reportedly filed
a US patent application for
anad-hoccash-dispensing
network which lets people
who need cash but cannot
locate an ATM send a
message through their
iPhone to find people
nearby who are willing
to lend them the money.
The patent application
involves a system where
people who sign up and
download an app can connect to an
Apple server.
Facebook has launched a prepaid
gift card that people can buy on
the social network and send to friends for
use at specific retailers and restaurants.
Cards can hold multiple gift balances, each
one dedicated to the associated retailer.
Balances can be checked in account
settings on Facebook from users’ phones
or desktops, with real-time notifications
sent when there are changes.
Bank of Ireland has introduce
mobile-to-mobile payments for
customers. The bank’s new ‘Pay to Mobile’
service allows customers to send money to
family and friends with a registered Bank
of Ireland account by using their mobile
phone number. To date, almost
20,000 of the bank’s 180,000
active mobile customers have
pre-registered for the service,
which is available for iPhone
users, with an Android version
following shortly.
7. American Express is enabling custom-
ers to sync cards with their Twitter
accountsandthenmakepurchasesbytweet-
ing hashtags. Using its Card Sync technol-
ogy, AmEx is offering selected cardholders
the option to link their card to their Twitter
account to buy the network’s gift cards and
productsfromAmazon,Sony,UrbanZenand
Xbox 360.
BlackBerry is piloting a person-to-per-
sonmobilepaymentsservicewithinits
BBM instant messaging system in Indonesia.
TheBBMMoneycommercialpilotwillletusers
access an account from their smartphone
and make real-time payments from within
the messenger app to their contacts who are
also signed up to the service. Customers will
also be able to buy mobile airtime credit and
transfermoneytobankaccounts.Theservice
has been developed by BlackBerry with local
financial institution PermataBank and AGIT
Monitise Indonesia, part of global mobile
banking service provider Monitise.
Incoming Bank of England governor
Mark Carney has indicated that he may
introduce Canadian-style plastic bank notes
to the UK. In Canada, the polymer bank note
is widely used. Carney said that the notes are
environmentallyfriendlyandrepresentgood
value for taxpayers.
The Australian Competition and
Consumer Commission (ACCC) is suing
Visaafteraccusingthenetworkofmisusingits
market power to distort competing dynamic
currencyconversion(DCC)services.Suchcon-
version services allow consumers to choose
whether they complete a transaction in their
home currency or in the local one of the POS
terminal or ATM they are using. In 2010 Visa
announced rules to stop the expansion of
supply of DCC services by rival providers on
POS transactions on its network, according
to the ACCC.
Banking giant Citi has started roll-
ing out functionally advanced
Citibank Express ATMs in Singapore,
Malaysia and the Philippines, which are
aimed at joining the physical and digital
banking worlds. The ATMs incorporate
an online banking connection, video-
conferencing and biometric capabilities
for customer identity authentication. A
customer can start a transaction on a
computer or mobile device and complete
it on Citibank Express, and vice versa.
Bridge Community Bank of the US
is introducing a biometrics-based
system for verifying customers inside
branches. Current and new account holders
can sign up for a digital icon in branches,
which incorporate customer fingerprint and
facial biometic data to generate a financial
security number which is linked to the
customer’s account. To identify
themselves in a branch
and carry out transactions,
customers then provide their
name and fingerprint.
The US state of Iowa is
to enable residents to pay some of
their taxes using Dwolla, a local digital
transactions start-up. Dwolla is a cash-
based payment network that provides
real-time, online and mobile payments,
charging a $0.25 fee on any transaction
over $10. Businesses that already pay more
than $100 million in cigarette stamp taxes
now have the option of paying via Dwolla.
US mobile-based financial services
provider Moven has launched a
closed beta test of its services. Moven
is advertising itself as a cardless and
branchless alternative to traditional
lenders, and is working with partners
that have charters and FDIC insurance.
Customers will receive a contactless
MasterCard sticker which they can attach
to their phone and link to the Moven app
for physical payments. Users will also be
able to pay friends through Facebook,
deposit cheques from their handset, and
withdraw cash for free from thousands of
ATMs across the US.
news in brief
paymentscardsandmobile.com payments cards and mobile | March | April 2013 7
Visa is working with several
Indian banks in order to utilise
the country’s biometrics-based national
identity system to bring financial services
and electronic payments to millions of
people. The ‘Saral Money’ account from
Visa, Axis Bank, HDFC Bank, ICICI Bank,
Indian Overseas Bank and the State Bank
of India is designed to solve the long-
standing problem of how to authenticate
the many millions of Indians without
existing bank accounts or adequate
forms of ID. They plan to tap into the
government’s Aadhaar national identity
system which uses fingerprint and iris
biometric information to verify users and
authorise payments. There are currently
210 million Aadhaar card holders, with
the government planning to expand this
to 600 million by 2015.
Just 3% of UK organisations have
made preparations for the intro-
duction of SEPA for direct debits, lagging
behind rivals in France and Germany as
the countdown to the 2014 migration
begins. The survey of 300 businesses in
France, Germany and the UK conducted
by Edgar Dunn & Company on behalf of
Steria, finds that almost 70% of European
businesses are aware of SEPA in general,
and more than 80% of businesses have
heard about SEPA Direct Debit in France
and Germany. However, only 26% of UK
businesses are aware of the mandate.
Sweden’s Swedbank is piloting
the use of mobile couponing with
merchants in Uppsala, the country’s
fourth-largest city which is attempting
to eradicate cash as part of a local crime-
fighting initiative. Swedbank is trialling the
use ofMasterCard’s
mobile application
Koy with high
street merchants
who can use the
app to post deals
to subscribers that
can be redeemed
from the user’s
smartphone.
VeriFone has had the wind taken out
of Sail, its app and dongle-based
system for turning smartphones into card
acceptance devices. Having failed to gain
traction with merchants, VeriFone will
instead offer the technology to banks. Sail
was launched in May 2012, but according
to the company, the standalone economics
of micro-merchant acquiring ultimately
proved to be unprofitable.
Vietnamese payment switch operator
Smartlink is working with Singapore
tech vendor Tagit to build a mobile bank-
ing service. Tagit’s Mobeix platform will
be available to over 40 million cardholders
belongingtoSmartlink’smorethan50mem-
ber banks. Vietcombank will be the first to
roll out the service, enabling customers to
downloadaniOS,Android,BlackBerryorJava
appthatcanbeusedforaccountinformation
queries, fund transfers, bill payments and
mobile top-ups. Through the Tagit system,
Smartlink customers will also be able to con-
nect with third parties such as utility compa-
nies and government agencies.
Royal Bank of Scotland, Lloyds
TSB and NatWest in the UK are in
a generous mood, having set aside £10
million to refund customers who forgot
to pick up cash dispensed at the ATM. The
banks are set to compensate hundreds
of thousands of customers who made a
withdrawal at the ATM but walked away
without the cash. Unlike other banks which
automatically re-credit consumer accounts
when the machine retracts the forgotten
cash, the banks diverted the funds into their
own reserves account and only paid up if
the customer asked for a refund.
US start-up Movenbank, which has
positioneditselfasamobile-only,card-
less, branchless bank, may be forced to offer
companion plastic cards to customers in
order to be compliant with MasterCard rules.
Movenbank is working with MasterCard on a
planned February 2013 launch which will see
customers issued with contactless stickers
that they can attach to their mobile phones,
says founder and CEO Brett King. However,
he maintains that the firm is still “anti-card”.
news in brief
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8. card notes
payments cards and mobile | March | April 2013 paymentscardsandmobile.com8
and Nigeria.
Cash has been the primary means of
payment for many in these regions until
now. This, along with high numbers of new
customers entering banking systems and
government programmes to encourage
usage of cards to access bank accounts, will
bring about such an increase in ATM with-
drawal volumes in many of these markets
that deployers will be forced to ramp up
their deployment of ATMs. ■
rate of 8% per year, in compari-
son with growth in the number
of installations of 7% per year.
Despite speculation about the
emergence of cashless societ-
ies, it seems that worldwide the
demand for ATMs and cash with-
drawals will remain high.
Vast numbers of people in emerging
markets in Asia-Pacific and Middle East and
Africa still have no access to ATMs or other
banking services, which means that the
potential for new ATMs and ATM usage in
these regions remains immense. In Asia-
Pacific, the annual volume of cash with-
drawals is forecast to outpace growth in
installations in China, Pakistan and Taiwan,
whilst in the Middle East and Africa the
same is predicted to be true for Egypt, Iran
Continued growth in ATM
withdrawal volumes
T
he global ATM market is set to con-
tinue to grow, largely as a result of
huge projected growth in demand
for cash withdrawal services in the com-
ing years, particularly from emerging mar-
kets, according to a study from strategic
research and consulting firm, Retail Banking
Research (RBR).
The report predicts that some emerging
markets will explode in the next few years,
with the number of ATM cash withdrawals
projected to rise by around 90% in the Asia-
Pacific and Middle East and Africa regions
between 2011 and 2017. In Asia Pacific,
the Middle East and Africa and central and
eastern Europe, growth in ATM usage is
expected to outpace the increase in ATM
installations. Globally, the total number
of cash withdrawals is forecast to rise at a
GLOBAL
at the POS continued its medium-term
growth path. In this period, there was no
evidence of a negative influence of the
interchange or MSC reduction on the sales
volume at the POS, in spite of the fact that
the mandated interchange reduction was
particularly strong in this period. In the
period 2001 to 2008, card payment volumes
and the volumes of cash withdrawals at the
ATM both grew continuously.
little evidence
There is also little evidence to support the
claim that the reduction in interchange has
led to higher withdrawals of cash and thus
higher use of cash as a means of payments,
PaySys adds. In the period 2006 to 2010 the
interchange rates in Spain were steadily
reduced from an average of 1.55% to 0.64%.
This led to financial savings for card-accept-
Spanish interchange study called into question
In its battles with regulators over multi-
lateral interchange fees (MIFs) in Europe,
MasterCard has repeatedly pointed to a
study which tracked the after-effects of
interchange reductions in Spain. According
to MasterCard, the study found that over
the five-year period from 2006 to 2010,
interchange fees were reduced by more
than 57%, and that it was merchants, not
consumers, which benefitted from the
reduction. The study stated that consumer
costs, mainly through annual card fees con-
sumers pay to their banks, increased by a
staggering 50% over the same period.
However, German payment consultancy
PaySys has cast doubt on the findings of
the Spanish study, claiming that it has “seri-
ous doubts about the interpretation of the
statistics and the presented results”.
According to PaySys, in the period 2006
to 2008, Spanish card payment volume
ing merchants and an additional burden of
cardholders.Inspiteoftheemergenceofthe
financial crisis, in this period, the number of
cardholders increased (+10%), the number
of POS terminals increased (+25%), card
transactionsatthePOSincreased(+36%),the
issuerrevenuepercardincreased(+12%),and
the income of the acquirer from the margin
MSC/interchange increased by about €1
billion.
Speaking to PCM, Dr. Hugo Godschalk,
managing director of PaySys, said: “Our
conclusions from the study are that the
MIF-regulation did not harm the Spanish
card business at all. Issuers, acquirers and
card schemes benefitted from the regula-
tion and the cardholders accepted the
higher annual fees without termination of
their cards. It would be better for the card
schemes and issuers if the regulators in
Brussels would not read this study.” ■
Source: Global ATM Market and Forecaststo 2017 (RBR).
Volume of cash withdrawls (millions), 2009–2017
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017
10. UK
card notes
payments cards and mobile | March | April 2013 paymentscardsandmobile.com10
compared to last year, which the govern-
ment puts at 1.8%, excluding fuel,” said Nigel
Brayne,seniordirectorofglobalbusinesscon-
sultingatFICO.“Thissuggeststhatmanycon-
sumers shifted their spending to credit cards,
perhaps so that they could pay for gifts over
alongerperiodoftime.Justasconsumersare
worried about their finances, card issuers will
bemonitoringtheiraccountscloselyforsigns
of delinquency.”
For accounts on the books less than 12
months, FICO’s data also showed a drop of
22% in the percentage of payments to bal-
ance, compared with December 2011.
For these accounts, average total sales
wereup4%overlastyearandutilisation
was up 5%. Payment trends were still
positive in the most recent data, with
the percentage of balances that were
two cycles (60 days) delinquent hitting
a two-year low. “It will be interesting to
see the impact of the Christmas spend
on delinquencies next quarter, to see
whether cardholders overreached in
their spending,” Brayne said. ■
UK holiday card spend rise in 2012
F
ICO has released its quarterly UK cards
datashowingthataveragetotalsalesper
classic credit card hit a two-year high in
December2012of£600.25,surpassingthelevel
from December 2011 by 10%. The latest data
from the FICO Benchmark Reporting Service
showedthataveragesalesperIrish(euro)card
also rose, hitting a two-year high of €732.55,
while student cards were slightly above 2011
levels. Only premium cards fell in terms of
spendingcomparedtoDecember2011.
“The growth in card spending far out-
stripped the growth in December retail sales
Payments M&A activity
heats up
Mergers and acquisitions in the pay-
ment space during 2012 made a sig-
nificant impact on overall M&A trends
over the year, according to research
from investment bank Berkery Noyes.
Overall M&A transaction volume
underwent a 7% increase over the
past twelve months, from 282 trans-
actions in 2011 to 302 transactions in
2012. Moreover, transaction value rose
from $19.84 billion to $30.23 billion, an
increase of 52%.
M&A activity in the payments seg-
ment improved at a robust pace in
2012, rising 47% from 2011. With this
growth, payments had a slight edge
over capital markets as the most active
segment in the report on a year-to-
year basis.
In addition, four of the industry’s
top ten highest-value deals fell within
the payments segment, compared to
two in 2011. These four transactions,
with a combined value of $5.83 billion,
represented 19% of the industry’s 2012
aggregate deal value.
According to John Guzzo, manag-
ing director at Berkery Noyes: “There
are significant changes occurring in
the payments sector, which is draw-
ing heightened attention from both
strategic and financial acquirers. This
includes the creation of enterprise pay-
ments hubs that can lower processing
costs, as well as the more extensive use
of mobile payments systems.”
Guzzo added: “Heightened regula-
tory scrutiny and new legislation –
particularly the CARD Act and Durbin
Amendment – is also starting to have
an impact on the sector, as new report-
ing and record keeping requirements
come into effect. Some payments com-
panies, responding in part to these
regulations, will look to diversify their
revenue streams by launching new
products and services.” ■
compared to €6.8 billion in 2011.
The growth of e-commerce is also helping
to boost iDEAL volumes. Consumers con-
tinued to rate iDEAL positively in 2012: 55%
of online shoppers preferred iDEAL to any
other means of payment. For 2013, Currence
expects iDEAL to continue to grow, partly
due to the expected growth in online shop-
ping. A major boost for this is the increasing
use of smartphones and tablets. As a result,
consumers are no longer tied by their own
location for their online purchases and are
able to purchase online anywhere and any
time. The preference for payment via iDEAL
is even higher for mobile shopping than for
shopping online (69% for mobile versus 55%
on average). It is expected that this year more
banks will support iDEAL mobile. ■
iDEAL continues on strong growth trajectory
DutchonlinepaymentsystemiDEALhaslong
been cited as one of the strongest non-cash
competitors to card payments, and recent fig-
uresshowthatover2012,thenumberofiDEAL
transactionscontinuedtoshowstronggrowth,
witha24.9%riseintransactionvolumes.
The system, operated by Currence, also
broke records in 2012. In October last year, the
milestoneof10millionmonthlypaymentswas
exceeded for the first time since its introduc-
tion in 2005 and throughout 2012 more than
117.2millioniDEALpaymentsweremade.
Moreover, the number of iDEAL payments
made in December 2012 set a new monthly
record. With more than 11.7 million trans-
actions, December was the peak month of
2012. The total sales made with iDEAL last
year amounted to more than €8.8 billion,
Source:Global ATM Market and Forecaststo 2017 (RBR).
Average UK credit card sales
900
800
700
600
500
400
300
200
100
0
2010-12
2011-05
2012-05
2011-10
2012-10
2011-01
2012-01
2011-06
2012-06
2011-11
2012-11
2011-02
2012-02
2011-07
2012-07
2011-12
2012-12
2011-03
2012-03
2011-08
2012-08
2011-04
2012-04
2011-09
2012-09
Classic–Allaccounts Premium–Allaccounts Student–Allaccounts Euro–Allaccounts
11.
12. Western Africa:
7.8 million registered accounts
720,000 active accounts
South Asia:
13.3 million registered accounts
3.8 million active accounts
East Asia and Pacific:
4.3 million registered accounts
1.8 million active accounts
Eastern Africa:
48.5 million registered accounts
9.7 million active accounts
card notes
payments cards and mobile | March | April 2013 paymentscardsandmobile.com12
live deployments and 37% of the 166 mobile
networksoperatorsintheregionhavealready
launched mobile money.
The rise of these services means that there
are now more mobile money accounts than
bankaccountsinKenya,Madagascar,Tanzania
and Uganda, and more mobile money agent
outlets than bank branches in at least 28
countries.Withover520,000registeredagent
outlets,therearenowasmanymobilemoney
sites as Western Union points of sale.
Furthermore, the total value of mobile
money transactions is worth a significant
proportion of some countries’ overall wealth
– equivalent to 60% of GDP in Kenya in June
2012, 30% in Tanzania and 20% in Uganda. ■
the mobile money industry is growing at an
unparalleled rate, driven by the developing
world. There are 150 live services for the
unbanked,41ofwhichwerelaunchedin2012.
In addition, the industry is also becoming
competitive, with 40 markets now having at
least two different services available.
The report identifies six services with more
than 1 million active customer accounts,
three of which passed the milestone in the
last 12 months. There are 56.9 million regis-
tered customers in sub-Saharan Africa and in
June 2012, there were twice as many mobile
money users as Facebook users in the region.
In terms of geographical spread, more than
halfofallcountriesinsub-SaharanAfricahave
African mobile money
adoption soars – GSMA
GLOBAL
M
ore than 30 million people around
theworldcarriedoutmobilemoney
transactionsinJune2012,according
to figures from the GSMA, with sub-Sahara
Africa leading the way in uptake of the bur-
geoning technology. According to evidence
from 78 mobile money deployments in 49
countries, compiled by the global mobile
industry trade group, 30 million people car-
riedoutmorethan224millionhandset-based
transactions worth $4.6 billion during the
month of June 2012 alone.
This exceeds the 196.3 million transactions
performed by customers of online payments
giant PayPal on average each month dur-
ing the third quarter. The study shows that
on an issuers’ income statement.
He gave the example of Discover – which is
five years into its planning for EMV migration
– which reported $93 million in fraud losses for
2012,orroughly$8millionmorethanitspenton
postage. By comparison, net charge-offs from
credit card debt cost it over $1.2 billion in 2012
andasmuchas$3.7billionin2010.
Kingadded:“It’snosecretbynowthatwhile
EMV has been excellent at reducing face-to-
face fraud, card-not-present (CNP) fraud con-
tinuestorisebecauseEMVdoesnoteffectively
prevent it in today’s online environment.” He
pointstoCanada,wherelossesfromCNPfraud
sincetheroll-outofEMVin2008hadmorethan
doubled by 2011, rising from C$128 mil-
liontoC$259.5million.
“Ultimately, EMV as it exists today
only solves part of the fraud equation,”
says King. “Until a cost-effective and
consumer-friendlyCNPfraudreduction
solution gains traction, I believe a busi-
ness case for EMV built around fraud
losses will remain difficult to build.” ■
US EMV migration called into question PayPal co-founder launches
m-commerce firmEMV in the US is well underway, much to the
reliefofglobalpaymentstakeholderswhohave
long argued that the US needed to catch up
with the rest of the world, particularly in rela-
tion to combating fraud with the technology.
However,aseniorstaffmemberattheFederal
Reserve Bank of Atlanta has questioned the
businesscaseofthemigration.
The first liability shifts for the US are
scheduled to take place in April 2015, and
issuers and other stakeholders are being
urgedtosetouttheirmigrationroadmapsas
an urgent business priority. But Atlanta Fed
payments risk expert Douglas King claims
that fraud is a small, albeit growing, expense
As if payment industry incumbents weren’t
worrying enough about competition from
non-bank players like PayPal, it appears
PayPal has some competition of its own.
PayPal co-founder Max Levchin has
launched a mobile money service, Affirm,
which aims to make it easier for online shop-
perstocompletepurchases.
On its website, Affirm claims that the online
check-out experience has not improved for
shoppers in more than a decade, meaning
merchants are left with countless abandoned
carts. Affirm is promising to help online mer-
chants convert more mobile shoppers into
buyers through a quick and simple check-out
process, requiring just a couple of taps of the
customer’shandset.
Affirm will use Facebook to authenticate
customersatthecheck-out,beforeguarantee-
ing the merchant payment, for which it gets a
fee.Actingasadigitalchargecard,Affirmthen
gives the customers 30 days to settle the bill,
althoughitdoesnotchargethemforthis.■
Source: Aite Group.
Whoagree/stonglyagreethatEMVwillmigratetoUS
n 2011:Agreetostonglyagree(n=58) n 2009:Agreetostonglyagree(n=29)
19%
34%
50%
55%
0%
33%
55%
63%
17%
35%
1–2yrs 3–4yrs 5–7yrs 7+yrs Never
14. card notes
payments cards and mobile | March | April 2013 paymentscardsandmobile.com14
maturity of the internet and widespread
dissatisfaction in many countries with tra-
ditional banking services.
Relating to which type of organisation is
best at driving payments innovation, the
clear consensus of the jury is that new mar-
ket entrants are best at driving payments
innovation, with
nearly 70% of respon-
dents holding this
view. According to the
report, new players in
the payments space
are carrying out activi-
ties that traditionally
would have been seen
as the role of banks. A
significant portion of
the jury saw technolo-
gy vendors as the best
at driving innovation.
The jury agreed that
incumbents such as
the established retail
banks, payments
processors and card
schemes are the least
effective at driving
innovation, despite
often investing very
heavily, as they are
hampered by legacy
Payments innovation report highlights driving forces
GLOBAL
T
he recently-released Payments
Innovation Jury Report 2013, from
Ixaris and Anthemis Group, has high-
lighted how the payments industry is
undergoing an intense period of innova-
tion, driven by a number of factors includ-
ing advances in technology, the growing
China and account for 43% of all transac-
tions, mobile banking is the fastest growing
and accounts for 30% of all transactions.
Celent estimates that mobile shopping
in China will reach $7.4 billion in 2013 and
$40.8 billion in 2015. Moreover, more than
80% of China’s young consumers would
like to have their public transport card, bank
card, and other payment tools integrated
into the mobile phone, and more than 50%
China m-banking on the rise – Celent
According to a new report from payment
consultancy Celent, the number of mobile
banking users in China reached 150 million
in 2012, accounting for more than 40% of
mobile banking users worldwide. Major
commercial banks saw more than 100%
growth in mobile banking users in 2012, and
more than 300% growth in mobile banking
transaction value, according to the report.
While PCs are the most widely used in
of users hope that mobile banking can offer
comprehensive mall shopping services.
“Mobile banking in China is not only
growing rapidly, it is enabling new busi-
ness models,” says Hua Zhang, analyst with
Celent’s Asian financial services group and
author of the report. “Mobile banking pro-
vides banks with massive amounts of trans-
action data, which they can analyse in order
to develop new products and strategies.” ■
Card schemes (4%)
Retail banks (4%)
Technology vendors (12%)
New market entrants (72%)
Other (8%)
Processors (0%)
infrastructures and business models.
The report also finds that emerging
economies will be the hotbeds for pay-
ments innovation over the next two years
with Asia in top place followed closely by
Africa, North America and Latin America. A
common reason cited by the jury for these
findings is that the emerging economies
are not lumbered with existing payments
infrastructures which are difficult to build
on. The developed economies are consid-
ered to see comparatively little payments
innovation, particularly Europe, due to the
stranglehold of regulation, a fragmented
payments landscape and the overhang of
the banking crisis.
Smartphone and tablet biggest driver
Unsurprisingly, adoption of smartphone
and tablet technology is seen to be the
biggest driver for innovation in payments,
with nearly half of the jury considering
this to be the most important technology
trend. However, the jury also sees the avail-
ability of open APIs to be a major trend
driving innovation in payments. APIs are
now being extended to a wide range of
payments types, opening up possibilities
for many companies at a mere fraction of
the cost of developing a proprietary sys-
tem from scratch. ■
Contactless technology (4%)
Cloud Computing (8%)
Widespread adoption of
smartphones and tablets (52%)
Availability of open APIs (36%)
Rise of big data and data analytics (0%)
Other (0%)
Source: The Payments Innovation Jury Report 2013. Notes: Figures are based on input from 25
payments innovators from around the world.
Which type of organisation is best at driving
payments innovation?
What is the biggest technology trend that is driving
innovation in payments?
15. One stop conference & expo
June 2013June 24-25 2013, Frankfurt
www.mpos-world.com
mPOS WORLD
Technologies
Value Added Services
mPOS Payments
16. their PC or from their mobile device.
But there have been some significant
shifts between this year’s survey and last
year’s relating to the perception of which
players are most likely to drive mobile pay-
ments. The most notable shift was Google.
It fell from a tie last year with PayPal for first,
to fourth this year with only 76% of respon-
dents believing that Google would drive
mobile payments compared with 91% the
prior year.
Mobilecommerceisatopstrategicpriority
for MNOs globally. They have led initiatives
in multiple markets forming joint ventures
within their industry and in some markets
across both banking and telecommunica-
tionsindustries.MNOjointventuresalsosaw
significant shift in this year’s survey in the
perception of their ability to drive growth of
mobile, which increased from 59% to 68%.
Speaking to PCM, Samee Zafar, director at
Edgar, Dunn & Company, said:
“One highlight of the report is
that people are realising that
there are lots of challenges for
new players. People used to
think that players like Google
and PayPal had a much better
shot at this than everybody
else but gradually people are
realising that even those play-
ers, formidable as they may be,
are also encountering a lot of
challenges in this area.
“Relating to the question
on players most likely to drive
growth, last year 91% of people
who answered this question
2013 advanced payments report
payments cards and mobile | March | April 2013 paymentscardsandmobile.com16
The top mobile payment categories that
surveyrespondentsbelievewillbesuccessful
relatetomobileonline(orremote)payments.
Mobile online or remote payments rank
above proximity payments because in the
near term, mobile online payments do not
require any additional infrastructure. Mobile
internet is gradually becoming faster and
the quality of connectivity is improving on a
continuous basis.
Which players will drive growth?
As in our prior surveys, we asked survey
participants which mobile players they feel
aremostlikelytodrivegrowthinmobilepay-
ments. PayPal and the card networks again
rank at the top. PayPal’s focus on mobile is
key to their multi-channel retail approach,
providing a consistent online experience
for consumers shopping online, either from
W
ith global mobile cellular con-
nections expected to exceed 8
billion by 2016 (overtaking the
world’s population in the process), payment
industry stakeholders are scrambling to put
in place mobile commerce services. But as
PCM’s 2013 Advanced Payments Report
shows, one thing that is clear is that it is not
just the technology that drives customer
adoption. New or emerging services, such
as mobile financial services, have to be
provided in a way that they assist people in
making their routine tasks easier or more
productive, or offer them new ways to do
things in a compelling manner. This simple
market fact is often forgotten even by long
standing industry incumbents who tend
to focus and invest in technical innovation
only, but fail to grasp that substantial invest-
ments in marketing and distribution are
equally, if not more, important.
This year’s Advanced Payments Report, put together by Edgar, Dunn & Company
in conjunction with PCMand First Data, shows that while the mobile payments
opportunity looms bright, there are still some hurdles to overcome.
by Victoria Conroy and Samee Zafar with insight from FirstData
The future of m-payments
0%
20%
40%
60%
80%
100%
Mobile network operators and initiatives (e.g., MNO, carriers, joint-venture like ISIS)
MNO / bank joint initiatives
Banks and financial institutions
Google
Web-related innovative companies such as Facebook, Apple, Amazon
Card networks / payment schemes
PayPal
59%
68%
70%
91%
81%
82%
91%
68%
68%
72%
76%
78%
82%
87%
2013 2012
Source: EDC APS 2013
Players most likely to drive growth in mobile payments
SPONSORED BY
17. 2013 advanced payments report
paymentscardsandmobile.com payments cards and mobile | March | April 2013 17
device for accessing facilities and digital
identification are services that help consum-
ers manage their lives better.
Speaking to PCM, Dominic Morea, senior
vice-president of mobile commerce solu-
tions at First Data, said: “While there are a
number of diverse enabling technologies,
it’sreallynotaboutthetechnology.It’sabout
the solutions and the customer experience
and the value add. The payment aspect has
gottobereliableandfrictionless.Butthereal
key is what’s in it for the consumer, the mer-
chant and the financial institution. That’s got
tobearoundmoreadvantageforconsumers
in their shopping journey and experience.
“Formerchants,it’sabouttheabilitytosell
more and deepen loyalty and the relation-
ship with the consumer. Technology enables
that but there has to be that ability to like a
customer back and connect with them from
a loyalty and rewards perspective. For issu-
ers and financial institutions, it’s about how
they create new dimensions and ways to
build upon the basic account relationship.
That builds around the element of providing
valuableconsumerpropositionswhichhelps
to differentiate them from other competing
financial institutions”
Making the business case for
mobile payments
In our survey, the most difficult hurdle
to cross in mobile payments is the busi-
ness case. In other words, stakeholders who
said Google would be one of them and this
year it’s gone down to 76%. So it is still high,
but there has been a decline in the number
of people who think that Google will really
be at the centre of it. There is the same thing
with PayPal but only very slightly. Previously
for mobile operators only 59% of people
thought last year that they would be driv-
ing mobile payments, but this year it’s 68%.
The total this year is still less for MNOs than
Google. But the percentage for MNOs has
gone up whereas for Google it’s gone down.
That basically highlights that it is difficult to
see who, even at this stage, whether there
is one single category of stakeholder who is
driving this space.”
The recipe for success in payments con-
tains several ingredients. Customer experi-
ence is certainly the most important. A
service that is useful, intuitive and easy to
use has a far greater chance of success than
one which is technically superior but not so
easy to use. Many payment innovations are
cleverlyconstructedandmarketedbutfailto
provide an attractive customer proposition.
What is clear from this year’s report is that
it is essential for a new payment service to
leverage existing infrastructure. Using what
is already available, rather than developing
something entirely new, helps customers
understand and adapt to new products and
servicesquicker.Anewpaymentmethod,for
example, that requires a separate account
to be opened, requiring funding and moni-
toring, can be a hurdle that many custom-
ers do not bother to overcome.
Using existing infrastructure also
helps the service provider opti-
miseoperationalcostsandreduce
exception items.
Value added services took
third place in our survey but to
many industry observers, they
are perhaps the most important.
Value added services include
those linked to loyalty, market-
ing, reward schemes or travel
and transport. Ability to quickly
access travel related services such
as using the mobile device as a
boarding pass for flights or use
the phone as a secure unlocking
responded to our survey are not sure how
they will make money from mobile payment
services. This is not a new observation and
it comes up in most surveys time and time
again.Oneofthereasonswhyitisatthevery
topofthetableisbecausestakeholderswant
to see revenues generated directly from
mobile payment services. They don’t want
tolookatotherrelatedbutequallyvalidben-
efits such as customer retention and regen-
eration of existing revenue streams. But in
the midst of this search for premium profits
from mobile payments, many forget that for
afinancialservicesinstitutionsuchasabank,
developing mobile payment services is not
solely a question of standalone business
viability, it is in fact now a “strategic impera-
tive”, and not a matter of choice anymore.
The complex mobile eco-system is yet
another major hurdle. A standard credit card
transaction is facilitated by banks and card
companies but in the mobile proximity eco-
system, additional stakeholders play impor-
tant roles. The mobile operator, the trusted
servicesmanagerandthedevicemanufactur-
er are new additions to the card eco-system
when a payment takes place in the mobile
environment.Admittedlythough,thisrelates
tomobileproximitypaymentsasothertypes
of mobile payments can be completed with
fewer infrastructure elements.
The lack of an acceptance network is
also perceived as an obstacle. This refers to
POS terminals that are capable of accepting
mobile payments, primarily contactless ter-
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Mobile payment
solution using a
new payment
infrastructure
Partner with other
stakeholders to
leverage specific
expertise
Filling the gaps of
the existing
payment methods
Value added
services linked to
mobile payments
Mobile payment
solution relying on
an existing
payment
infrastructure
A smooth and
practical customer
experience
24% 31%
41%
48%
71%
85%
Source: EDC APS 2013
Key success factors of a mobile payment solution
SPONSORED BY
18. gained traction. Competition has intensified
as start-ups and payment processors have
scrambled to introduce their solutions to
market. Consequently, as many as 84% of
survey respondents believe that ‘mobile as
POS’solutionswillbecomewidespread.Most
currentofferingsrequireaseparatehardware
device(suchasadongle)thatattachestothe
smartphone and reads payment cards; the
card credentials captured via the hardware
are typically linked to a software application
within the smartphone to process payment.
Co-operation is still necessary to produce
a consistent interoperable set of standards
for mobile payments – for example, a com-
mon security protocol to combat fraud that
is subscribed to by all network participants.
In the quest to align industry interests, it is
anticipated that strategic mobile partner-
ships will become widespread, and more
consolidation will take place between dif-
ferent participants in the mobile payments
value chain.
The mobile payments landscape remains
fragmented, with financial institutions,
non-bank participants, payment proces-
sor brands, network operators, hardware
device manufacturers, security software
developers, start-up enterprises and more,
jostlingtocaptureapieceoftheopportunity.
For mobile payments to achieve universal
adoption, acceptance needs to reach near-
ubiquity on the merchant side, while the
value proposition needs to be sufficiently
compelling for consumers to adopt mobile
payments en masse. Only then will the
mobile device fully realise its potential to
revolutionise the payments industry.
ZafarofEdgar,Dunn&CompanytoldPCM:
“If you under-invest in a new payment ser-
viceoranewtechnology,thereisnowayyou
willbeabletogetitofftheground.Thereisa
levelofinvestmentbelowwhichyouaresure
never to get real customer traction. Banks
first need to get their mobile payments and
banking services efficiently distributed and
make sure the customer service is good,
and understand that to get new payment
servicesoffthegroundthereisacertainlevel
of cooperation that is required. Beyond that,
bankswillofcoursecompetewitheachother
butthereisalevelofcooperationneeded.”■
2013 advanced payments report
payments cards and mobile | March | April 2013 paymentscardsandmobile.com18
that alternatives such as QR codes would be
successful in the short term. Responses to
this question varied between regions with
more developed payments markets having
more belief in QR codes and other emerging
technologies while those with more emerg-
ing payments markets were more skeptical
of QR technologies.
One new question in this year’s survey
asked our respondents if they agreed with
the following statement “Social networks
will play an important role in the develop-
ment of mobile payments”. More than half
of them (57%) agreed with the statement.
Most industry experts agree that mobile
wallets will be used by consumers for more
than just payments and utilise users’ data –
within limits – to make the consumer experi-
ence relevant and rewarding. With these
two goals in mind, social networks certainly
could prove to be the most interesting addi-
tions to the mobile wallet.
In this year’s survey we also asked our
respondents if they agreed with the follow-
ing statement: “The use of consumer data is
key for the development of mobile wallets
(i.e. for marketing purposes)” – 78% of the
participants agree with the statement. This
sentiment is in line with several of the indus-
try players pursuing the development of
mobile wallets some of whom have actually
based their business models on the collec-
tion and analysis of consumer data.
2012 can be seen as the year in which
the ‘mobile as POS’ movement definitively
minals for NFC payments or some other ele-
ments of hardware such as barcode readers.
Security is a key concern as well, and other
significant hurdles refer to costs of deploy-
ment and to mobile payment providers not
always having direct access to payments
infrastructure in some markets.
Almost all of this year’s participants
believe that mobile wallets need to bundle
more than just the payment functionality
and include services such as couponing, loy-
alty and other value added features. These
features will be critical to the adoption of
mobile wallets.
We also asked our participants about the
time, during the purchase process, where
they believe a mobile wallet will be used
by the consumers. As expected most of
the respondents mentioned that the wallet
would be used during the payment process.
Nevertheless, it is important to note that 3/4
of all the participants also mentioned that
the wallet would be used before and after
the payment.
Competing technology models
Recognising the emergence of these
competing models, this year we asked our
survey participants which technology they
thought had the best chance of success.
Responses were tightly grouped, but the
leading opinion was that alternatives to NFC
would be successful, with 73% agreeing
with this statement. Slightly fewer believed
0%
20%
40%
60%
80%
100%
Regulations
Access to existing payment infrastructure
Costs
Security
Acceptance network
Partnerships / Ecosystem
Business model
52%
63%
69%
73%
79%
82%
83%
Key concerns of stakeholders around mobile payments
Source: EDC APS 2013
Key concerns of stakeholders around mobile payments
SPONSORED BY
19. At First Data, we look for every opportunity to go beyond core processing
to help merchants and financial institutions make transactions simpler,
faster, safer and more rewarding. Because, in today’s competitive
world, it’s not enough to focus on the transaction alone, you
need to go beyond it.
Let First Data Take You There.
To find out more,
please visit firstdata.com
20. Until 2009 (when the EC was negotiating
a new deal with the card schemes) there
was almost worldwide recognition of the
reward model for banks to displace cash.
The traditional 30 year-old Baxter structure
requires a proportion of banks’ card pro-
cessing charges to merchants to be passed
on to the card issuer in the form of an inter-
change incentive. For the proceeding ten
years EU regulators had become increas-
ingly unhappy with this concept, particu-
larly with the national market differences in
merchant fees.Regulatorsalsofacedintense
merchantlobbyingtoimplementacommon
or harmonised interchange across the EU.
International and domestic card schemes
opposed the regulator’s vision, arguing that
interchange was a key enabler to cash dis-
placement and that lower payments would
reduce incentives to use cards and inhibit
contactless and mobile cash substitution. In
addition, the cards businesses argued that
different country rates reflect the need for
greater investment and incentives where
cash usage is particularly high.
However in 2008 the EC regulators iden-
tified a new solution and model for inter-
change. In 2008, two academics (Rochet
and Tirole) developed the concept of the
“Merchant Indifference Test (MIT)”1
. This the-
oretical model suggests that merchants will
accept cards if they know they are less costly
than cash. They proposed the cost benefits
from displacing cash with cards should
be shared with the merchant as an effi-
ciency saving and with the bank to cover
incentivisation costs. Very quickly (over 2
cash displacement benefits
payments cards and mobile | March | April 2013 paymentscardsandmobile.com20
However academic analysis shows the
effectiveness of migrating cash to cards
has a strong correlation with the size of the
unofficial economy. The Northern European
nations with low grey economies have
been most successful in reducing their
cash mountains. Over the past five years
cash transactions have dropped in the UK,
France, Benelux and Scandinavia to almost
60% of total payments. In contrast, in the
Southern nations, all with high unofficial
economies, cash usage remains stubbornly
high at close to 80%. In the Baltics and CEE
nations with 85% cash usage, displacement
is accelerating but several have unofficial
economies exceeding 27% of GDP. For all
these countries lower cash usage through
the implementation of electronic and card
systems, which when combined with foren-
sic analysis, have good potential to increase
tax collection revenues.
Commission interventions have
inadvertently created a blockage
Inevitably maintaining a cash to card
momentum needs investment and incen-
tives. Unfortunately there is worrying evi-
dence that the Commission is not yet fully
committed to the concept.
Over the past four years several
Commission interventions have inadver-
tently created a blockage to raising more
tax revenue and improving global EU pay-
ment efficiencies.
K
ey stakeholders responsible for
European Union (EU) payments are
more or less unified in their views
of the tax collection benefits from displac-
ing the unofficial cash economy. Several
nations desperate to cut their deficits have
passed legislation to reduce high value cash
purchases but all are aware that much more
is possible if the banks are on side.
Europe’s cash mountain fuels the unof-
ficial economy which in the Southern
European, Baltics and CEE nations is at an
unacceptably high level. VAT and other tax
avoidance could be reduced by up to €8bn
to €10bn each year if a 7.5% to 10% saving
could be achieved.
Many believe that of even greater impor-
tance is cash displacement’s impact on
EU-wide payments efficiency. It is claimed
lower cash usage across the EU could reduce
stock holding, cut distribution/transport
costs, reduce crime and money laundering,
producing additional annual cost efficien-
cies of a further €10bn, as well as delivering
significant benefits to society.
Displacing cash is not a new phenom-
enon; it has been happening since the
1960s from the payment of electronic
wages/salaries, through cash dispensers,
electronic POS to e-commerce and now
“last mile” low value payment concepts
such as contactless and mobile Near Field
Communication (NFC). For cards a key bank
driver for this long term project has been
available funds to persuade customers to
change behaviour and to develop innova-
tive new payment concepts.
The economic crisis has highlighted EU governments’ need to reduce the
unofficial cash economy and increase tax and VAT collection. Many believe cash
displacement by payment cards can make a significant contribution. But due to
a four-year delay in the EU approving an incentive programme, banks are unsure.
by Peter Jones, Managing Director, PSE Consulting
Why the delay?
21. cash displacement benefits
paymentscardsandmobile.com payments cards and mobile | March | April 2013 21
andbanksandmerchants.Asecondpaperby
RochetandWrightissuedin20095suggested
that credit card interchange should be based
on the costs of merchants not providing
credit themselves. This model did not fit well
with the Commission backed MIT cost of
cash framework, undermining confidence in
their first paper. Another international card
scheme accepted 0.20% for debit condi-
tional on empirical cost of cash evidence. The
General Court of the European Union backed
up some of the Commission’s thinking in
Q3 20126
although this may be a temporary
adjudicationifanappeal,basedonthelackof
economic studies to support MIT, succeeds.
However, more importantly, is the damage
to the Commission’s credibility and its com-
mitment to the long term cash displacement
project and the revenues and efficiency it
can generate. Clearly in this case it lacks the
abilitytospeedilybackupnewconceptswith
thorough and detailed research.
Recently the European Parliament voted
for the implementation of a common inter-
change, a message that may encourage the
Markets and Competition Directorates to be
bold.The2012GreenPaperonpaymentswill
be followed by a White Paper detailing new
payment and possibly interchange regula-
tion in Q2 20137
. But any new legislation will
also have high risks for it could be delivered
into an empirical vacuum with insufficient
supporting data to back up any common
rates set. Inevitably challenges might result.
If this proceeds then some may say there is
little to prevent the Commission from tak-
ing pricing initiatives in other sectors under
scrutiny, perhaps water, gas, electricity and
even petrol pricing.
Commission’s study appears
to exclude efficiency and tax
benefits delivered by cash
displacement
So where do we go from here with cash
displacement? The expensive (€2m) “Cost of
Cash and Cards” study is in the pipeline and
the expectations are that it will be delivered
inQ2/Q32013.Thestudyoutputs,itishoped,
to 3 months) the Commission expanded
the concept, which was presented in early
2009, to one of the international card
schemes as the new basis for intra EU card
transaction interchange.
This new MIT structure was also used to
support a change in fees. The EC proposed
new intra EU cross border rates of 0.2% for
debit and 0.3% for credit which it mandated
with the proviso that the Rochet/Tirole
theoretical model would be backed up by
an EU wide “Cost of Cash and Cards” eco-
nomic study.
Importance of the cost of cash
and cards study cannot be
overstated
The importance of the cost of cash
study cannot be overstated. The Merchant
Indifference Test (MIT) overturned much of
theestablishedempiricalacademiceconom-
ic studies. Several commentators at the time
pointed out the risks the Commission was
taking in enforcing a new rate based on an
unsubstantiated model without clear verifi-
ableevidencethattheindifferenceapproach
was a practical framework.
So in 2009 speed was of the essence if the
Commission was to convince card schemes,
networks, bankers and academics that MIT
was the new cash displacement lodestone
and that their mandated interchange rates
would be justified by the then just contract-
edstudy2
.Howeverfouryearslaterallarestill
waiting for the evidence.
Itisbelievedthedelayhasbeenanembar-
rassment for the Commission. To be fair,
negotiating and managing payment studies
is outside regulators comfort zone. The first
2009 study had a modest budget and it is
believed initial, but inconclusive, feedback
was produced by mid-2011 although it is
believed it was very useful scoping exercise3
.
By 2012 it became obvious that the initial
study had not produced worthwhile results
when plans were revealed for a larger more
sophisticated and highly funded study4
.
Unfortunately this four-year delay has had
anunsettlingimpactontheEUcardschemes
will once and for all establish merchant costs
of handling cash and cards and enable the
mandated 0.2% debit and 0.3% credit intra
rates to be substantiated. The highly com-
plex study involves collecting detailed costs
for500merchantsandthecollectionofvolu-
metric data from a further 2,000. However
the study deliverables may not satisfy cost
of cash purists and those who believe the
analysis should have a wider, more com-
prehensive scope. The study brief appears
light on the costs of merchant surveillance
equipment, cost of theft and robbery and
trade losses through business disruption.
At this stage the study appears to exclude
the convenience and social cost benefits
that less cash delivers to citizens and society.
More importantly, the EU-wide payments
efficiency improvements and tax benefits
from cash displacement are not mentioned.
Key risks and important lessons
A key risk is that the study shows that cash
costs are lower than cards, up to a higher
level of value than previously thought. This
would significantly undermine the cash to
cards displacement vision and damage the
objective of shrinking the unofficial econo-
my and improving payments efficiency.
If the study feedback shows card costs
are lower than the MIT model it will be
validated although an area for debate will
be the extent of the saving, the real benefits
to society and government and how much is
shared with banks.
An important lesson learned for the
Commission is that changing long-estab-
lished economic models, needs speedy,
powerful analysis and reliable empirical
all embracing evidence to support a case.
Proposing the MIT as an alternative to estab-
lished practices and the mandating of new
rates which were conditional on a “Cost of
Cash” study that fails to materialise was a
high risk strategy.
As a result, countries desperate to reduce
their unofficial cash mountains and to see
SEPA efficiency savings have had to wait
several years before they can start to plan
much-neededVATandtaxrevenueincreases
and national deficit reductions. ■
References: 1. Must Take Cards Merchant Discounts and Avoided Costs, Jean-Charles Rochet and Jean Tirole, 7th November 2008. 2. European Commission Invitation to Tender, Comp/2008/D/020. 3. Minutes of Meeting of DG Internal Markets, 10th March 2010. 4. European Commission Invitation to
Tender, Comp/2012/003 & 004. 5. Credit Card Interchange Fees, Jean-Charles Rochet and Julian Wright, December 2009. 6. General Court of European Union, Press Release No.69/12. 7. Review of Directive 2007/64/EC(PSD) and Regulation (EC) No. 924/2009, Table of the European Commission Proposals.
22. cial basis, albeit with some key founding
principles that underline the commitment
to responsible, sustainable lending.
This is reflective of the wider global eco-
nomic scenario which has tightened lending
belts and where, even in countries such as
Brazil or India that have not suffered an eco-
nomicrecession,itwouldappearthattheles-
sons of the Western credit crunch have been
listened to and lending criteria adjusted to
ensure programme sustainability.
It is therefore apparent that although
linked closely with aid budgets, the micro-
finance industry is not ring-fenced as might
once have been assumed. Indeed early
investigation indicates that micro lend-
ing initiatives have been more severely
impacted in the more credit-impaired mar-
kets surveyed in the study, such as in Egypt.
Adapt or perish
The repercussions of this are evident
across the countries in the study. A con-
sumer credit-fuelled boom in South Africa
for instance has provoked a sharp retrench-
ment in unsecured lending issuance in
order to reduce unsustainably high levels
of bad debt. Similarly in Brazil, close, care-
ful management of microcredit business
lines by commercial institutions such as
Santander and Banco do Nordeste, has
maintained levels of bad debt at less than
1% of total micro loans outstandings.
Meanwhile growing customer demand
for the developed world equivalent of
credit for marginal communities, in the
form of payday lending, is emboldening
regulators in the UK to act to oppose often-
microcredit
payments cards and mobile | March | April 2013 paymentscardsandmobile.com22
mon themes that signal the approaching
maturity of the microfinance industry.
Some common themes
Most significant of all perhaps for a form
of lending originally born out of an informal
community is the relatively urgent need for
microcredit programme formalisation.
Whether on the side of the customer – or
loan recipient – or from the point of view of
the credit issuers, more formal processes for
risk evaluation, pricing, regulation, market-
ing and credit distribution are in demand
by lenders and their customers across the
emerging world.
The outcome is that, microcredit, sprung
out of a developed world desire to use
financial tools to aid development pro-
grammes, is no longer quite such a distant
relative of the commercial, mainstream
unsecured lending industry. As Santander
Microcredit in Brazil demonstrates (see
box), success in microcredit is best achieved
when the programme is run on a commer-
A
preparatory study of unsecured and
micro lending marketplaces in high
growth and developed markets has
underlined the following:
· The financial crisis has caused a sharp
drop in emerging world access to basic
financial services.
· There is a clear disconnect between the
social and commercial objectives of con-
sumer and micro-lending schemes.
· There is a clear need for measurable
evidence of the impact of micro lending
programmes on economic growth.
· There is an acknowledged need for a
coherent approach to the regulation,
provision and distribution of micro and
consumer credit that cuts across govern-
ment, the private sector, the financial
services community, NGOs and multilat-
eral agencies.
Although there are distinct peculiarities
in the scale, individual loan size and distri-
bution of microcredit in each of the regions
and markets included in the study, early
investigation also reveals a number of com-
Microcredit,aboomingsectorsincethe‘90s,isthelatesttofeelthepinchinthewake
oftheglobalfinancialcrisis,accordingtoareportbyBaird’sCMCFinancialServices.
by Simon Hardie and Denise Gee
Softfinancegettingtougher
Santander microcredit programme
The Brazilian subsidiary of Spanish lender Santander’s microcredit programme is a
particularly strong example of the benefits of a more formalised, commercial approach
to microcredit.
The bank’s business line, named Santander Microcredit since 2010 after the bank
acquired Real Microcredit uses a team of credit agents serving more than 600 cities
across Brazil to meet loan applicants and assess their eligibility.
According to the bank, it is the traditional, face-to-face approach to lending that
has been key to its success. The approach involves a combination of strong customer
relationship management with close monitoring and assistance of its consumer base
that is traditionally not highly financially literate. ■
23. microcredit
paymentscardsandmobile.com payments cards and mobile | March | April 2013 23
tution initiative in Kenya is a particu-
larly strong example of this. Musoni, a
Netherlands-based social enterprise, has
partnered with Kenya’s M-Pesa, the service
that enables funds to be transferred elec-
tronically by SMS message, to assess and
approve microloans using tablet comput-
ers. Once approved, loans are sent directly
by SMS, avoiding the need for riskier, cost-
lier cash-based transactions.
The Musoni initiative is one of the best
examples worldwide of how technology is
broadening the reach of financial services by
reducing loan approval time, which allows
morecustomersinremoteareastobeserved.
At the same time savings generated by trans-
ferring funds electronically, and lower risk of
funds being stolen, is creating a more attrac-
tive microfinance business proposition.
Intime,thisshouldenablenewcompetitors
to enter the marketplace, driving down the
cost to consumers and improving financial
pernicious rates of interest. Quite justifiably
these legitimately provided products serve
customers beyond the reach of regular bor-
rowers and potentially reduce the number
of lenders who might resort to more unreg-
ulated sources of funds in their absence.
The increased regulatory scrutiny however
neatly highlights the balance that needs to
be struck between higher costs of credit,
business model sustainability and, the per-
ceived or implicit responsibility of lenders to
improve the lives of their customers.
InotherpartsofAfrica,aswellaselsewhere
in the emerging world, the use of technology
is also proving to be an essential tool that is
helping both to reduce the risk adherent in
previously cash-dominated lending markets
and enable mainstream lenders to chase
‘the long tail’ by serving formerly unserved
customerswithproductsthatpreviouslywere
not commercially viable or sustainable.
The Musoni mobile microfinance insti-
Box heading
inclusion for poorer or subprime customers.
For more on the impact of technology on the
global unsecured lending industry, see our
follow-up article “Chasing the long tail” for
publication later this year.
The study forms part of a unique global
research project conducted by international
communications management consultancy
Baird’s CMC. ■
Full findings of The Global Consumer
Credit Conditions Report will be released
at a global conference in Rio De Janeiro
in February 2014. It will use evidence from
prime and sub-prime unsecured and micro-
credit lenders in high growth and advanced
markets to inform the economic conditions
that support creation of a vibrant lending
market; the regulatory policy that can best
ensure sustainable consumer borrowing; and
identify the connection between unsecured
credit and economic growth.
www.bairdscmc.com
24. issuing and acquiring
payments cards and mobile | March | April 2013 paymentscardsandmobile.com24
Lookingattheexplosivegrowthofe-com-
merce,BenjaminNachman,CEOofCredorax,
told delegates that the internet economy is
expected to grow almost 10% per annum
through to 2016, representing a $4.2 trillion
contribution to the G-20’s total GDP in 2016.
However, there are a number of challenges
to overcome before payment stakeholders
can leverage the full opportunity.
Cross-border market complexity is still at
the fore, and fraud remains the number one
issue. There is also a need to enhance cross-
border servicing and support, particularly
in light of the many fragmented payment
models in existence.
While the European e-commerce market
ismaturingandtheonlinepaymentschainis
evolving,competitionfromnewandexisting
playersisincreasing.Paymentserviceprovid-
ers are now required to think not just about
paymentprocessingbutalsoaboutpayment
management.
MPE 2013 highlights changing acquiring landscape
T
he Merchant Payment Ecosystem 2013
event, held in February in Berlin, is
proving to be one of the most impor-
tanteventsintheglobalpaymentlandscape.
This year’s event brought together over 430
participants, 70 presenters, and 25 sponsors
and exhibitors.
Over three days, delegates heard from
speaker insights into topics such as rich mer-
chant services, covering a new generation of
servicesdesignedtoimprovethe interaction
with consumers and to streamline merchant
business operations. The importance of
payment convergence in m-commerce and
e-commercewasalsowellbriefed.Delegates
heard that in order to provide a rich e-com-
merce shopping experience for consum-
ers, interaction beyond payments with 24/7
connected consumers will bring additional
opportunities and threats to the industry.
As with last year, mPOS was one of the
most discussed topics. Magnus Nilsson, CEO
of mPOS firm iZettle, told delegates that far
from being the disruptive force it has been
hailed as, iZettle is pursuing partnerships
withleadingbanksinEurope in orderto pro-
mote card payments in the micro-merchant
sector. To this end it has partnered with the
likes of Raiffeisen Bank and DZ Bank to pro-
vide them with mPOS capabilities. The main
advantages of this for banks is that it helps
to reposition them as innovators, while also
enabling them to attract new customers.
Jeremy King, European director of the PCI
SecurityStandardsCouncil,lookedatthestate
ofanti-fraudeffortsintheindustry,tellingdel-
egatesthatofthedatacompromisesdetected
in 2012, around 97% were avoidable through
simple or intermediate controls.
Security, he told delegates, was not about
having a single process in place, but required
the bundling of people, processes and tech-
nology. The PCI Security Standards Council
is also working to bolster security in the
m-payment space and has already identified
mobile apps that can be validated to PA-DSS.
Additionally, there will be a new PCI 3.0 stan-
dards release arriving in November 2013.
Such players need to deliver localised and
customised solutions, and provide a seam-
lessexperienceinordertosupportcustomer
long-term stability and growth. They also
need to offer robust fraud screening and
preventionandassessmenttools,alongwith
leveragingvast,pooledandsegmenteddata
to improve client business decisions.
Perhaps of most importance in this age of
convergence is the need to become what he
termed a “channel-less” payments provider,
and provide merchants with price trans-
parent, omni-channel technology-oriented,
innovative solutions. Also of importance is
the need to nurture niche payment part-
nerships that enhance and complement
businesses.
One of the defining elements of the MPE
event is its awards gala, which honours
the outstanding products, services and
companies which are all helping to shape
the industry. ■
EquensprocesseditsbillionthSEPAtrans-
action last week. Since the launch of
the SEPA Credit Transfer (SCT) scheme
in January 2008 and the introduction of
SEPA Direct Debit (SDD) in November
2009, transaction volumes have shown
progressive growth.
Although Equens’ systems have been
preparedforlargeSEPApaymentvolumes
since day one, it has taken five years to
reach the mark of 1 billion SEPA transac-
tions, as many market participants have
not yet prepared themselves for the SEPA
migration. There is therefore still a lot to
do between now and the SEPA end date
of 1 February 2014.
Michael Steinbach, CEO and Chairman
of the Board of Directors of Equens: “Our
billionth SEPA transaction is the result of
our early and intense preparation for the
introduction of SEPA Credit Transfer and
Direct Debit. Our timely investments in
ourhigh-performancepaymentsystemare
nowstartingtopayoff.AlthoughtheSEPA
format brings about much higher data
volumes, our system currently processes
up to 10 million SEPA payments per day
without problems. Despite the milestone
of1billionprocessedSEPAtransactions,we
see that the European payments market
still has a long way to go before the final
SEPA migration next year.” ■
Equens processes billionth SEPA transaction
25. issuing and acquiring
paymentscardsandmobile.com payments cards and mobile | March | April 2013 25
WorldPay has announced the acquisi-
tion of the payment service provider
YESpay. Leveraging YESpay’s technol-
ogy, WorldPay will offer its UK clients a
complete payment service, including
merchant acquiring, card processing
and payment terminals integrated with
POS systems. The combined service
will allow WorldPay and YESpay cus-
tomers to fully exploit the evolving
needs of omni-channel shoppers with
a single payment service operating in-
store, online and on mobile.
According to WorldPay, the acquisi-
tion, made for an undisclosed amount,
is in response to growing demand from
WorldPay’s clients for integrated pay-
ment services - allowing the integration
of their payment service with all of their
sales channels - to support the evolving
needs of the omni-channel shopper.
It also enables YESpay to significantly
increasethedeploymentofitssolutions
to WorldPay’s customer base. ■
Barclaycard and American Express
have agreed to expand the scope of
their current global relationships, with
Barclaycard becoming an American
Express card issuing partner in the UK.
This builds upon their existing relation-
ships and will enable Barclaycard to
issue cards accepted on the American
Express global network in the UK.
Barclaycard and American Express
currently have a number of business
relationships around the world. This
new agreement will increase the choice
available to Barclaycard customers and
will lead to a wider range of products
being offered to UK consumers. The
companies will commence product
development during 2013. ■
WorldPay acquires
YESpay
Barclaycard and Amex
sign new UK card issuing
agreement
to subscribe and engage with credit card
social media pages. Consumers were most
interested in the ability to contact cus-
tomer service through social media (34.1%
incidence rate), redeem exclusive rewards/
special offers (32.5% incidence rate) and
sign up for cardholder subscriber events
(30.1% incidence rate).
“Social media is a huge opportunity
for issuers, given its strong cardholder
penetration”, said Matt Simester, manag-
ing director at Auriemma. “Social media
provides a way to drive increased engage-
ment and usage amongst cardholders, and
is best suited as either a mass servicing or
marketing channel, as one-on-one inter-
action remains difficult to accomplish. To
drive stronger interest and engagement
with social media, exclusive and frequent
offers are key, which will also serve to dif-
ferentiate issuers from the competition in
an increasingly competitive marketplace.
Issuers need to start spending as much
time on engagement through this channel
as phone and branch based services.” ■
Social media improves engagement
with UK credit cardholders
A
ccording to new research from the
Auriemma Consulting Group, cred-
it card issuers have been seeking
new ways to drive cardholder loyalty and
engagement, as their market share has
been under threat from both debit cards
and emerging payment types (e.g. mobile
apps, mobile wallets).
Social media represents a significant new
channeltoimprovecardholderengagement,
as 71.7% of credit cardholders already use
socialmedia,andusageisincreasingamongst
younger and higher-income cardholders.
Despite strong cardholder penetration
of social media, only 13.8% of consumers
are subscribed to their credit cards issu-
ers’ Facebook page. Further, some 68%
of the cardholders subscribed had not
yet interacted through the channel (e.g.,
responded, replied or shared a message).
Issuers therefore have yet to solve how to
best use social media to drive increased
engagement and loyalty.
The research showed that consumers
must see clear and tangible value in order
Prepaid Financial Services (PFS), a global
provider of prepaid solutions, and Deutsche
Card Services have announced the sign-
ing of a strategic partnership to develop
and deliver prepaid card solutions across
Europe. The strategic agreement is an out-
come of the prepaid card providers’ con-
tinuous expansion in new territories and
the full-service acquirer and payment ser-
vice provider’s aim to deliver solutions in
response to client demands.
Within the agreement, PFS will work
with Deutsche Card Services to develop
prepaid card solutions for corporate cli-
ents. According to PFS, some markets, e.g.
Germany, where prepaid cards do not yet
play as important a role, as they do in other
PFS forms prepaid partnership with Deutsche Card Services
regions such as UK, Italy and US, are espe-
cially interesting. Prepaid solutions can be
beneficial for travel and other corporate
expenses, payment of disbursements, ben-
efit payments, compensation payments e.g.
for airlines and insurance companies and
payroll administration, especially where
banking facilities are underdeveloped.
PFS will provide the technology and
support to enable Deutsche Card Services
to offer new payment solutions across
different regions and territories whilst
Deutsche Card Services will provide PFS
with strategic access to clientele in new
operating regions. The cooperation also
includes plans to jointly develop new ser-
vices in the future. ■
26. mobile payments
payments cards and mobile | March | April 2013 paymentscardsandmobile.com26
strategy on mobile payment technology
and products.
Kazem Aminaee, CEO and President of
Spire Payments, says of the move: “This is
further proof of our commitment to deliv-
er Spire’s product roadmap and business
strategy. At our industry launch event last
September, I promised our customers that
Spire Payments would bring a new range
of terminals to market in 2013, including
a product that would address the evolv-
ing mPOS market. We are now following
through on this commitment.” ■
eBay points to a
mobile future
eBay has revised its global m-com-
merce forecast, predicting that it will
generate in excess of $20 billion in
mobile sales volume in 2013.
The forecast comes as eBay reveals
that more than four million new
customers joined eBay via mobile
devices last year, boosting the three
million plus listings being added via
mobile around the world every week.
According to the company, nearly
one in three transactions made on
eBay today are now influenced by
mobile at some point during the
shopping journey.
eBay’s suite of mobile apps have
been downloaded more than 120 mil-
lion times globally, a 20% increase since
reaching the 100 million download
milestone in September 2012.
Olivier Ropars, senior director of
mobile at eBay, said: “Our forecast for
global transactions taking place in 2013
is ambitious, but I believe we are yet to
see the full potential that mobile can
offer the UK retail economy. We predict
that the value of global transactions
will reach $119 billion by 2015, and I’m
excited to see what this means for eBay
and its consumers alike.” ■
S
pire Payments has announced the
acquisition of Thyron Payments
Systems, which specialises in mobile
payments. The acquisition cements Spire
Payments as the third-largest POS player
in Europe by providing a chip and PIN/PCI
SRED-certified mPOS solution alongside the
new range of Spire Payments terminals, due
to be rolled out in early 2013.
Under the terms of the agreement,
Thyron will become a wholly owned sub-
sidiary of Spire Payments UK Limited, and
will become the focal point for Spire’s
Spire Payments acquires Thyron
PayOne has filed a patent infringement
lawsuit against retailer Home Depot in the
Northern District of California, alleging
that the Home Depot retail store deploy-
ment and use of PayPal’s in-store check-
out infringes on multiple PayOne patents
including the use of a mobile phone num-
ber and a PIN to complete the check-out
process and payment at point of sale.
The convergence of the payments and
technology industries creates a business
opportunity and a significant transition for
the vending sector afforded by the spread
of payments-enabled mobile devices, writes
Electronic Transactions Association CEO
Jason Oxman.
He notes the vending industry is adapt-
ing to this trend through collaboration with
the mobile payments industry to devise
mobile payment options that include smart-
er vending machines. “The mobile phone
has evolved from a two-way communica-
tion tool to a complete socially interactive,
machine interactive device, and it’s going
to play an important role in the continued
resurgence of vending,” predicts Apriva’s
Rinaldo Spinella.
Embedding interactive smartphone capa-
PayOne files patent infringement lawsuit against Home Depot
Mobile payments offer big opportunity for vending industry
The complaint seeks unspecified dam-
ages and a court-ordered injunction
against future infringement by Home
Depot. According to PayOne, its platform
and proprietary technologies enable,
among other solutions, the use of a
mobile phone number and PIN to instant-
ly transact with a merchant at the POS or
in a virtual environment. ■
bilities broadens access to a new consumer
market that does not carry cash but always
has a mobile payment device on hand.
Smarter vending machines also widen value
beyond the items they stock, including
expanded functions such as ATM services or
the generation and accessibility of product
data and consumer behavior.
“Mobile payment technology has the
potential to extend the reach of vending as
a tool for collecting market intelligence by
increasing the attraction exerted by vend-
ing machines on the younger, more mobile
consumerswhoaremostfavourablydisposed
to automated convenience,” Oxman writes.
However, he says the payments and vending
industries must work together to address
security and other challenges that come with
mobilepaymenttechnology’sproliferation.■
Stripe begins UK beta trial
Stripe has launched a closed beta
trial of its payments solution in Britain
ahead of a broader European deploy-
ment. Stripe gives merchants an
application programming interface
that they can incorporate into their
websites to enable easy credit card
acceptance, without needing mer-
chant accounts.
They also can establish their own
payment forms without concerning
themselves about PCI compliance
requirements. ■
27. mobile payments
paymentscardsandmobile.com payments cards and mobile | March | April 2013 27
A
ccording to a new report from the
UK Payments Council, “The Way
We Pay”, over the past decade, UK
consumers have significantly changed their
purchasing behaviours over the last decade,
with the share of cash payments being
eroded by rising usage of debits cards with
every passing year. One of the more con-
troversial conclusions of the report is that
the end of plastic cards could be in sight as
mobile phones are increasingly adopted as
payment devices.
Cheque usage continues to fall, halving
every five years. In 2001, 40% of home rental
paymentsweremadeincashand43%ofretail
spending by value used cash too. By 2011,
landlords collected only just over a
quarter of rents in cash, while only
30% of shopping was paid for in this
way (with the majority of payments
beingunder£5).Theriseofthedebit
card has been responsible for the
decline of cash on the high street –
debitcardspendinghasrisenalmost
fourfold since 2001 – while direct
debits have changed the way UK
consumers make regular payments.
The Way We Pay – Payments Council
Adrian Kamellard, CEO of the Payments
Council, said: “We scarcely notice the steady
changes in the way we pay, yet someone
in their thirties today will see more change
in their lifetime than in the entire history of
money. Even recent innovations such as pay-
mentviaamobilephone,whichtenyearsago
some felt to be science fiction, will soon be
commonplace. The 2000s were the decade
of the debit card. The 2010s are likely to be
the decade of the mobile phone. Just as we
can’t imagine how we ever did without the
internet, many people will soon wonder how
we used to be so dependent on cash and
cheque. Twenty years from now even cards
may seem archaic.” ■
New research from VocaLink into UK con-
sumer appetite for alternative ways to pay
on mobile devices reveals that 81% of those
interested in new digital payment methods
say they are more likely to adopt such ser-
vices if they are provided by their bank.
The independent research undertaken
by Accord on behalf of VocaLink, includes
both qualitative and quantitative analysis
across 5,000 UK consumers, merchants and
businesses. The research shines a light on UK
consumers’ current payment habits.
· 33%ofsmartphoneownersintheUKhave
used them to shop online.
· 42% of smartphone owners have used
them for online banking.
· 43% of tablet owners in the UK have used
them to shop online.
Banks must drive UK digital payments innovation
· 33% of tablet owners have used them for
online banking.
Convenienceandeaseofuseareimportant
factors in encouraging consumers to adopt
these new ways to pay. However security
remainsasimportantfornewdigitalmethods
as well as existing payments methods.
For those interested in new payment ser-
vices,81%indicatedtheywouldbemorelike-
ly to use them if they were provided by their
bank – and of those, around half indicated
they would be encouraged to transact more
using their mobile device. This indicates that
banks are trusted to provide safe and secure
transactions, regardless of channel and the
delivery of alternative payments is a clear
opportunity for banks to maintain and build
greater customer engagement. ■
Companies struggle to
popularise Mobile Money
Visa launches mobile
managed service
Various companies are grappling with
the challenge to develop compelling
reasons for consumers to use mobile
payment technology.
The GSM Association’s Reed Peterson
says in-store smartphone payments
require “a lot of things to align,” includ-
ingequippingthephonewithNFChard-
ware and software, deploying the right
equipment and training in the store, the
phone company supporting the trans-
action, and payment processors and
banks having a stake in it. Peterson says
although some of these components
have been established, the network of
commercial pacts that supports these
paymentsrequiresexpansion,whilecon-
sumer demand remains lukewarm.
The popularity of iPhones among
consumers is an impediment to NFC
adoption because Apple has not yet
embedded NFC into any of its smart-
phones. Another flashpoint for NFC
revolvesaroundwhocontrolsthesecure
element in phones, with the GSMA sup-
porting the element’s installation in the
subscriber identity module rather than
in the phone itself.
Visa, Google, and phone companies
are debating over who controls the
secure element, while PayPal advocates
avoiding NFC altogether. ■
Visa has announced the launch of
a new plug-and-play mobile money
platform that will make it simpler and
cost-efficient for financial institutions
and mobile operators to offer mobile
financial services. The global platform
is the world’s first bank-grade managed
service for mobile money – meaning it
allows Visa to host and fully manage all
aspects on behalf of the provider. ■
Source: Payments Council – The Way We Pay 2013.
Payments volumes from 2001 to 2021
800
700
600
500
400
300
200
100
0
2001
2006
2018
2011
2002
2014
2007
2019
2012
2003
2015
2008
2020
2013
2004
2016
2009
2021
2005
2017
2010
DebitCard
Index2000=100
Automated
credits
Directdebit
Creditcard
Cash
Cheque
