How one Fintech start-up is rolling out mobile payments services across Europe

 
As Fintech firms continue to make breakthroughs and disrupt banking and payments services around the world, I am delighted to share the perspective of someone at the forefront of innovation in Europe.

 

Cashcloud has received a number of awards for its’ innovative payments service, most recently winning the Fintech Innovation Awards 2015 held here in London. I was therefore delighted to have a chance to get their story from the man who is behind much of the success, Olaf Taupitz, Managing Director of Cashcloud SA.

 

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Olaf, Congratulations on winning the Fintech Innovation Awards 2015. Could you please give us an introduction to your company and services?

 

I look after all the operational entities of the Cashcloud group of companies. We have our headquarters in Switzerland. Cashcloud SA in Luxembourg is the unit through which we manage the relationship with partners & customers. We have an important operations base in Germany and Romania which has agents for customer service. We also have near-shore development teams in Ukraine and Spain.

So although we have just 35 people on board, it is an international setup focused on European markets. My partner Sven Donhuysen was the Founder of the company in 2012. By the end of 2013 we launched in the first 4 European markets where we have over 100,000 customers and over 500,000 downloads of our app.

We are proud of the award you mention, that we recently won in London. This was the third award we received in 6 months with wins in Switzerland (Nov 2014), Germany (Dec 2014) before that. These have been encouragements for us to become better and better, and provide us motivation to tackle the host of issues we as a start-up face.

 

Could you tell us a bit about your products, services, markets and segments, and what is behind the recent awards you’ve received?

 

What was particularly appreciated is how easy it is to use our application and the fact that we combine a number of things, not just payments.

Our primary segment is the “native digital” youth market, who can transfer money easily between each other, make payments at POS through NFC stickers and earn cash credits in return for buying specific goods, sharing information or inviting friends. Coupons and cashback activities have been launched in Germany and Spain.

We allow customers to easily transfer money between friends through a simple message. They can pay at POS using NFC stickers and will shortly have cards with MasterCard acceptance around the world. And importantly, people can obtain offers and bonuses for using us through Cash Credits.

 

Why did you decide to get into mobile payments, and how did you select the countries you’ve picked (Germany, France, Spain and the Netherlands)?

 

Regarding the motivation to enter mobile payments, I have a background in Telecoms and Finance and was convinced that we could make a strong play through a Telecoms+Finance+Card offer, especially as the smartphone kept getting cheaper.

Through the mobile Cashcloud eWallet we aim to offer this: a means for people to pay online with no need to enter personal data, good control over their transactions and special incentives for using our service to make payments.

 

Which of the four European countries showed the most take-up of mobile payments?

 

So far for us Spain showed most adoption. With NFC stickers, there are more NFC acquiring terminals there. As you know, card usage itself is not as popular in Germany, which is a cash-driven market. Netherlands is not bad but we don’t promote so many activities there - it is a good test market for us.

 

So right now if I was to go on holiday from UK to Spain, could I use your service to pay in Euros?

 

We primarily issue the service to citizens of the countries in which we’ve launched.

However people could receive a secondary card or sticker up to the limit of 2,500 Euro a year, beyond which KYC requirements apply. People can use the MasterCard to pay everywhere in the world.

 

How easy has it been for you to expand to new countries in Europe? Any plans to go outside Europe?

 

We had to start with one currency first – Euro based and chose 3 big markets and one small. Later this year we hope to investigate launch in other Euro-based countries as well as in UK, Poland, Romania and Switzerland in their currencies.

Going outside Europe is not on our plans right now. In our future work, we look forward to enabling remittances as well, especially as we enter the UK market.

 

How does your business model work, and how have customers reacted to your Freemium/Premium pricing?

 

We’re not about making money from payments itself. With the new rulings across Europe we anticipated that transaction fees, interchange would drop, merchants want to pay less.

What we are able to do is to obtain aggregate knowledge on consumer trends and profile typical customer shopping behaviour. This is very important for the emerging campaign management and advertising models.

What key technology decisions did you have to make since 2012 and how have these contributed to your success?

Two key decisions we made from the start have proved right, and helped in our success. Firstly we decided that our service must be mobile and supported Android and iOS from the start. Secondly, from the start we focused on building a platform – an online API that would help us integrate and be a part of other ecosystems and use cases.

What is your view on the competition especially Apple? How would a startup service fare against such global competitors?

 

Actually we welcomed the Apple Pay launch as it supported the NFC solution. We are happy to see the success in the US. We anticipate it will take longer to launch in Europe, perhaps it could take another 12 months for the pieces to be put in place.

 

What’s been the most difficult challenge for you so far?

 

I’d say we found it easy from the issuing side, but it was the acquiring side that is harder for us to control. As the acceptance network rolls out across Europe we expect this to be resolved.

Secondly it has been a challenge to build strong drivers for adoption. This is the problem faced with mobile payments in developed countries where people already have good banking and card services. I think the role of the mobile phone as an authentication device is now being acknowledged and we expect better take up due to this.

 

What are your plans for 2015 and beyond?

 

We are hard at work on our plans for expansion. Apart from more countries across the Eurozone, we are investigating in market launches in the UK, Switzerland, Romania and Poland – so will have to support a number of new currencies.

 

It has been fascinating speaking to you Olaf. Thanks for sharing your story that I hope will be an inspiration for the many Fintech startups, across Europe and around the world. I wish you the very best of success in your plans!

 


Olaf TaupitzOlaf Taupitz is Head of Product and Innovation and a Member of Board at cashcloud.

Olaf is in charge of managing all initiatives of the company and he oversees the development of cashcloud’s application and technical set up, including management of outsourced partnerships. He brings to his role key expertise from his experience at IPS International Prepay Solution AF, CALL4T, Tele2 and his other work at the intersection of Telecoms, Payments and Card services.

 

 


Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

http://www.linkedin.com/in/charmaineoak

Join me on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn

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Passwordless Experience – The FIDO Standards behind this

As security breaches continued to grab headlines over 2014, I was intrigued by new claims that not only could online security be improved for consumers, but it could actually become a more delightful user experience. The launch of Apple Pay has proven to us that this is possible.

With over 150 FIDO members, the Board of Directors alone reads like a Who’s Who List: Alibaba/Alipay, ARM, Bank of America, CrucialTec, Discover Financial Services, Google, Identity X, Lenovo, MasterCard, Microsoft, Nok Nok Labs, NXP semiconductors, Oberthur Technologies, PayPal, Qualcomm, RSA Security, Samsung, Synaptics, Visa, and Yubico.

Keen to understand what attracted so many key players, I was delighted to have an opportunity to interview Executive Director of the FIDO Alliance, Brett McDowell, to understand more about how all this works and what changes we are likely to see in the world of payments because of this.

 

Brett, I’ve heard so much about FIDO as the standard behind high profile launches of 2014, and am keen to understand more. Could you share a bit about yourself and your mission at FIDO?

 

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I am currently the Executive Director of the FIDO (Fast IDentity Online) Alliance which I helped to found in July 2012, when I was the Head of Ecosystem Security at PayPal, to address the lack of interoperability among strong authentication devices as well as the problems users face with creating and remembering multiple usernames and passwords. At the FIDO Alliance, we are changing the nature of online authentication by developing specifications that define an open, scalable, interoperable set of mechanisms that supplant reliance on passwords to securely authenticate users of online and mobile services.

Previously I spent several years at PayPal where, as Head of Ecosystem Security, I was tasked with developing strategies and leading initiatives to make the Internet a safer environment for PayPal and its customers. I spearheaded authentication strategy, including working with global policy makers to evolve best practices in strong authentication regulation. Prior to joining PayPal I spent several years as Executive Director of industry standards organizations, including Liberty Alliance and Kantara Initiative, which produced standards and accreditation programs in the field of digital identity.

At the FIDO Alliance, our mission is tightly scoped to producing open standards and industry adoption programs that enable implementers to change the nature of online authentication by improving user experience while simultaneously providing better security in a very privacy-respecting manner. We just released the final FIDO 1.0 specifications at the end of 2014.

 

Why did you feel standards were needed relating to strong authentication, and how does this differ from traditional authentication?

 

clip_image004So, “traditional” is an interesting word in the context of strong authentication, as the concept has not gotten a tremendous amount of adoption, especially not from consumers. Before FIDO authentication, if you were an online service provider, in order to authenticate your users, you would typically use username and password. If you wanted more security you had to add another authentication factor from a set of options that were not necessarily designed for ease-of-use. The “historic” approach to multi-factor authentication, or “strong authentication” as it is often called, combines “something you know” (like a password or other form of “shared secret”) with another factor, such as “something you are” (a biometric for instance) or “something you have” (such as a token or physical device). The industry norm in 2011-2012, before FIDO authentication was announced, was username and password as the ubiquitous first-factor, and the second factor, if there was one, was typically a 6-digit one-time-use passcode. You’d get the second factor through an SMS to your mobile device or create it on a specialised hardware device or copy it from a code-generating mobile app on your smartphone. This 6 digit number- the one-time password (OTP) - is called a security token.

The first problem with OTP -- and one of the many issues that FIDO authentication inherently addresses -- is usability. The first word in FIDO is fast, and it helps to explain why FIDO technologies became so disruptive so quickly. We are not about bolting on extra security that puts the burden on the user. We are about delivering an end-to-end innovative approach to authentication through a new, open, online cryptographic protocol that enables best-of-breed device-centric authentication to be used for online access.

 

How does the FIDO UAF Architecture enable online services and websites to leverage native security features of devices and what problem does this address?

 

From the payments perspective our standards enable a better user experience – faster, more secure, privacy respecting and easier-to-use. An example is, Samsung has enabled a number of payments applications using FIDO to allow a user to simply swipe a finger across a sensor on their smartphone or tablet. This is arguably easier than everything else in the market, certainly easier than passwords.

Although the concept of strong authentication has been around for a while and pretty well adopted by pockets of the enterprise market, it has not achieved widespread adoption beyond the enterprise because it has lacked the means to achieve interoperability among systems and devices; FIDO authentication standards enable any strong authentication method, what we call “authenticators”, to interoperate with any online service, independent of solution vendor or device.

Without interoperable strong authentication, you are left with the classic “token necklace” problem; wearing specialized security tokens, often around your neck with your security badge at work, for each online service that requires strong authentication because you cannot use any one of them to authentication into the other online applications. This is because “traditional” strong authentication relied on proprietary centralized servers (closed systems) connecting authenticators in the hands of users to proprietary server side functionality. Limited in both reach and function, strong authentication solutions have been neither open nor interoperable, until FIDO UAF and U2F 1.0 standards , which have opened the door for ubiquitous strong authentication through “net effects” that only emerge from an open ecosystem.

 

Is this interoperability issue something you address through UAF and U2F?

 

Yes, both UAF and U2F protocols, applied to devices, client software and online servers, produce entirely interoperable strong authentication. What the FIDO Alliance founders introduced first was the Universal Authentication Framework (UAF) protocol. This solves pain points around first-factor authentication because it is designed to replace the password, usually (but not exclusively) with a biometric factor that is retained only locally on the user device, never shared centrally or in the cloud. FIDO UAF is a strong authentication framework that enables online services and websites, whether on the open Internet or within enterprises, to transparently leverage native security features of end-user computing devices. In a FIDO ecosystem online service providers can easily achieve strong user authentication, and free users from creating and remembering more online credentials, simply by leveraging existing FIDO devices to authenticate at their sites and to use their services, such as mobile payments where UAF has seen early industry adoption.

If you are going to offer a replacement for passwords, you need a robust mechanism that isn’t based on the same “what you know” shared secret security design that has been the bane of password systems of late. We decided upon asymmetric public key cryptography, which uses a private key paired with a public key for each authenticator registration. However, we knew that putting the private key in the server could create vulnerability and undesired externalities in the case of a breach. We wanted to get to a model that would have no secrets on the server side. With FIDO authentication, the server holds a public key, but the private key is held only by the individual’s personal device, such as a mobile phone, and is never shared outside of that device. We saw the opportunity to make 1st factor authentication both easy & more secure by relying upon existing device-specific user verification methods being embedded in smartphones, tablets and PC’s. FIDO UAF then enables those local device authentication methods to be used securely online.

We found that before FIDO authentication, existing strong authentication options had very low user acceptance rates, sometimes less than 3% of users choosing to register for strong authentication when it was available as an option. The user acceptance of natural authentication methods that don’t tax the user’s memory or require extra steps in the process have been far more successful as seen by the increased number of people opting to lock their phone with gesture locks, 4 digit pin codes, and now biometric sensors like fingerprint sensors. However, under FIDO UAF, fingerprints are just one of many biometric options supported by the protocol- iris scanning, voice recognition, and behavioural sensors from wearable devices, are all supported in FIDO UAF.

We wanted a standard that could support any future authentication method, and support the industry in its drive to continuously innovate. Proprietary innovation happens between the device and user; this is where the industry can compete with differentiating solutions. FIDO standards come into play in the implementation between the device and the online service.

Another question is how online Payment Service Providers (PSPs) would know that the technique between device and user is trustworthy? FIDO standards incorporate the ability for online services like PSPs to set their own security policy defining the devices or device characteristics they want to trust. The members of the FIDO Alliance wanted a solution set that enabled trust between all devices and all services, but didn’t mandate it. They want a solution to be flexible enough to leave the trust decision in the hands of the online service provider who is in the position of making the risk decision related to any authenticated transaction.

 

We have discussed UAF in some detail. What then is U2F and where does it fit in the FIDO ecosystem?

 

FIDO U2F authentication addresses a totally different use case. FIDO UAF provides a simpler, stronger 1st factor authenticator where U2F provides a simpler, stronger 2nd factor authenticator. FIDO U2F does not replace the password but instead replaces the second factor and enables a simpler form of password, like a short PIN number, because the security burden can now be placed on the FIDO U2F authenticator and not the password. FIDO U2F has already been deployed by Google Accounts and now ships in all Google Chrome browsers.

So far the implementations of FIDO U2F authenticators are in the form of external specialized devices, but these capabilities could be embedded directly in handsets or other form factors in the future. What separates FIDO U2F security tokens from the OTP tokens discussed previously is that one device will work with any FIDO U2F server, regardless of vendor solution or device manufacturer. Another key differentiator is the phishing resistance inherent in the FIDO U2F standard. A FIDO U2F user cannot be tricked into giving a secret to a fraudster the way they can in a OTP use case.

Yubico and Plug-up are the two primary providers of U2F-enabled devices today, which work by being inserted into a USB slot. NFC and BLE support for U2F tokens is coming soon and will accommodate U2F devices for use with devices that don’t have USB slots.

To learn more about all the UAF and U2F FIDO Ready™ implementations please visit our website where they are all listed along with the profiles they support.

 

This is very interesting and thanks for helping to make our online experiences easier as well as more secure. Do you have any final message for us?

 

One thing I’d like to emphasize is the relationship between authentication and payments. Payments is just another application that requires strong user authentication. FIDO standards can be used for a whole variety of use cases that require strong online authentication… for healthcare applications, airline bookings, gaming, banking, enterprise use cases and anything that requires a user to authenticate online. The reason we saw the first adoption in mobile payments is because that industry segment had the greatest amount of pent-up demand for faster, easier strong authentication from mobile devices where typing passwords was the least convenient option.

The second topic I would like to emphasize is the relationship between FIDO standards and government regulation around strong authentication. Sticking with the payments example, you recently asked me about how FIDO UAF could be used to meet the criteria developed by regulatory regimes such as the EBA Guidelines. Though an analysis of exactly how a FIDO UAF implementation could meet the requirements of this specific regulation is beyond the scope of this interview, most multi-factor regulatory regimes are looking for two or more of a “what you know”, “what you are”, or “what you have” authentication factors. In just the example we see in the market already on Samsung Galaxy® devices, it may appear there is only a single “what you are” factor being offered by the fingerprint sensor, but there is also a “what you have” factor due to the secure protection of the private keys on the device, resulting in a multi-factor authentication event from a single user gesture. The Privacy and Public Policy Working Group in FIDO Alliance is going to make a concerted effort to educate regulators across various industries and geographical regions in 2015 to help them understand how to apply FIDO authentication to the markets they oversee.

 

Thanks Brett and I wish you the very best for all the further innovation that you plan in this very important space!


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Brett McDowell currently serves as Executive Director of the Fast IDentity Online (FIDO) Alliance, the organization Brett helped establish in 2012 to remove the world's dependency on passwords through open standards for strong authentication. Brett is also an advisor to Agari and the Bitcoin Foundation.

Previously, Brett spent several years at PayPal where, as Head of Ecosystem Security, he was tasked with developing strategies and leading initiatives to make the Internet a safer environment for PayPal and their customers.

 


Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

Join me on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn

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The year 2014 was a tipping point for NFC payments says Visa Europe

Today I am delighted to be speaking to Jonathan Vaux, Executive Director, New Digital Payments and Strategy at Visa Europe. Jonathan tells us what trends impressed him over 2014, which he considers to be a really powerful year for mobile payments. We discuss the UK and European developments and Jonathan shares his views on the outlook for 2015 for digital payments in Europe and world-wide. For background see my previous blog “How payments changed in UK in 2014 and what’s next

Jonathan, thanks for making time for this discussion. Could you please tell us a bit about yourself and your remit at Visa Europe?

Contactless PaymentsReally I have two major roles at Visa Europe. Firstly, to look at emerging technologies and gauge what our involvement should be. Is this a technology so impactful we must do something about it but not necessarily be a provider? A good example of this could be authentication or identity, where it’s probably more about us adapting our product rules and frameworks to recognise emerging technologies. Alternatively, is it a service we should provide as part of our core services? A good example of this might be tokenisation, or incorporating geo-fencing into our services as a way of improving our authorisation services and improving the customer experience to approve genuine transactions and help capture fraudulent ones.

Secondly my job is to create roadmaps and conduct prioritisation exercises.

At Visa Europe my job is really to look at changes in the way people want to pay and make sure that Visa is the preferred payment method for whatever app or wallet consumers wish to use for payments.

 

How has Visa Europe recently reorganised to address opportunities from changes in the way we pay?

We’ve undertaken a major reorganisation recently that resulted in positioning us very well with respect to the changes we expect in payments over 2015 and beyond. We have created a dedicated digital business unit as a group of 150 people looking at the services we must provide and also delivering the services. This is a dedicated team currently separate from our “core” business.

We want to make sure we are as easy to integrate into new banking and payments apps as possible, creating the connectivity and seamless payments experience consumers require.

 

What are some of the key global trends you observed over 2014?

To my mind 2014 was a tipping point for NFC payments. With the launch of Apple Pay and the number of developments over the year, some technologies that had been struggling to get adoption got legitimised. There has been more emphasis on customers wanting personalised services. Also we’ve seen much more adoption of online banking and mobile banking. More than ever banks have started to engage with digital channels, as an imperative rather than an option.

We saw some important traction in the role of biometrics, with TouchID for instance, and the technologies becoming more open.

Tokenisation is another major development. Another is the evolution of players such as Stripe with an open API approach. In short, 2014 has been a really powerful year for payments innovations.

 

On the other hand we had so many negative incidents, such as credit cards being stolen, that in a way may also precipitate tokenisation, and make paying by mobile even safer than other methods?

We need to make sure we consider this as we evaluate how to scale any potential new technologies, although the issues did not arise due to mobile as a channel as such just re-emphasised the importance of security.

Also if you look at fraud ratio in Europe, thanks to implementation of Chip and PIN, the rates are relatively low as compared to US for instance. In Europe there is more nervousness about technologies that are seen as less safe.

The other important point is we need to ensure that the way to mitigate fraud does not impact consumer experience. It is all about creating streamlined, secure methods to pay with consumer experiences that are also great.

 

On the topic of focus on consumer experience, do you see digital as an opportunity for banks to safeguard against becoming commoditised and also regain consumer goodwill?

As a general point most people look to retail banks to manage funds and trust their bank to keep their money safe. If you consider core propositions in this area, the customer looks to their primary retail bank for that. I’m not sure how much the potential peripheral services, such as loyalty, have a material effect in terms of customer relationship - the crux of it is: Is my money safe? Am I protected if something goes wrong?

However, a lot of day-to-day experiences in the banking world may not be consumer friendly enough. Consumers may shift for more convenience. PayPal, for instance, have had a lot of impact as they offered such a strong customer experience.

 

Over 2014 we saw so much traction in the UK with Transport for London (TfL). Could you please tell us more on this?

A lot of the services fail as they don’t become habitual for the customer. What is fantastic about applications such as TfL is that for people living and travelling around London the use of such services becomes habitual very fast. The use of contactless payments on TfL extends and reinforces the use of that plastic card that I use elsewhere. It’s a new use case and it works as it is something I use regularly.

It is interesting to see the number of transactions and also the number of people constantly using contactless cards has greatly increased over 2014.

Visa Europe predicts that, with the launch of contactless journeys on Transport for London’s (TfL) travel
network and the introduction of mobile contactless services, Brits will make 500 million contactless payments between now and December 2015.

Any update for me in terms of the use of mobile contactless payments? Now that services are available from some of the leading mobile operators, how are these being used so far?

I am not sure how much specific data I can share on that but I would say that today most transactions are still predominantly contactless plastic cards. We’ll probably see more focus from the operators in trying to capitalise on the press attention that things like Apple Pay’s launch in the US have received to grow their share of transactions and I think we’ll hear a lot more about wearables in 2015.

 

Within Europe, please could you describe some of the unique characteristics you have observed?

The big challenge for Europe is there are still lots of local processing systems despite Pan-European discussions. In 2014 we saw domestic regulators becoming more stringent on some issues, such as data storage required to be in the country, not overseas. This is an interesting trend that’s emerging. Over 2015 we must see how much that may counter-balance the speed rollout for global brands. It may also affect the scale of roll out of digital payments, and how that differs.

 

I agree it’s not just one market. I’m wondering if you have an update for me on Eastern European (EE) markets. I’m recently back from Poland and it was interesting to see the developments there.

Yes, there are a number of benefits in terms of markets such as Poland which have been very early adopters of contactless payments. There is a really high usage of contactless there. Merchants are actively leveraging technology to drive loyalty behaviour.

Nine Polish banks have confirmed plans to commercially launch Visa Cloud-based Mobile Contactless Payment services from early this year, re-enforcing Poland’s reputation as a hotbed for innovation in digital payment services.

Banking providers ING Bank Śląski, mBank, Bank Millennium, Raiffeisen Polbank, eurobank, Getin Bank, Bank Polskiej Spółdzielczości and Bank SMART will join Bank Zachodni WBK in rolling out services utilising Visa’s Cloud-based Payment specifications, enabling customers with payment apps utilising Host Card Emulation (HCE) functionality to make contactless payments quickly and safely using an NFC-enabled Android smartphone.

Poland tends to act more as a homogenous market, with more collaboration, as compared to some of the more developed markets in Western Europe. Sometimes entrenched legacy systems can actually be a constraint. So we are seeing some of the EE markets leapfrogging other European markets. They are building shared infrastructure backed by enabling rather than differentiating technology.

 

How do you see Tokenisation evolving – what are the promises and potential challenges?

Tokenisation already exists today and works successfully in a lot of online markets. It is important to look at the different use cases, and the ways it adds value and cost. With margins coming down markedly we need to be sure we don’t add layers of cost where it’s difficult to make sufficient money to justify this.

So if you compare the EU against US, the margins are very different in Europe. My customer asks, what’s the investment case? So there is little money to cover the costs, unless it gives significant upside.

 

I suppose big markets such as India and China already have their own cards roadmap. When we were in India recently we saw Rupay debit cards being issued for 53 million new accounts opened in just 2 months. What do you see in terms of global outlook?

The important thing is how do you transition quickly? It is a case of not just issuance but creating the necessary acceptance infrastructure. Time to scale of this would be a key differentiating factor.

 

Thanks Jonathan, this has been most interesting. To conclude, what do you most look forward to in 2015?

I think we’ll start to see material changes, new use cases and increasing adoption of the exciting new technology. As some of the things start to roll out I believe 2015 will be a really critical year as the new services become the norm and pilots go mainstream.

 

Which are the new technologies you would back?

You will see NFC, HCE, QR codes and more but as Visa we are agnostic. You will see these become more frequently used methods. You’re going to have very different consumer experiences. If Tesco offers a QR code app, that will be possible, just as other use cases such as NFC or HCE must also be possible, and that’s what we at Visa Europe are working hard to ensure the necessary support.

 

Jonathan Vaux is Executive Director, New Digital Payments and Strategy at Visa Europe. Jonathan is responsible for the development and execution of the New Digital Payments Propositions Strategy for Visa Europe. Key responsibilities include development of innovation agenda, development of digital roadmap and management of key partnerships and interaction with innovation partners, including startups, incubators and accelerators.

This is part of Shift Thought’s Focus on UK Series. Shift Thought provides unique, detailed and up-to-date Country Viewports on most developed and emerging markets around the world. Talk to us today at +44 (0)754 0711 848, or write to us at contact@shiftthought.com to learn more about how we can support your digital banking, digital payments and remittances projects.

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Researchers claim potentially serious flaw in Visa contactless payments cards in the UK

 

This morning a BBC report showed researcher claims of a potentially very serious vulnerability in Visa contactless payments. It is still not clear enough to what extent this could open the door for fraudsters around the world to use the flaw but from what was presented it seems this could be an expensive problem, most unwelcome at this time.

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Contactless payments cards allow people to make purchases below a certain value by just touching the card against a Point of Sale (POS) terminal. People do not need to enter a PIN except when prompted, after a certain number of transactions.Visa and MasterCard have been active in rolling out these cards across the UK, and indeed world-wide this trend has progressed strongly this year.

 

Spend on contactless cards in the UK is expected to rise to £6.4 million a week in 2014, up from £3.2 million in 2013. UK is a leader in contactless payments world-wide, making the latest discovery a point for people around the world to consider and take into account in their own projects and testing involving contactless payments.

 

Today, a demonstration on BBC showed a mobile based contactless payment card meant to block transactions higher than £20 actually allowed an amount of $ 999999.99 to be put through as it was in a foreign currency. The claim was that the flaw is with Visa contactless cards, and not just payment via mobile phones, although the demonstration was of a mobile initiated transaction. Prof AAD Van Moorsel of Newcastle University made a statement about the research and vulnerabilities they found.

 

Due to the widespread roll out of these cards in the UK, it is possible that people have these cards without being aware of it. There are 48 million contactless cards in the UK today.

 

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Visa Europe responded to the BBC on this to say the research does not take into account the multiple safeguards put into place and in practice it would be difficult to complete such a transaction. Of course, the amount would go through only if the account had the money. They were already updating their system anyway to make this kind of attack difficult.

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This could be a potentially very big issue, but found by researchers before it was exploited by criminals.  BBC states that so far in the UK contactless card fraud was only £51,000  in the first half of 2014, but then most people have not actually begun to use the contactless functionality on the  cards.

This is an unfortunate setback at a time when contactless payments was at last set to take off. In the UK, with new rules having come into effect in July 2014, contactless cards were to be the mainstay of payments on London buses where cash is no longer accepted.

 

The question this raises for me is to what extent this flaw may be present in other cases of  contactless payments in Europe and world-wide. The reports so far do not make it conclusively clear at what level this flaw exists – whether only for dematerialised cards on mobile phones or for all Visa contactless payments cards.

 


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Shaping the Future of Payments in the Nordics, Baltics and beyond

 

I recently caught up with Kristian T. Sørensen (KS), Senior Manager Corporate Strategy at Nets Denmark to seek his expert views on payments in Northern Europe.

imageAs a Member of the Board of Directors at Mobey Forum, Mr. Sorensen has helped to shape the direction of the development of mobile wallets and mobile payments in Europe. We discuss his experiences as Senior Manager, Mobile Payments and E-Commerce at Nets Denmark, and relating to his new portfolio. It was a privilege to understand more about the payments market in Northern Europe and his views on the future of mobile payments.

Founded in 1968, Nets is a key provider of payments, cards and information services in the Nordic market, as it manages key products including BankAxept, Betalingsservice, Dankort, NemID, Mobilpenge, eFaktura and Avtalegiro.

 

Please tell us a bit about yourself and your role at Nets

Kristian WalletAt Nets I was tasked with co-ordination of mobile payments and e-commerce initiatives across business units, and over the last couple of years those initiatives have matured and got absorbed into the appropriate business units. Recently Nets has been acquired by Advent International, ATP and Bain Capital and is in the process of growing the business, and I trust that mobile services including mobile payments will play an important role in this.

This is therefore an exciting time for me personally, as my current role in strategy includes direction for mobile payments. Things are really starting to happen, after many years of discussions, pilots and bilateral initiatives we are starting to see fundamental change and more interoperability.

Northern Europe has been in a leadership position in digital money. What changes have you seen in the way people pay?

Yes, Nets is fortunate to be working across the Nordics. In Denmark & Norway we enjoy a central position and we also operate in Finland, Sweden and Estonia.

The Nordic countries have been leaders in transformation to cashless payments. I was in one of the large Danish banks and part of the transition to digital banking. As people got access to the Internet at home, they found self-service useful and online banking really caught on. As smartphone penetration was also higher than in other regions we naturally expected to be leaders in mobile payments by default, but that proved not to be the case.

 

So, surprisingly regarding contactless card initiatives the Nordics were not first, nor the fastest!

This was because a number of the services we already have are so successful and cost-efficient. Card payment is widespread even for paying for just a cup of coffee. We needed more than just a new way to pay.

 

In Denmark it is not a problem living without cash.

I only carry currencies other than my own – I never need cash at home. With that in mind we had to deliver something that brings not just payments but also commerce to the next level. We had to look at mobile payments in a much broader context than just transactional payments.

 

We had to add context to payments to make the transition to mobile attractive to consumers.

This links well with the work I do at Mobey Forum, devising wallets to broaden the reach of issuers, and value added services including coupons, loyalty and membership benefits. Although coupons are not widely used in the Nordic region, this is changing with recent new legislation that allows for an increased use of coupons. But although coupons may present an interesting use case, we can’t stop there.

 

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One of the major drivers is IDENTITY, which underpins many use cases.

Identity services are important, and in this space Nets is a major provider as we run identity schemes in Denmark and Norway. All of a sudden once you solve the problem of digital identity, you start covering all the use cases the leather wallet supports: payment credentials, membership, loyalty, identity and more. In Denmark there is one identity all banks and authorities use and moving this to mobile is a key feature that will drive mobile adoption going forward.

 

Could you please share more about NFC, mobile payments and contactless payments using stickers in the Nordic region?

In Norway we are seeing mobile wallet solutions being brought to market – we are implementing a mobile wallet solution for Eika Kredittbank and in terms of contactless cards in Norway, more than 1 million are expected next year. In Denmark the first banks have started to issue contactless cards and recently an announcement was made to enable Dankort for contactless payment by Q3 2015. In Finland mobile payments have been widely used for some time.

Denmark and Norway were held back due to lack of acceptance infrastructure, as through a PCI compliance waiver terminals were not replaced. Over this year the situation has changed and 80-90% contactless terminals are contactless ready. Moreover, the kinds of terminals ready are those with very high transaction volume, at leading supermarkets for instance. So we expect a lot of initiatives to start now, and we expect contactless payments to pick up.

Sweden has been somewhat reluctant towards contactless & NFC. It has been different from the rest of the Nordics, with a more fragmented landscape, lots of trials and different concepts. This fragmented market has however impacted both issuers and merchants who are unsure and therefore reluctant to invest. With Apple committing to NFC now, Sweden is also expected to move in that direction. Nets have increased presence in Sweden through acquisition of a major POS provider and we are now in a better position to actively address the Swedish market.

 

Nets seem also well positioned to address Baltic markets including Estonia, Latvia and Lithuania. I see Nets has been chosen by Danske Bank as partner for entering the card acquiring markets in Latvia and Lithuania.

Yes, the Baltics have a lot of similarities to the Nordic countries, as well as being neighbouring countries. We find great benefits and synergies of working there as our services apply well to the Baltics.

 

Regarding the important issue of Tokenisation, I recently read an analysis from Mercator saying this may give more of the revenue to the network as opposed to processors. What is your opinion?

This is a natural evolution from the schemes for securing their place in the ecosystem. The whole card infrastructure was created to offer a convenient interface to bank accounts. To move money from bank accounts customers had to log in. Cross-border transactions in particular were a problem. Now with the spread of mobile devices we carry our own piece of infrastructure with us. The access to bank interfaces is not far. Card schemes need to consequently extend their business to remain relevant. This is where tokenisation comes in as it provides new level of convenience to payments and also makes secure transactions easier.

 

Does it fit naturally into existing payments? PayPal also has its own different way of securing online payments.

To reduce fraud we must readdress where we hold sensitive information to avoid incidents such as the Target breach. Consumers shop more online and need to pay but don’t want to leave payment information with merchants. In the physical world, you’d not want to leave your payment card at a store. Instead of leaving full credentials at merchants they can get paid conveniently without having to control all the payment data. Tokens can be limited in different ways, for instance by duration, amount and where used.

 

What are your views for the outlook of NFC and mobile payments?

Through the recent years there has been an on-going expectation, but now with Apple supporting NFC through the launch of Apple Pay and the iPhone 6 capabilities the outlook has improved. We are likely to see issuers and merchants driving many kinds of initiatives – not one size fits all. We see the confidence in the market and there will be a snowball effect on mobile payments and mobile commerce.

The estimates of mobile payments have so far exceeded the actuals, not unlike the time of the advent of the Internet. Yet looking back, even the most optimistic could not predict how big Google could be, how big e-commerce would be and how much we would end up today using internet and mobile. Similarly I don’t think we can even start to imagine how big mobile payments could be down the road!

 

What do you see to be the future of Nets & future of payments?

The growth of payments industry does not just hinge on the mechanics of payments. Moving money from one account to the other will be commoditised. But the general exchange of valuables in a connected world fuelled by mobile is the truly important thing.

In this, players like Nets have a significant role to play. Broader exchange of valuables includes coupons, loyalty points and more. What is required is a trusted broker of valuables: at a supermarket you could tap your phone and instead of paying £89 for grocery, you might pay 4,000 Avios points, some Starbucks points and store points– you may get the groceries without using money.

 

Thanks very much for this fascinating interview. Wish you the very best in your new role and for the exciting work planned at Nets.


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Kristian T. Sørensen (KS), Senior Manager Corporate Strategy at Nets Denmark. Prior to this, Kristian spent ten years working within online and mobile financial services at Danish Bank, Nykredit. Kristian holds a master’s degree in Communication and Psychology, and has worked with online solutions since the early days of the Internet in the mid-1990s and with online financial services since 2002. Kristian has participated in Mobey Forum since 2010 and has been an active contributor to the production of mobile wallet white papers. He was elected to the Board and Chairman of the Marketing Work group in 2012 and is a sought after Speaker and Thought Leader in the field of Payments.


Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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Remittances remain buoyant but cross-border mobile remittance still less than 2%

 

World Bank’s recent reports on remittances indicate a welcome continued buoyancy. India remains the largest receiver, as growth in 2014 is led by East Asia and the Pacific, South Asia, Latin America and the Caribbean. However MENA flows are affected due to disturbances in the region, and ECA countries traditionally receiving inflows from Russia are badly affected. While mobile money has been adopted for domestic money transfer, 7 years on it has yet to make the inroads into cross-border remittances that was originally expected.

 

Good news as global cost of remittances falls from 8.9% to 7.9%

The global average cost of sending $200 fell from 8.9% in 2013 to 7.9% in Q3 of 2014, as remittances go online and digital. Account-based money transfer (cash-to-account is the lowest-cost method today). However although mobile money is being used for domestic money transfers, and is making an impact on sending money from urban to rural areas, its use for cross-border transactions remains limited. Less than 2% of remittance value took place through mobile phones. Yet with global remittance flows at $542 bn this even now represents a flow of $10 bn.

However Bill Gates believes that even with all the regulatory compliance it should be possible for pure digital to digital transactions to be moved at less than a percent. We are still far from achieving this goal. Is it a case of further enablers or something else that is needed to make this this possible?

 

Global remittance flows to developing countries are projected to reach US$435 billion in 2014

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At a much welcome 5% increase over last year, the growth is expected to continue into 2015, though at a reduced rate of 4.4%. Total flows are expected to rise from US$582 billion in 2014 to US$608 billion in 2015.

 

Forced migration is at an all time high with 73 million forced to leave home

The main message from the latest World Bank report on migration is that forced migration due to conflict has reached the highest level since World War II. Of the 73 million who had to leave their homes, over 51 million were forced to move due to conflict, and 22 million moved due to natural disasters.

 

India remains largest recipient at estimated $71 billion

Highest receivers are India ($71 b), China ($64 b), the Philippines ($28 b), Mexico ($24 b), Nigeria ($21 b) and Egypt ($18 b). Yet these flows are not as high as they could be. The largest receiver, India, only receiver 3.7% of GDP in 2013.

 

Remittance flows respond to natural disasters

Remittances continue to offer a much-needed lifeline of support in times of natural disasters, rising by 16.6% for Pakistan in 2014, and 8.5%  in the Philippines in 2013 in response to destruction from the super typhoon.

 

Regional trends

Remittances are projected to increase by 7% in the East Asia and Pacific region (EAP) with China and Philippines being the largest receivers. Remittances to South Asia have rebounded strongly in 2014, expected to grow by 5.5% to over $117 bn in 2014, with very strong growth for Pakistan, Nepal and Sri Lanka.

Growth in remittances to Sub-Saharan Africa is picking up in 2014, expected to reach $33 billion in 2014. Nigeria continues to dominate in terms of inward remittances flow, with $21.3 bn forecast for 2014.

 

imageRemittances to Europe and Central Asia (ECA) are slowing as compared to 2013 affected by conflict in Ukraine and sanctions against Russia. The figure shows how receivers of remittances from Russia have been affected as remittances received continue to decelerate.

 

 

 

 

 

 

Another affected region is the Middle East and North Africa, but despite the volatility, remittances represent substantially larger and more stable sources of inflows. Remittances to the region are expected to grow by 2.9% to reach $51 bn. Remittances to Egypt are expected to stabilize in 2014,  after the 2013 decline of 7.3% in remittances to Egypt (biggest receiver in the region, 6th worldwide).

 

For the full World Bank report click here: Migration and Development Brief 23 

 

Charmaine Oak, Practice Lead, Digital Money

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

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http://www.linkedin.com/in/charmaineoak

 

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The Digital Money Game– a multi-trillion dollar industry emerges

 

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I have great pleasure in announcing the launch of my new book, The Digital Money Game. I describe the multi-trillion dollar emerging industry I term “Digital Money” from the perspective of very many different industries. It is not just meant for payment experts in large organisations, but for anyone who wants to understand how people pay, and how this is changing in each part of the world.

 

The penetration of mobile phones and smartphones is transforming the way in which consumers interact with brands and greatly facilitates a move towards non-cash payments around the world. To play the game properly though, one needs to understand the changes in a much wider set of fundamentals - identity, security, authentication, regulations, technologies and more, so as to create appropriate vision that goes across channels, services and market segments. That way you have a more effective roadmap with respect to new entrants, and a better chance that what you plan now will still be relevant when your projects go live. I share more about why I wrote The Digital Money Game here.

 

The book is based on Shift Thought research in markets around the world, and my interviews with experts from all the different industries that now participate in payments and financial services. I did my first set of interviews in July 2011. Four years later, the wisdom that they, and countless others shared with me has helped to shape this book. This is the first book in The Digital Money Series and we are currently working on others in the series.

Since then I have learnt so much from so many conversations that unfortunately it is impossible to thank each one of you by name – I hope you will recognize your contributions when you read the book!

 

The book is designed to help you to spot opportunities and gain confidence and insights to channel your work in a way that benefits you, and the markets you serve. It addresses multiple functional areas and levels: Chief Executives, Technologists, Business Development, Market Development and Product Development executives from Banking, Cards, Money Transfer, Telecoms, Payments, Technology, Retail, and Venture Financing Industries.

The digital money approach described in this book can help you create products and services that are secure, convenient and empowering to a whole range of consumers and merchants, across a variety of channels. The goal is to create a shift in thinking – from merely addressing the new opportunity provided by mobile phones, to launching holistic services that build solid brands.

 

My book is available on Amazon stores around the world, priced in local currency and immediately accessible as an  Amazon Kindle download that works across Kindle for PC and a host of commonly used devices. In case it says “Pricing information not available” just look to the right of the screen to select the Amazon site in your country.

In the first 2 days that the book has been available I am delighted to say that it has already been bought from many countries around the world. Thank you so very much for your support and kind words.

 

Have you bought my book? I would love to have your feedback and can direct you to further resources that may be of interest. Do drop me a line at contact@shiftthought.com.

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From smartphones to super wallets: how a new breed of applications is changing mobile banking

 

This is an interesting time in the development of the digital payments market in Poland. The leading banks are collaborating to launch mobile payment services that potentially bypass the card schemes, allowing consumers to pay directly from their bank accounts. As a follow on from our previous blog, Transforming the way people pay in Poland Charmaine Oak interviewed Tomasz Krajewski, Head of mCommerce at eLeader. SuperWallet claims to be the first wallet to combine mobile banking, mobile payments and mobile commerce services. Tomasz shares his thoughts on the Polish payments market, as well as other markets in which eLeader has been active.

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CO: Tomasz, thanks for taking the time to share with us your thoughts on the development of mobile commerce, in Poland and elsewhere in the world. To start with, could you kindly give us a short introduction on the achievements of eLeader. In which markets do you now operate, and who are your main customers?

TT: eLeader is a leading mobile software company, with experience that dates back to the origins of the smartphone industry. Our services are used in over 70 countries worldwide and clients include Grupo Santander, Unicredit Group, mBank, Danske Bank, Raiffeisen, the National Bank of Kuwait and Orange/T-Mobile.

Our innovations have allowed us to achieve a number of awards and high ranks in industry reports, including a mention in the Top worldwide mobile banking vendors report (Juniper Research, 2012), Technology Fast 50 CE (Deloitte, 2008) and the Top technology companies in Europe (Red Herring, 2013).

 

CO: How has eLeader gained such a leadership position in Mobile Banking?

TT: You can say that going against the current is in eLeader’s DNA. We launched in 2000 with mobile solutions to support employees to work remotely, from outside the office. In those days in Lublin, where we are based, few people had even heard about smartphones, and many felt that this was a crazy idea. And perhaps so it was, but the product was a total success.

We started to invest into mobile banking in 2006 and that was the time when people were speaking about the brilliant future of WAP protocol, forgotten today. Back then, few had heard of smartphones. The iPhone and Android had not yet made a mark. Nokia had a dominant position in the market. At that time, we believed that native apps would be the future of mobility also in the banking industry.

Our first mobile banking platform was revealed in 2007 and it was based on native apps for 3 platforms: Symbian, BlackBerry and Pocket PC. As far as we can tell, ours could well have been a world first solution, with native apps individually designed for all the major OS platforms, accounting for over 95% of the smartphone market.

Raiffeisen Bank became our first customer in Poland. I remember meeting with the President of the bank. Instead of showing a slide deck, our CEO, Dobromir Piekarski, handed him a Nokia smartphone with our banking app – without any instructions. He played with the app in silence and just asked a simple question: How much? After a negotiation of just one minute they shook hands on it. The legend is that this could have been one of the fastest decisions in the banking industry, ever!

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CO: What were some of the challenges you encountered on the way?

TT: The biggest challenge was our first implementation. As mentioned earlier, we started at a time when the mobile banking industry was in its infancy. There was a lack of best practices and useful benchmarks. We had to convince the clients to use our solution, without any projects in the portfolio, armed only with cold calling. Can you imagine what that was like?

We had to design a new concept of application interface, UX and security measures.

Most banks were generally skeptical about native apps at that time; many said that we are going in the wrong direction. Fortunately very soon the iPhone changed the whole industry and attitudes to mobile apps. Native apps went main-stream, and became the norm.

Another milestone was reached when we entered foreign markets. By that time we had something to show in our portfolio, but still needed to prove that an unknown Polish company was able to make great applications and that too without any branches in the client’s country.

 

CO: In what way is Innovation in mobile banking held back by compliance requirements?

TT: Did you know that when the financial crisis came to Poland none of the banks have announced bankruptcy?It seems that none of them have even been in danger of such a situation.

To some extent this is thanks to Polish banking supervision which is very strict in terms of control. However, on the other hand regulations are so far-reaching that they do not allow banks to overstep clearly defined and legally imposed limits. This extends also to the sphere of innovation. You can say that from the regulator point of view, banking is for banks, and deviations from this principle are not allowed.

For instance, take the most used mobile banking functionality – checking one’s bank account balance. Because this is considered disclosure under banking secrecy, bank should require that the user authenticates before gaining access to balance information. Some of banks will ask you to login. Other banks will show you only the percentage of funds left in your account. There is also a bank which lets users choose which of the options would suit them best. You may say this is not a big innovation, but it clearly shows that users want the simplest solutions possible.

Non-bank start-ups are not subject to banking regulations, which is undoubtedly their competitive advantage in the market.

 

CO: In what areas do you see mobile security improving over the next 3 years?

TT: The trend to watch is certainly biometrics. My voice will be my password to mobile banking. Gartner predicts 30% of organizations will use biometric authentication on mobile in 2016 so this is worth watching.

 

CO: What has caused the Polish market to develop more rapidly than some other European markets in recent years?

TT: Polish people don’t use checks, and we never did. When in the 90s Poland entered capitalism after the communist era, emerging banking industry implemented only the newest IT solutions, leap frogging the old payment systems. This is one of the reasons why today we lead in contactless payments globally, and can transfer money from one bank to another in just 30 seconds, thanks to the Elixir Express standard.

Contactless penetration in Poland is higher than anywhere else in Europe or the Americas. This is largely because Visa and MasterCard have invested to subsidize contactless readers, so as to transform Poland into a showcase market for contactless payments. We are at the forefront not just in penetration of cards with a contactless function (20 million, 57.7% of all cards on the market) but also in number of POS accepting contactless payments (in the fourth quarter of 2013 this was already 170 thousand, or 52.1% of all the devices on the market).

Other important favorable factors for Poland include the high mobile and internet penetration, the highly educated society and our continued economic growth. According to Person’s ranking our education is ranked 10th in the world and the last time we had a recession was at the beginning of the XXIII century.

 

CO: How does eLeader expect to continue to play a leadership role in Europe, and elsewhere?

TT: The year 2014 is critical for us, as it is the time for us to launch the new mobile solutions that we have developed through our focused Research & Development over the last few years.

The product we are now introducing to the market is the SuperWallet. It is a combination of m-banking, m-commerce and m-payments. The biggest innovation of these is our embedded in-app commerce services. These services allow users to, for instance purchase public transport tickets, shop for groceries with home delivery, pay for cinema tickets, order taxis and pizzas or book flights.

Our aim is to transform mobile banking into the first choice financial app for smartphone users by supporting them to perform all their daily activities. Recent SAS studies point out that, above all, users perceive mobile wallets as a way to buy goods online, pay bills and check bank accounts. All of these and much more can be achieved by one SuperWallet app.

Together with an ecosystem of integrated merchants, the SuperWallet is offered as a white label solution for banks in a PaaS (Payments as a Service) model.

This has already been successfully deployed by the biggest Santander Group bank in the CEE region, Bank Zachodni WBK, and is gaining popularity among its users. Because the SuperWallet has very flexible architecture and a wide array of capabilities, we are greatly excited to see how it will be used by banks from outside the CEE region.

I believe that the SuperWallet is at the cusp of an emerging market trend. Solutions that are similar but limited to in-app purchases can be found in ICICI Bank and PrivatBank offers.

 

CO: Tomasz, thanks for your time today!

This has been incredibly informative, and provided us with interesting insights into the payments scene in Poland. Above all, what you have achieved at eLeader is most inspiring and I take this opportunity to wish you the best of success with your plans for the SuperWallet and beyond.


Tomasz Krajewski

Tomasz Krajewski is Head of mCommerce/Superwallet at eLeader. He is responsible for development of SuperWallet, which claims to be the first wallet to combine mobile banking, mobile payments and mobile commerce services, thus adding value to mobile banking. The first SuperWallet was deployed in November 2013 in BZ WBK (the biggest bank of Santander Group in CEE). eLeader is one of the world's top mobile innovators in the smartphone business software market, used by global and national companies in over 70 countries worldwide.

 


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Transforming the way people pay in Poland

With the sun shining over Europe, I am about to leave pretty England for Poland. In the run up to my visit I’ve had a chance to speak to some of the people of Poland to understand how they pay and how this has changed recently. As Santander became the latest to launch their mobile payment service app last month, I learn what consumers think about newly launched services.

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Poland’s Central Bank Narodowy Bank Polski (NBP) express their mission simply: “We protect the value of money”. Indeed as the European Union sank into recession in 2008,  Poland stood out as one country that seemed to be getting it right. Since accession to the EU in 2004, Poland has made considerable progress, though important sectors still need modernisation.

With neighbour Ukraine facing a grave crisis, we recently completed our study of Payment systems in Russia, just ahead of the recent furore over card payments. We have been deeply interested in the progress made by each of the countries in Emerging Europe, and this is part of the work we undertook to understand more about how money is going digital in Poland.

In July last year six of the largest banks in Poland got together to build a mobile payment service. We knew it was important as it involved Alior Bank, Bank Millennium, Bank Zachodni WBK, BRE Bank, ING Bank and PKO Bank Polski, who together reach 70% of the banked customers. They set out to create an open, interoperable bank-based payment service that would support cash withdrawal, mobile money transfer, mobile payments and more. While elsewhere in Europe mobile operators were gearing up for a leading role in payments, Poland stood out as a bank-led market. But would things take off, or would this be just another case of business model paralysis?

imageGuess what, it seems big changes are indeed afoot.  One of the interesting developments people spoke to us about was mobile payment at discount stores. Poland’s largest discount store Biedronka ( Polish for “Lady Bug”) has recently given their customers something pretty important – a non-cash way to pay for their goods, where normally only cash was accepted. What is interesting to me is that this development does appear to be a case in point of “protecting the value of money” as NBP wants to do. It appears that the move away from cash is because a business model has been found that allows the chain to offer an alternative without this inflating cost to the store, and ultimately to customers.

Jeronimo Martins Polska SA owns the largest retail network in Poland, Biedronka. With over 2,400 stores in 900 cities, Biedronka, The Discount Shop of Poland is the biggest, enjoying an estimated 60% of the discount market. People like to shop here in large quantities, for provisions that can last 1-2 weeks as they receive good offers that way. However until recently the store accepted only cash. People were unable to pay using their cards.

imageNow this is set to change. Customers can pay using their mobile phones. Recently this large retail chain has adopted PEO PAY. PeoPay supports non-cash payments in shops, as well as fast money transfers, online payment and cash withdrawal from Bank Pekao SA ATMs.

Customers of Getin Bank and Alior bank use IKAS. IKAS is a free app that works on most phones and does not just rely on smartphones. The service is available across mobile operators.

And now there is BZWBK24, the latest mobile banking app from Bank Zachodni WBK, part of the Santander group. The cryptic name does not refer to a top secret project – it is a mobile wallet given by the bank to their customers for making payments across a wide range of services.

So what do customers make of all this? It seems they do fairly large purchases at these stores, to last them a week, or even two. They trust banks as the providers for payments, and it seems these services could meet an important need, while helping the store maintain their reputation of delivering value for money – no “costly” card payments here.

Read more about these and other services in our soon to be launched “Digital Money in Poland 2014” viewport.

Charmaine Oak will be speaking on “The transformation of money – new perspectives for payment services” at the Poland Payments Summit Warsaw on the 21st of May 2014 at 11 am. If you plan to attend, we look forward to meeting you there. We’ll have highlights of our research of 2014, and you can trawl through the premium content of our portal and see latest copies of our reports.

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RBS – the role for digital banking in establishing the most trusted bank in UK

 

As Ross McEwan (Chief Executive of RBS since October 2013) sets out to cut 1 billion pounds of cost this year, this post sheds light on how digital channels are likely to support this plan. The plan involves removal of duplication and complexity by rationalising functions currently duplicated across divisions.

With the backdrop of these plans, and the context of the UK launch of Paym last week, Charmaine Oak (CO) caught up with Terry Cordeiro (TC), Head of Mobile, RBS, to understand how his vision plays out in terms of mobile banking and payments. He shares with us his expert insights into the UK payments market, and how he hopes to create a seamless consumer interface that hides implementation details and simply solves the consumer needs.

But first there is the imperative to sort out the systems behind recent high-profile outages. RBS reportedly plans to reduce technology platforms by over 50%, slashing the number of core banking systems from 50 to 10 and the number of payment systems from 80 to 10.

imageCO: Terry, what services do RBS/NatWest customers currently enjoy with respect to mobile banking and payments services?

TC: Our mobile app supports a range of everyday banking needs including statement history for the last 90 days across all accounts, payments and transfer services. Our award-winning NatWest and RBS GetCash service has evolved from an emergency cash service to much more casual, every-day use, “money for treats without your wallet”.

SMS services have been around for a while, and can sometimes be taken for granted, yet we find increasing numbers of our customers signing up for these. From their use as alerts and notifications regarding payments, they have evolved into ways in which we can help our customers save money, by reminding them about upcoming thresholds beyond which they may incur penalty charges.

CO: How about contactless payments? Do you plan a follow-up on your TouchPay trial of 2012-2013 that allowed consumers to pay for £20 or less from their current accounts?

TC: The TouchPay trial proved to be a useful learning exercise for us. Customers told us they want more than just going from paying with plastic to paying with mobile. We’re currently in the process of designing that “something extra” experience which will incentivise customers to overcome the inertia of changing their habit of paying with a card. This could include location awareness, loyalty points and incentives that come from the new data points such services can provide.

CO: What about domestic transfers? Why is RBS not in the first tranche of banks supporting Paym?

TC: We’ve supported payment to mobile phone number for the last 12 months, via our Pay your contacts service and it has been incredibly successful. This is a P2P service that runs on our internal systems for on-us payments, and leverages Visa Europe Personal Payment services for payments to anyone holding a valid UK to Visa card and UK mobile number. We expect to first manage some of the rationalisation projects, recently announced by Ross McEwan, before we implement Paym later this year.

CO: Talking about rationalisation, it seems UK customers are now spoilt for choice with respect to mobile payment services. Your own bank services have now been joined by those from the schemes, and now interoperable services such as Paym and Zapp, not to mention operator based services from Weve and individual mobile operators. Don’t you think there is a danger of confusing the consumer into an “analysis paralysis” almost?

TC: That is exactly where we come in. Our goal is to simplify the experience for the consumer – just give them increasingly easier ways to pay. As the alternatives become available they just provide more options for the 2.5 million to 3 million UK consumers who currently use our mobile banking services. It’s great that these new services are helping to increase the awareness of new ways to pay.

CO: Terry, thanks so much for sharing your vision and these insights with us. I wish you the very best in taking your strategy forward, and hope to learn more about it as it evolves further.

 

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