A deep dive into China’s innovations in Mobile Payments, Internet Finance and Banking

It is easy to write-off what is happening in a market far away from you, and to believe that somehow your services are not affected. After working on our latest in-depth study of the People’s Republic of China (PRC), I believe this would be a fallacy. If you are offering or intend to offer digital money services of any kind, you really need to be aware of what’s happening in the most populous country in the world, and now the largest online retail market. Here’s Why ..

chinaimageOn a trip to Beijing a few years ago I found myself on a main road trying to hail a cab in the evening at rush hour. After moving to several different locations and not succeeding I finally walked the long distance to my hotel and put this down to one of the most difficult travel experiences ever. Now, though, you can simply order and pay for a cab from your mobile phone, and this is just one of a set of highly convenient mobile payment services now available.

An immense change has taken place in mainland China over the last 5 years over which we have carried out in-depth studies of this market. This has positioned China as the largest online retail market in the world, and a leader in the use of Digital Money. Services started strongly on the Internet and have now gone mobile and offline, in contrast to a number of African countries that grew on the M-Pesa Kenya model.

A strong focus on innovation

Over 2014, the downturn in traditional sectors such as real estate and slower growth in exports resulted in Q3 2014 economic growth sliding to 7.3%, the lowest growth level since the global financial crisis. This prompted the China State Council to promote innovation especially in the MSME sector, with a new 40 billion yuan ($6.5 billion) venture capital (VC) investment announced in January 20154. To place this figure in context, since first launch of the VC program in 2009, just 9.1 billion yuan was allocated.

Shift Thought sees this as one more indicator of how China is reinventing it’s positioning in the global business value chain, and digital money services are an integral part of this plan. Several large IPOs are expected as the large Chinese banks continue to restructure and go public, with a reported 5 banks doing so since Oct 2013.

Over the past 4 months Shift Thought has completed an immersive study and analysis of the highly complex China financial services market, leading to the publication of our 380 page in-depth report on every aspect of money going digital in China, including details on regulation and sizing of the various different sub-markets. I share a few highlights in this blog, as the first in our “Focus on China Series”.

Historic changes in regulations

As the market has demonstrated a voracious appetite for the new services, regulators have struggled to stay in control and also safeguard the existing licensed players in the market. In rapid succession we’ve seen regulations that brought in new third party providers, online banks and agent banking. New regulations are imminent that will have wide ramifications for start-ups and existing players alike.

First online private banks

Last month we saw the launch of the first private online bank WeBank, and there are a number of other newly licensed banks about to launch. What is interesting is the strategic potential this creates for the category Shift Thought terms as the ’Internet Tech Giants (ITG)’ of China: including groups such as Alibaba, Tencent, Baidu and others. We see huge M&A activity and rebranding activities that are readying these groups for the next level of strategic expansion over 2015.

Internet Finance

With the rapid increase in the use of the Internet, especially through smart devices, the most important trend we saw in 2014 was the meteoric rise of Internet Finance including a range of online financial services such as online payment, crowd funding, P2P Lending and others. This prompted the banks to jointly issue limits on the amount that could be transferred to investment funds such as Alibaba’s Yuebao, with P2P regulations expected shortly.

Third party providers deepen services

In 2010 the PBC released regulations to allow third party non-bank providers of payment services. Since then over 264 licenses or extensions were granted to third party payment institutions, of which over 97 supported online payment and over 30 (including the 3 mobile network operators) have permission for mobile payment services. Favourable tax treatment for online transactions has further ignited this market.

Online Payment market slows down after meteoric rise

Over the last 4 years along with massive growth, there has been stiff competition in the online payments market, with some of the providers already forced to close down. However the achievements have been phenomenal, leading to the creation of the largest online retail market in the world, and digital wallets transforming into mobile wallets.

The rise of O2O services

Both online payment and mobile payment grew strongly over 2014, with mobile payment substituting offline payment and new O2O services emerging that connect online and offline services in a manner that has been uniquely innovated in China. These O2O services allow consumers to find and use products online and offline in new ways that support their lifestyles and completely shake up the existing retail market, with strategic partnerships being formed to reposition and link retailers and online providers.

Financial inclusion

A key concern of senior Chinese Government, working with development groups this year has been for the 400 million unbanked/under-banked in China, and the 100 million under the poverty line residing largely in rural areas. Other underserved segments include migrant workers, MSMEs and unemployed workers, with recent lay-offs from state-owned enterprises (SEOs). We explore each of these segments at length, to look at the services now available to them and how these are changing – including domestic remittances, inward remittances, lending and branchless banking services.

Focus on rural areas

Some of the most interesting innovations we saw were those that are now going into rural areas, with the rapid spread of the mobile internet. In a manner that creates rich scenarios for The Digital Money Game as described in my recent book, providers are targeting multiple services over multiple channels in a bid to cement their market shares and create and grow new markets through their innovations. Our report details these innovations, such as a unique green telephone that has been adapted to support Point-of-Sale and banking transactions and was distributed free to rural households.

So why is this important to you?

This is not just important from the perspective of making an entry into the largest digital money market in the world – a feat not for the faint-hearted, I’m afraid.

As we saw Chinese goods flooding Western markets in the past, the new digital channels are enabled a new Chapter in Chinese export capabilities. We see a number of services already extending across South-East Asia. With the benefit of massive IPOs (such as Alibaba’s  $25 billion, the largest IPO of it’s kind ever), providers are readying themselves to travel further afield, and you may need to compete against these new services in the US and European markets and not just in Asia Pacific.

Digital Money in China 2015

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We are proud to announce the release of our globally unique report “Digital Money in China 2015”. This is essential reading for anyone who offers, or plans to offer any one the 32 key services we cover under Digital Money: including Online Payments, Mobile Payments, P2P Lending, Digital Banking, Remittances and more. Contact us today to look inside this report and learn more. Our team is ready to support you in your plans for China and elsewhere in the world. Drop us a line at contact@shiftthought.com to arrange for a call to discuss your unique requirements.

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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How payments changed in UK in 2014, and the perfect storm brewing for 2015

 

We in the United Kingdom already use so little cash that we could easily have gone the way of the Nordics, where consumers have such good payment systems that mobile payments took a back seat. Yet this year the UK pulled ahead in The Digital Money Game. At the player category level too we saw major upsets to the apple-carts of more than one category of providers, and a perfect storm is now in the brewing for others.

While the acceleration happened on several levels, in this blog I focus on how mobile payments took off this year and consumers now enjoy a raft of payment services on the go. It is fortunate that the Payments Council, Vocalink and Zapp had time to get a head start, as the likes of Apple Pay and Alipay prepare to descend on the UK in early 2015.

What do British consumers really need?

ukIn the UK with a population of 64 million, we have over 84 million mobile connections and more than 72% of these are smartphones. An increasing number of ‘phablets’ are rapidly coming into use.  We have 90.5% banked and a high penetration of internet services of over 84%.

We take internet banking for granted, and have enjoyed bank transfers in minutes for years now, thanks to Faster Payments. An estimated 5.7 million mobile banking transactions take place daily in the UK. We expect to pay everywhere with cards, with over 55 million credit cards and 95 million debit cards issued over the last year.

So do we really need mobile payments? We may feel overcharged by our banks, and while we may resent surcharges on card payments at some merchants in general domestically the use of cash is more of a lifestyle choice than a necessity. I can’t recall when I last used a cheque book. Yet survey results this month claim that enthusiasm for mobile payments has skyrocketed over the last 15 months, with 44% of those polled prepared to even switch accounts to access mobile payments.

London transport goes cashless

Absence of a real need may be one reason why the promise of NFC remained unfulfilled since 2005, but neither consumers nor merchants quite invited it in- until recently. I have been closely involved in projects involving mobile payments and NFC since the early days when Transport for London (TfL) was considered to be the major prize that everyone worked hard to win. Yet it took a decade before mobile payment services on the TfL network launched and even today while it is possible to pay using mobile phones, people are just beginning to use their contactless cards. While in theory mobile payments are available on EE and Vodafone, in practice some elements of the consumer experience remain to be ironed out.

Contactless payments – here at last!

imageIt was quite a novelty to see the new Barclaycard contactless payment gloves trialled for Christmas shopping at some stores this season. The Barclaycard gloves have an embedded contactless chip that is linked to a credit or debit card to pay for transactions of up to £20. Contactless payments are also supported by the Barclaycard PayTag on London buses, McDonalds, Pret, Starbucks and many other chain stores.

We’ve had contactless payments infrastructure building up for years now, accelerated by the 2012 Olympics, attracting major investments from Visa Europe and others. Today across the UK, an estimated 300,000 terminals accept contactless cards. There are over 48.3m contactless cards issued, with a quarter of all plastic new cards being contactless-enabled. Over 2014 UK consumers are expected to spend £2 billion through contactless payments,

What does it mean for the consumer in everyday life?

As a British consumer, paying for things has now become easier. Apart from the danger of card clash, for which we have been most soundly educated, we have to be savvy to protect ourselves from a constant stream of marketing offers. From the consumer perspective, the winners are those who use the new features to shop smarter, save money and stick to their budget.

We now need even less cash, and at stores there are many more self-service checkout points that there were in 2012. You won’t have to tote around a load of loyalty cards either – Tesco has already begun to trial their PayQwiq service at 32 stores. Triallists use the online grocery service and add card details for use through the app. In store they buy up to £400 a day, sign into the app with a four-digit PIN and pick the card they want to use. A QR Code appears on their phone which the till scans to take payment and credit them with Clubcard points.

Life has become easier in many ways. Just as you can easily hail a cab and pay for it through the Uber app, something that London black cabs have not been too pleased about, expect more “Uber-like” innovations wherever there are pain points to be found.

New ways to pay: Pingit, Pay-em or Zapp-em?

paymThis April the Payments Council launched an important service called Paym. This allows convenient transfer of money between participating UK bank account holders. Earlier, Barclays supported Pingit, since 2012 as a great new way to send money in minutes using a phone, but Paym is integrated into customers’ existing mobile banking or payment apps as an additional way to pay, making it possible to send and receive payments using just a mobile number.

Customers register their phone number and the account they want payments made into with their bank or building society and people can then pay directly into the account using just a mobile number – no sort codes or account numbers are needed.

How Paym works

To send a payment, you select the mobile number to pay from your list of contacts, along with an amount and a reference. Behind the scenes the sender’s bank accesses the Paym database to confirm that the recipient is registered with the service and to retrieve their bank or building society account details.

The app helps to confirm details and receive immediate confirmation. The real magic behind this is managed by the Faster Payments Service or by the LINK network, whether or not the recipient phone is on or within coverage. In most cases the payment reaches the recipient account almost immediately and they see it in recent transactions on their account.

How Zapp proposes to work

zappZapp, announced early in 2014 now claims partnerships with major merchants including Asda, Sainsbury, House of Frasers and more. People will be able to pay for goods and services using Zapp, authorising the transaction from their mobile banking app. The payment will be made directly from their bank account, with the use of tokens to offer better security.

What is most interesting really is the effect this will have in enabling payments to small businesses. Shaving off pennies on each transaction can bring welcome relief to a number of traders and servicemen who can expect to take payments using their mobile phones.

A perfect storm brewing

If you are a provider, this is no time to be complacent. Consumers are set to “select and forget” their means of payment and many will make their choice in 2015. Merchants too are selecting their partners just now.

With Paym, banks continue to compete through P2P services that bear their own brand and can be differentiated in some ways. Zapp, on the cards for (delayed) launch in early 2015 will further put the banks in the driving seat as far as payments go.

Weve, a joint initiative of mobile operators in the UK was to roll out Pouch but has already announced it would close the wallet this year. With the HCE initiative announced by the card schemes in February this year, mobile operators no longer dictate terms with regard to NFC services, and in the UK also have the larger consideration of M&A on their minds, with the proposed acquisition of EE by BT on the cards.

applepayWith Apple Pay, already in use in the US and preparing to enter the UK market, I think we may expect a mega-battle on the cards for 2015. Google Wallet, Amazon and others are already highly active in the market.

Besides, we have not even begun to discuss the wider digital money picture. This includes a host of innovation from newly funded players including not just Fintech startups but well-funded Alipay, richer by $25 billion with the largest IPO having come through this year, and WorldRemit and Transferwise, expanding rapidly in remittances.

UK then is the place to watch. Shift Thought continues to do in-depth research on this market. Our detailed interviews with leading UK providers will shortly be published. Do drop me a line at contact@shiftthought.com if you have further questions.

Photo Credits: Promotional material from Barclaycard, Apple Pay, Zapp and Paym

Mobile Money in Zimbabwe– freely transfer money, in minutes not weeks!

 

As mobile penetration reached 106% , and effectively 60% of people in Zimbabwe now have access to mobile services, mobile operators have gone a step further. They now offer people safe and convenient ways to transfer money, pay for electricity and basic services and last but not least, add much needed top-up to their own mobile phones, or those of friends and family. Having helped people communicate, they’re now helping them transact and receive money from abroad, helping the country recover from the hyper inflation of 2008 and the loss of their currency.

 

ZimbabweVictoriaFallsImage

 

When the Zimbabwe dollar failed to recover in spite of multiple rebirths: ZWD in 1980, ZWN in 2006, ZWR in 2008, and it’s fourth incarnation of ZWL in 2009, foreign currency finally got legalised in January 2009 and the Zimbabwean dollar was abandoned by April 2009. It is difficult to imagine how a country of 14 million people quietly went about with “business as usual”, as less than 2 million had access to any kind of formal banking services.

In a country where every individual is an entrepreneur there was a gap for how they pay and get paid locally, regionally and internationally. Now new services are starting to fill the needs, but success for all the entrants can by no means be taken for granted.

 

Mobile money brings new hope

Now though, a transformation is under way as over 5 million people have found new ways to carry out daily transactions through a 10,000+ agent and merchant network of small stores that function as points for people to open accounts, deposit and withdraw cash and pay bills.

 

ecocashThe largest operator in the country, Econet Wireless, now has 3.5 million of their subscriber base using their EcoCash Mobile Money service, since it launched in September 2011. At the time, the other two operators had already launched similar services that failed to capture the market, so it was not clear whether they would succeed. Today though, they already handle over $4.5 billion worth of transactions, and a vibrant ecosystem of merchants and services has built up in a remarkably short time.

 

telecashThe second largest operator, Telecel (Orascom) had entered the market in December 2011 without much success, but just as Telecel closed down their service Skwama, Econet made a break through with their Ecocash service. So while it may have seemed like Telecel had an option, the reality is that mobile money is now a part of the core package subscribers expect in Zimbabwe. Early this year Telecel launched Telecash, and four months ago they launched a mobile money Android app for Telecash. This time with a promise of free transfers, free cash in and cash out have had the desired effect, with 600,000 users taking up the service and reported transaction levels of $17 million.

 

imageThe third operator Netone is also seeing better traction with their mobile money service One Wallet now supported through a 1,100 strong network, though active subscribers are still nearer to 200,000 than to their 750,000 target.

 

 

nettcashMobile operators are not the only active players. In May 2014 a service call NettCash launched with a unique contactless technology called Near Sound Data Transfer (NSDT), an additional API and promise of online payment. As of today it claims to have over 200,000 customers supported by 1052+ agents and merchants. Our Shift Thought knowledge base registers over 18 services from a variety of players, as the market grows to meet the needs of the people.

 

The banks awaken

Now that the people have voted with their feet and regularly visit conveniently located agents, banks are anxious to get a slice of the newly established market. Econet owned Steward Bank supports Telecash, but a few days back launched their own new AllSave Bank Account that is supported at some of the Telecash agents. This low cost account is expected to help to deepen the customer relationship, with loans and other services. As seen in Pakistan, I expect this could result in the other mobile operators looking around for a suitable bank to acquire, to match the business models that Econet can now aspire to.

 

Agent networks: To share or not to share?

The new battleground is the agent network. As the pressure mounts to enrol customers, there has been a reluctance to share agents. This recently resulted in a directive from the Reserve Bank of Zimbabwe to discourage exclusivity of agents. However an interoperable agent network may raise as many questions as it solves and I see a need for new processes and compliance structures that are likely to gain focus in 2015.

 

Remittances made easy

Now that domestic money transfer has been conquered, the providers are turning their attention to the $1.9 billion formal remittances (equal amount of informal?) that are sent into the country. There has been concern as this declined markedly by 15% from $2.1 billion in 2012 to $1.8 billion in 2013. The main send countries include South Africa, UK, Canada, Australia and the United States.

If these transfers can be used to fund mobile money wallets and use digital money for daily transactions, that would help the fledgling services to thrive and grow. UK-based WorldRemit  offers an internet-based money transfer service from UK, from where an estimated 600,000 diaspora send money home to Zimbabwe. Telecel has partnered with UK based Mukuru.com for remittances from South Africa, from where an estimated 2 million migrants send money home. And certainly, Econet is well placed to address the opportunity for regional remittances, thanks to their presence across neighbouring countries in Africa.

 

Online payments – at last!

The vibrant mobile money market is injecting life into other parts of the economy.  In June 2014 card based transactions increased in value by a whopping 21% over the previous month, to reach $361 million. MasterCard recently announced a partnership with EcoNet to offer debit cards for EcoCash Accounts. Mobile and Internet transactions together have risen to $388 million, with electronic payments bringing in a new era of accountability and hope for the country.

 

The future of mobile money in Zimbabwe – will it mature into digital money in 2015?

What happens next depends on whether the Zimbabwe ecosystem is able to make that difficult transition to non-cash payments, merchant payments and retail payments. As the agent network grows, the small stores must fully embrace the services and find their businesses succeeding due to this. The country must go a long way to strengthen the building blocks and weaken the real enemy, cash and this means that all will need to pull in the same direction.

But underlying all this progress is one building block that must not be forgotten. Zimswitch provides the rails that allow for instant funds transfer and also supports mobile and online payment services. These underlying enablers need to be strengthened and connected into the vast developing digital economy – regional and global.

Though this is hard at first, Shift Thought research in markets around the world show that if everyone in the ecosystem starts to believe from their hearts that the success of one money service does not mean the failure of another, more people start to embrace the services and the whole market grows. I believe we have much to look forward to with the march of digital money in Zimbabwe, not just for Zimbabweans or even Africans, but for the future of payments around the world.

 


Charmaine Oak

Practice Lead, Digital Money

Email   : contact@shiftthought.com

 

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

 


SMART unlocks mobile operator revenues in the Philippines with multiple World firsts

 

For the Philippines, remittances is a game-changer, showing healthy growth over the last 5 years and a highly competitive set of services from players across a wide range of industries. Philippines became the first country to introduce mobile money in 2000 and is a pioneering example for many different digital money services today. It is therefore highly instructive to hear from the experiences of Smart (PLDT), the largest mobile network operator in Philippines, and one of the very first to launch Smart Money as a mobile operator-based solution.

 

UN ban ki-moon2Today I am delighted to share with you some brilliant examples that use the concepts of digital money to unlock revenue streams.

I have with me Lito Villanueva, Vice President and Head, e-Money Innovation, Digital Ecosystem Build & Global Engagements at Smart Communications, Inc. Lito shares how 14 years down the line, SMART is launching innovative services to create new revenue streams.

 

 

Mobile Operators in Financial Services

Financial services were once seen as a certain business model for new revenue streams for mobile operators. However this has proved to be harder than expected. This year Host Card Emulation (HCE) has sharply focussed on the fact that mobile operators are no longer the sole gate keepers to Mobile Payment NFC revenues. The GSMA has this year promoted Interoperability initiatives that hold a promise of better mobile money adoption, but this is not an easy solution as mobile operators do need to make the business model work through better churn reduction.

 

The Filipino Context

Although 12th in terms of population, The Republic of the Philippines is the third largest receiver of remittances in the world, with $22.7b for 2013, forecasted to rise to $28 million in 2014. Remittances touched a new monthly high of $2.286 b in Nov 2013, 7.5% higher than previous year due to Typhoon Haiyan (Yolanda), giving a boost to the new aid-oriented services.

 

Makati_skyline_j_0_n philippines

 

SMART Money evolves into a “surround” experience

 

At Shift Thought we have for some years described how mobile phones are the magic sauce, but not the sole ingredient in a mobile operator’s toolkit for succeeding in financial services. It is important to create rich customer experiences across multiple channels and services, that I have termed a “surround” experience.

I think one of the markets in which we see good examples of a diverse set of services is in the Philippines. On a visit to the country to trial the service I found it delightfully simple to use my SMART Money card to pay for provisions at a department store as well as transfer money to other users.

I was interested to see the new Smart Postpaid app that was launched a few days ago as a one-stop portal to manage postpaid accounts. For use on Android and iOS devices, this makes it easy to access a range of features through one number *121#. It is products like this that can create consumer experiences that put the customer in charge.

Now this month SMART launches something revolutionary: A unique solution branded as  LockByMobile. I was delighted to hear all about it from Lito.

My interview with Mr. Lito Villanueva follows. Enjoy!

 

It is great to have you here today Lito. Could we begin with a bit of background about yourself and the unique expertise you bring to the industry?

I currently lead initiatives at SMART to unlock the potential of e-money, extending beyond mobile money. Naturally we seek to leverage our unique capabilities with respect to mobile services.

Our mission is simple – to keep pioneering world-first solutions and unlock digital finance services to meet the unique needs of Filipinos including those in high growth and emerging markets.

Take for instance our world first anti-fraud and security solution. This month we are rolling out this solution to allow our customers in the Philippines to lock and unlock ANY ATM or credit card using its patented and proprietary LockByMobile.

We all know how important it is to control card security especially as online card-not-present use cases become more prevalent. Using our service people can finely tune what their card is allowed to do and lock down services themselves to prevent fraud.

 

You have been at SMART in the early days, back in 2007 – how has your strategy regarding financial services changed since then?

Well, for one thing, we did not have smartphones back then. Today over 10 million of our 70 million user base access our services via smartphones.

The Philippines is very much an Android market, and as the cost of handsets gets lowered we’re able to enhance the user experience of our services.

 

Yes, I’ve just been analysing implications of the launch of Android One, shortly planned for the Philippines. But what of the recent Apple Pay announcement?

Apple Pay is expected Q1 2015, but our NFC service will be launched ahead of that.

In November, we plan the first wave of a contactless payments rollout to our 2.5 million post-paid subscriber base. This is in partnership with Visa and Citi and will let people pay at Starbucks, McDonalds and other retail stores for face-to-face or via Paywave POS including our massive online merchant base such as Zalora, Easy Taxi, and a lot more in partnership with Rocket Internet for online commerce.

Remember that our parent company PLDT invested Euro333 Million into Rocket Internet representing approximately 10% equity share.

 

I understand you are also innovating with mobile loans services?

Yes, we offer salary loans via mobile to over 120,000 employees at 260 government agencies in Phase I.

This will extend in Phase II to include up to 20 million employees of private companies. They get access to what we believe is one of the lowest interest rates, at just 0.83%. This is touted to be the world’s first mobile-based paperless and fully electronic credit, savings and insurance in one.

 

What about money transfer and international remittance services?

At present domestic money transfer is big – it represents 70% of the volume, with international remittances accounting for 30%.

We’ve not so far made a big dent in this huge opportunity. One reason for this is the Philippines is a key market on which banks and money transfer operators in the key send corridors remain sharply focussed.

 

What are the differences that SMART Money has brought about in the Philippines?

Over 8 million of our 70 million subscribers use our services today. SMART is cited for being proactive and dynamically focussed on financial inclusion initiatives.

 

help.PH gsma2

 

Three innovations launched by wireless services leader Smart Communications, Inc. (Smart) and its subsidiary Smart e-Money, Inc. (SMI) were recently ranked among the world’s best by Telecoms.com.

Smart Money Padala was nominated this year as Best Mobile Payment Solution. It serves the domestic and international money remittance requirements of Filipinos. With this service, Pinoys can transfer funds to tens of millions of Smart subscribers at the speed of a text message.

Smart Money Padala boasts of a large remittance network, with 95,000 international and 27,000 local remittance partners.

 

What are the biggest challenges faced?

Since our last conversation, we continue to be very focussed on customer education, and increasing the number of value added services.

Customer education is very important in order to lift the percentage of active subscribers from the current level of around 20%. It is a steep learning curve for customers to change the way they pay and we continue to create campaigns to address this.

 

What is your vision for 2015?

Our vision is to harness digital commerce to support every customer’s digital lifestyle. The time is right – the time is now. Things have come together to let us move from mobile phone payments to a much broader spectrum and support across an entire set of use cases.

No less than our chairman Mr Manuel V. Pangilinan is a firm believer of democratizing data by making free and available across our prepaid base of over 66 million. This is a strategy to shift our customers to the digital marketplace!

 

Thanks very much for sharing your thoughts with us Lito. We wish you the very best for 2015 and beyond!

 

imageLito Villanueva is Vice President & Head for Payments Innovation, Digital Ecosystem & Global Engagements at Smart Communications, Inc.

Lito has unique expertise that crosses multiple segments and services from his work at SMART, IFC-World Bank and Visa. He is one of the few mobile money global practitioners to have a mix of experience in both banking and MNO sectors with a great deal of exposure in multi-market interventions and global best practices with established relationships with key stakeholders including international funding agencies.

 


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Shift Thought has recently published “Digital Money in Philippines 2014”, a detailed study on the complex Philippines market. We have also created a unique research document focussing in depth on the remittances opportunity with respect to the Philippines.

Contact us today at contact@shiftthought.com  to get access to this and other recent research on the Philippines and each of the emerging markets around the world. Each reports uses our proprietary Viewport format to create a highly interactive experience connected into our unique portal.

 

 

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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.

 


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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Insights on how to succeed in Mobile Money from Gemalto, a world leader in digital security

 

Today I have great pleasure in speaking with Naomi Lurie, Director of Marketing for Mobile Financial Services (MFS) at Gemalto. From this key position at the world’s leader in digital security, Naomi is very well placed to share with us about GMPP (Gemalto’s mobile payments platform) and the work Gemalto is doing around the world in the extremely fast moving payments arena, both in developed and developing countries. Naomi shares with us some of the key initiatives in which Gemalto has been involved, and explains the importance of perseverance in achieving mobile money adoption goals.

 

Naomi could you kindly set the context for us, with a bit background on Gemalto and your leadership position in mobile financial services?

Gemalto OfficeGemalto is a leader in digital security, and a technology enabler for mobile network operators, banks, governments, enterprises and retailers. We work behind the scenes to ensure that each time their customers, employees and citizens want to transact, connect or identify themselves, they can do it safely and easily. You may not realise it, but if you put your hand in your pocket and take out your wallet or mobile phone, chances are it has a Gemalto security component – in your SIM card, your bank card, your driver’s license or your government ID.

One of our important growth areas is mobile payment services, and I look after Marketing for these solutions. Specifically I’m responsible for our Mobile Money and Cloud Based Payments offers. In our Mobile Financial Services marketing team we also offer Trusted Services solutions, including TSM and a Trusted Services Hub business service, and we are NFC experts. It’s exciting work in exciting times, especially as we are a global player with 44 sites and customers in 190 countries.

And with the coming of tokenisation there is yet more work for you?

Yes, certainly. As the leading TSM provider, we’ve been provisioning credit cards onto the mobile device for the largest mobile payments initiatives in the world. Emerging standards for cloud-based payments and tokenization require secure provisioning services for cards, tokens and keys. So, our assets and expertise in provisioning, mobile security, and authentication all come into play.

We’ve recently announced our Trusted Services Hub, a turnkey business service that enables issuers, enterprises, transport operators and digital service providers to easily deploy their value-added and mobile payment services across smartphones and mobile networks around the world. So with one connection to the Hub they gain access to over 1.5 billion mobile users worldwide already covered by our solutions.

Please give us some background on the Gemalto Mobile Payment Platform (GMPP)

GMPP is our comprehensive, field-proven, secure, flexible platform for issuers, mobile operators, retailers and banks that wish to launch mobile payment services. It supports emerging market use cases including stored value accounts, agent networks, P2P transfers, bill payment, airtime top-up, merchant payments, government payments and more. GMPP also powers developed and semi-developed market use cases relating to payments, usually from smartphone devices, such as in-store and online payments, loyalty and couponing.

We work across many different channels: USSD, STK, mobile apps, web and more, and we offer strong security across all these. We authenticate customers and manage risks relating to repudiation, fraud and more. We integrate into mobile operator, issuer and retailer environments and manage diverse requirements based on the nature of the ecosystem, which ranges from simple to very complex.

How has GMPP been used around the world?

Our platform is deployed around the globe. In Europe we work with Telefonica Spain and Telecom Italia.

India Post

India PostThe Gemalto Mobile Payment Platform is running in India with India Post for domestic remittance, since November 2012. India Post’s domestic money transfer service was a traditional paper-based service that took around 5 days to arrive at the destination. India Post wanted to modernise the service, to compete with the new mobile money systems coming from new entrants such as mobile operators. Since India Post has close to 90% of their branches in rural areas, they decided to modernize their money transfer service using mobile. It’s an interesting over-the-counter service. The agents at the post office are equipped with a mobile device that runs an app that collects information about the sender and recipient, amount and pickup location. Immediately both sender and receiver get SMS notifications about the transfer and how to pick it up. And the transfer happens in minutes!

 

Transfer in Mexico

Transfer1In Mexico, the GMPP is at the heart of the Transfer Service, which is brought to market by Banamex (Citi’s Mexican subsidiary), Telcel (America Movil’s Mexican mobile phone subsidiary) and Banco Inbursa. Telcel provides the channels: SMS, USSD and CRM. The banks hold the accounts and create the use cases, as well as manage network integration with Point of Sale and ATM networks. In Transfer users can get a companion card as well, to access the balance in the prepaid stored value account for POS payments. GMPP hosts all transactions and the customer wallet. The service went live in April 2012.

GMPP is also installed with NetOne in Zimbabwe, for their OneWallet mobile money service. This is your classic service, with P2P, cash in, cash out, airtime top-up and bill payment.

Gemalto provides the SIM Toolkit (STK) and Secure Access Gateway for MTN Group in Africa, Vodafone Qatar and elsewhere.

GMPP obviously solves some key needs for the unbanked. Could you please tell us what makes your implementation uniquely compelling?

I think what’s unique is the way we can address a very broad spectrum of use cases in a highly secure manner.

If we rewind to 5 years ago we thought we knew the recipe for mobile money. Just provide the standard set of expected services, follow the formula and deploy. However services have gotten more diverse. There are specific needs and requirements when we deploy in semi-developed markets. And emerging markets also have diverse customers – some with smartphones and others with very basic phones. Take Mexico for instance, the aspiration is to bank the unbanked and offer a new kind of account to the masses, but they must also appeal to urban users. There is a need for a combination of scenarios. We therefore feel well placed as we can offer the limitless combinations, while maintaining security across all the channels. That’s the strength Gemalto has.

Also we build our platforms to scale. We see mobile money as mission-critical services and can affordably scale up and ramp up as the usage grows.

What do you see as some of the challenges faced in bringing services to market?

There is no magic. You can’t just deploy technology and expect the service to be a success. It has to have all the right elements – in go-to-market, organization, and budget. You really must do your homework and take care of buyer personas, marketing strategy and back office support. You need a lot of CXO attention and need to continuously attract investment and management attention.

I think it is really important to be able to correct yourself. Of the over two hundred mobile money deployments, only a few have reached scale. If you give up and just let the offer die down, that is a waste. As in case of any product launch, it’s important to be able to correct yourself.

Another challenge can be regulation, meaning what type of services the regulator allows and what kind of limiting factors will the regulator impose. Often you need a strong lobby on both aspects.

When you look at mobile driven and bank driven initiatives which of these have a better chance of succeeding?

It seems that mobile operators (MNOs) have been more successful, but this is quite dependant on the region. MNOs seem to have the lion’s share of deployments quantitatively, but we do observe a trend for more issuer-led services.

MNOs seem to have an advantage on the marketing side; they know how to market to the unbanked masses, while banks are more comfortable marketing to their traditional clients. To launch a service for the unbanked requires a real transformation for the banks. However, in semi-developed and developed markets where most of the population is banked, the banks are at an advantage.

What are the major changes you’ve seen in the last year?

One change in the emerging market space is the launch of more consortium-led initiatives, and also Central Bank led initiatives. There are some new models coming up along these lines, with an attempt to put the entire set of domestic transactions on a single platform. Within that setup, individual service providers can offer branded services and compete with each other. These types of initiatives aim to address the question of interoperability from day one.

We also observe a much higher interest in enabling payments – in-store and POS payments in addition to mobile P2P between buyer and seller.

What major goals do you look forward to in terms of 2015?

Our goal is to continue to be the trusted partner of our clients and to help them operate successful mobile payment services. We aim to help our clients bring their mobile business strategy to life, while providing all parties confidence in the robustness and security of the service. It promises to be quite an exciting year with the advent of emerging tokenization standards, the new Gemalto Trusted Services Hub, the launch of major new initiatives, and the evolution of existing services.

Naomi thanks for sharing the very interesting work you do around the world and I wish you and Gemalto the very best of success for the future!

 

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Naomi has a proven record of driving product and market excellence for products in the mobile, financial, retail and enterprise sectors.

Naomi joined Gemalto in 2010, where she drives marketing and strategy for the company’s mobile payment and mobile wallet solutions. She is an expert on the mobile money use cases emerging across the globe and is involved in some of the most ambitious and large-scale mCommerce services in both developed and developing markets.

Previously, Naomi was a product manager at Verint, which specializes in enterprise and security intelligence. Naomi was responsible for the global introduction of analytic software solutions for workforce-enterprise optimization, as well as the execution of product launch and rollout plans to sales, support and professional services.

E-Commerce in Thailand – Building a unique Omni-Channel Retail Experience

 

Today I am delighted to be speaking to Parin Songpracha (PS), who has been an important change agent in the Thailand payments scene. For the last 7 years, as Head of E-Commerce at 7-Eleven, Parin led important transformational changes to enable e-commerce and an omni-channel retail experience. Parin remains an advisor at 7-Eleven for E-Commerce, as this month he undertakes a new challenge as Director of eCommerce at DHL. He paints a picture of how people pay in Thailand, how this is changing and the key drivers for this change.

 

Parin, thank you for your time today. I am excited to hear your story. As a pioneer in the e-commerce scene in Thailand, could you please give us some background about your role and your achievements?

 

My journey in e-Commerce started in 2008 when I founded the e-Commerce business for 7-Eleven, starting from scratch. At the time I looked at the unique needs that people faced and designed solutions that used the ubiquitous 7-Eleven stores.

Today I continue to hold key roles in promoting e-Commerce in Thailand at the Thailand e-Commerce Association (THECA) since 2008 and the Thai Webmaster Association (TWA) since 2010. At THECA I am in charge of cross-border collaboration between Thailand and E-Commerce Associations in other ASEAN countries. We hope to launch an ASEAN Association next year.

 

How do people pay in Thailand? How have you seen this changing, and what are the needs addressed?

 

shopat7

 

ShopAt7.com is the 7-Eleven e-Commerce portal. This barcode payment on mobile is currently being implemented, with an expected time to market of the next 2 months. This is part of a journey that we began in 2009, and it has helped to transform the way people pay in Thailand.

The main needs regarding online payment stem from the fact that there is a low card penetration in Thailand. So firstly, as there is just about 12% card penetration this makes it difficult for shoppers. Secondly customers face a problem with transport and infrastructure that makes it hard to collect goods from far off places. Shipping to home addresses is very costly for merchants as well.

At 7-Eleven we were able to introduce a major innovation to let people pay online. Having selected their items, they now receive an SMS that they can use in-store to make payments. This unique SMS-based payment service was introduced by us as far back as 2009. At the time I visited other countries to look at Best Practice. Other 7-Eleven stores, including those in Japan had not yet started supporting the features we designed into our Thailand stores.

At the time we had roughly 3,500 stores nationwide (today we have around 8000). We offered free in-store pick up delivery and this made us very successful in e-commerce. This year we’ve achieved break-even and we expect profits next year.

From an external point of view, since 2011 the daily deals business such as Groupon further changed payments. Rocket Internet’s Lazada group has invested heavily in transforming and expanding e-commerce in Thailand.

 

How did you make changes to allow people to pay in 7-Eleven stores?

 

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I looked at how people pay card statements by coming into store with paper bills. The problem is they may forget to bring the bill and then payment gets delayed. How could we improve bill payments in store? I had the idea of using the mobile phone. But the code was too long at 32 digits. We first had to reduce this to 16 digits. We then made changes to ensure that both the store manager and the customers became fully comfortable with the new method of payment.

The other main improvement was in pickup. Once people order and pay in-store, goods are available for collection within 1-2 days in the Bangkok area, 4-5 days in the more remote areas, and up to 9 days for very remote islands.

 

That is a very inspiring story of innovation Parin! So what are now some of the main opportunities in the market?

I think the challenge is in bringing in innovations in stages. At first people require some hand-holding. After a few years they want the ability to do it themselves. This is how we have built and designed services, and I continue to think of ways to improve on how we do e-commerce here.

 

With the recent announcement of Apple Pay, how has E-Money and contactless payments progressed in Thailand and what have been some of the challenges?

True Money did support contactless payments through a mobile phone trial but so far proximity mobile payments have not really taken off. However, the launch of Apple Pay has made people very interested in NFC again. Although Apple does not have a large share of the market, they have the higher income big-spenders.

The low card penetration remains a problem. While direct bank payments are a solution, refunds for that method of payment take time. Imagine when a person buys an item such as an iPhone from a store and for some reason faces an issue and must ask for a refund. This could take as long as 49 days. Meanwhile he does not have the amount available to go to another store and make the purchase.

 

What are some of the main changes you expect to introduce in your role at DHL over 2015?

When we started I mentioned the logistics problem in reaching goods to people. DHL is very well positioned to support the growing number of businesses that wish to go online. We can support them for multiple solutions and I am very excited to be part of this major transformation over the next years.

 

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Thanks very much for this insightful interview Parin. I take this opportunity to congratulate you on your achievements and wish you the very best for your new role! I greatly look forward to trying out both the mobile payment and e-commerce services when I am next in beautiful Thailand!

 


parinParin Songpracha is currently Director eCommerce at DHL Thailand. Parin is an e-Commerce and Omni-channel expert from the largest retailer in Thailand. He plays a leading role in the development of E-Commerce in Thailand and in the larger ASEAN region.

Parin has a key role in promoting e-Commerce in Thailand at the Thailand e-Commerce Association (THECA) since 2008 and the Thai Webmaster Association (TWA) since 2010.

 

 


Have you got an interesting story to share about the difference you and your company are making to the way people pay around the world? If so do drop us a line at contact@shiftthought.com .

 

Charmaine Oak is Practice Lead, Digital Money  at Shift Thought

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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How Apple play affects The Digital Money Game

Now that Apple Pay is here, how does it affect the projects in your pipeline? Which should you drop, where should you invest more and who should you look to partner next? We are at the cusp of the creation of a new ecosystem. But will Apple Pay fare better than Google Wallet did when it first launched in May 2011? There is a feeling of Déjà vu and Let’s Wait and See. For Apple as well, Apple Watch was No. 1 – payments was No. 2.

So is this going to ignite NFC payments? How will things change? The short answer is I don’t think anyone knows yet. We’ll what are the mobile operators thinking now – we all know Verizon was not a cheer leader for the Google Wallet. What is PayPal thinking? What if Walmart does not come around?

Why is this important?

applepay

The major factor for any new payment service is adoption. So far adoption of NFC has been a 10-year war between the banks and the mobile operators and has struggled to gain traction.

Then in 2011 we had the entry of the Google wallet, and each of the card schemes with their own wallets. Still consumers and merchants failed to adopt. While contactless cards have gradually crept into use, paying by phone continues to prove elusive, for a variety of reasons, with one of the main ones claimed to be lack of handsets, customer security concerns and business model.

Apple has 800 million customers as “card on file”. Additionally the API will be available to developers. Merchant support has already been announced: Integration with Uber, a food app from Panera, Major League Baseball's app to order tickets from your phone, and Open Table to pay your bill from your iPhone 6 or iPhone 6 Plus. Apple API to be offered in iOS 8 to allow app developers to integrate Apple Pay into their applications.

Apple has a following, so is not dependant on mobile operators to push their phones, however operator subsidies that could be as high as $500 help make them affordable. The rapid adoption of smartphones across the world has changed the balance of power. Certainly in the US, Apple is Top Dog as a smartphone manufacturer, with 42.1% OEM market share as of June 2014 according to comScore reports.

However while in the US and Europe Samsung and Apple dominate, the share of both providers has been dropping in emerging markets where we see a fragmentation emerging. In urban China, Xiaomi with its affordable RedMi model continues to go from strength to strength, securing a 27% share of smartphone sales in the second quarter of 2014, compared with 21.1% for Samsung. And payments by watch + iPhone cannot be a top priority for the masses in emerging markets.

Too little too late?

So far Apple was a late starter where contactless payments are concerned. Like a swan, the movement seemed to be more “under-water”, as news of patents obtained for motion based payments got out in January 2013. Apple obtained a US Patent for a digital wallet and virtual currency. It described a system of managing credits via mobile device. Mobile users would be able to receive credits or coupons stored in their account. Check out Patently Apple for the whole background.

Back in June 2013 Apple released its first mobile commerce platform, called the iCloud Keychain: consumers could an store a variety of information, such as passwords and financial details for use across several Apple devices (Mac, iPhone or iPad) to log into websites or make purchases online. The platform did not support NFC and existed as an application rather than a physical device.

Earlier in June 2012, the Apple bar-code-based Passbook mobile wallet was launched, as a basic mobile wallet without payment functions, using barcodes to store and represent multiple boarding passes, store cards, and movie tickets. It had location-enabled alerts, and real-time updates and it displayed passes based on a specific time or location. When consumers walk into a participating shop the loyalty card appears and can be scanned to pay or check balance. It was expected that this could evolve into a mobile payment service by linking the Passbook to customer credit cards and iTunes accounts.

Effect on the Digital Money Game

Contactless payments that Apple Pay now propose to offer comes as a reinforcement