Cards and payments

REPORT
Cards and payments
Are banks ready to meet the challenges of an uncertain future?
June 2014
Cards and payments
Contents
Introduction ...................................................................................................................3
Cards and Payments Advisory Council Members ...............................................................4
Regional issues ..............................................................................................................6
Cards and payments in Turkey .........................................................................................8
Cards and payments systems: two case studies ................................................................10
Case study 1 ......................................................................................................10
Case study 2 ......................................................................................................11
Mobile peer-to-peer (P2P) payments in Denmark ..............................................................13
Highlights and headaches in cards and payments ............................................................15
Mobile banking and payments ......................................................................................18
Digital wallets ..............................................................................................................22
Contactless payments ...................................................................................................25
Regulations .................................................................................................................28
Interchange .................................................................................................................29
Aggregators, new entrants and access to information .......................................................31
Other issues ................................................................................................................34
Conclusions .................................................................................................................37
About us .....................................................................................................................39
2
Introduction
This is the first annual report of the Efma Cards and Payments Advisory Council,
which was formed in spring 2013. It covers three meetings of the Council, held over
a period of 12 months. The Council provides a forum at which senior executives from
the retail banking sector can meet together and exchange information and ideas on a
wide range of topics relating to cards and payments.
The Advisory Council is designed to encourage the sharing of best practices and
views in a non-threatening and confidential environment. As a ‘think tank’, it seeks to
provide guidance, news, views and support to its members as they seek to address
the challenges and opportunities that are arising in the cards and payments sector.
The three meetings held so far have involved much energetic discussion on a varied
array of stimulating topics relating to the cards and payments arena. As well as
looking at the issues facing particular countries - and focusing on specific activities
in two of these in particular - the Council has also debated some pressing issues that
affect most if not all retail banks.
These have included the use of cards as payment instruments; the growing emergence
of mobile banking and mobile payments; the development of contactless solutions
(involving both cards and mobiles); and the potential uses and opportunities afforded
by digital wallets.
The Council has also explored some of the specific difficulties facing banks. These
include a continuing stream of sometimes oppressive regulations; the difficulties and
challenges posed by deteriorating interchange rates; and the very real threat of
competition from new entrants from outside the banking industry.
The Cards and Payments Council will continue to provide a dynamic forum for
debating these and other important issues and for sharing news, ideas and best
practices between its members in the months and years ahead.
The Efma Cards and Payments Advisory Council
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Cards and payments
Cards and Payments Advisory Council members
Efma would like to thank the following Cards and Payments Advisory Council members for their
participation in this report:
Marc Alaurent
Directeur Paiements
LaSer, France
Francisco Javier Celaya Mingot
Consumer Finance and Payments Systems Director
Bankia, Spain
Meriç Apatay
Vice President, Product Management,
Credit Cards Department
Akbank, Turkey
Béatrice Delanau
Head of Card Marketing
La Banque Postale, France
Mikel Arriaran
Technological and Operative Developments,
Cards and Payments, Laboral Kutxa, Spain
David Baranyai
Head of Sales
ING Biztosito Rt, Hungary
Tom Beernaert
Manager Cards, Products and Operations
Payments, Accounts, Cards & Savings
ING Belgium, Belgium
Axel Beune
Senior Product and Innovation Manager
ABN AMRO Bank, Netherlands
Carlo Bovero
Head of Customer Banking Solutions
BNP Paribas, France
Claude Brun
Managing Director, Payment Systems
Crédit Mutuel Centre Est Europe, France
Jan-Olof Brunila
Deputy Director - Group Cards
Swedbank, Sweden
Soner Canko
Chief Executive Officer
BKM (Bankalarası Kart Merkezi), Turkey
4
Arnaud Dubois Coutant
Directeur Département Entreprises du Groupe
Groupama Banque, France
Olle Durelius
Head of Business Area Payments, Retail Sweden
SEB, Sweden
Bülent Ersöz
Payment System Director (Issuing & Acquiring)
TEB, Turkey
Edoardo Fontana Rava
Responsabile Marketing Prodotti
Banca Mediolanum, Italy
Stefania Gentile
Head of Transactional Products
for Private Customers
Intesa Sanpaolo, Italy
Ferenc Joó
Vice President, Retail CRM and Marketing Leader
Raiffeisen Bank International, Austria
Serkan Uùraü
Kaygalak, Head of Card Payments Department
Isbank, Turkey
Frank Kirchner
Director Product Management Cards
Targobank Germany, Germany
Davor Krsul
Senior Expert Card Business, Group Retail Banking
Hypo Alpe Adria Bank International, Austria
Laurent Le Moal
Vice President and General Manager
PayPal CEMEA
PayPal, France
Rita Lourenço
General Manager - Head of Cards & Payments
Millennium bcp, Portugal
Philippe Marquetty
Directeur des Instruments de Paiement
Société Générale, France
Alenka MejaĀ Krassnig
Head of Card Management
Nova Ljubljanska Banka, Slovenia
Maguy Mercier
Responsable de la Monétique,
Stratégie des Moyens de Paiement
BPCE, France
Joan Morla Tomas
Card Area Director
La Caixa, Spain
Gérard Nebouy
Directeur Général
Visa Europe (France), France
Vassilios Parlavantzas
Director of Consumer Lending and Cards
Piraeus Bank, Greece
Jan Staal Rasmussen
First Vice President, Head of Cards
and Business Products
Nykredit, Denmark
Luis Rocha Dos Reis
Senior Vice President Cards,
Consumer Finance and Acquiring
Banco Espírito Santo, Portugal
Vincenzo Romano
Payment Systems Manager
Credito Emiliano, Italy
István Szabó
Head of Card & Electronic Channels Directorate
Erste Bank Hungary, Hungary
Luka Tomaskovic
Director, Cards and Transactional Banking and
Consumer Finance Products
Zagrebaþka Banka, Croatia
Laura Torre
Payments System Manager
Banca Carige, Italy
David Wirth
Head of Issuing and Acquiring
PostFinance, Switzerland
Narinda You
Director of Strategy and Interbank Relation,
Secretary General Payments Department
Crédit Agricole - Cedicam, France
Neven Raic
Group Head Retail Banking
Hypo Alpe-Adria Bank, Austria
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Cards and payments
Regional issues
An Eastern European bank said that the cards and payments issue that it is most concerned about
is the threat of regulation. Most of the government banks in the area are very aggressive and have
an enormous impact on retailers. It is also looking at campaign management and the connection
between payment and the CRM system.
Another Eastern European bank said that it is currently focusing on cards management. The main
challenge is profitability as the market is relatively small, which causes problems with innovations.
However, the bank is deploying a whole point of sale (PoS) network with contactless readers and
will soon start issuing contactless cards. Profitability is even harder in the area that it covers, as debit
cards aren’t profitable at all.
A bank that was born from a financial advisor network and has no branches has developed direct
solutions combined with financial advisor services. It has grown quite rapidly over the last few years
and is also launching a test of NFC with Vodafone.
Meanwhile, a Central European bank reported that its main focus has been on issuing, as the market
on the acquiring side has been closed until recently. However, that is now changing. The main issue
is what the consequences will be if people can step in on the acquiring side. Another issue is the
new evolutionary model: what will happen with mobile and what will the impact be on customer and
business models? The bank is also looking at if and when it would be appropriate to collaborate with
partners, such as other banks, MNOs or telcos.
A Western European bank said that it has started deploying contactless cards and is also involved
in a limited deployment of mobile payments to see how these will develop. The mobile payments
are SIM-based but the delegate said that he would prefer them as iOS, as this is cloud-based.
However, the issue is that of the bank as a trusted and safe environment, in which the bank’s ID can
be deployed much more across all payment products. If this is done well, the bank can identify the
customer, whether in a simple or online environment. The bank needs to use this for its own benefit.
A Western European group said that it is focusing on the consumer retail business, particularly
consumer loans and credit. The main emphasis for credit cards is revolving credit. The bank wants to
increase its portfolio - for example, by cross-selling into its sales finance business. It is also one of the
first banks in its area to issue contactless cards.
In the UK, a new development in the cards and payments sector is Zapp, a bank-to-bank payment
system. It acts like a peer-to-peer system - individuals can use the bank account to purchase goods
and services and pay bills using a mobile, online, PoS etc. So instead of using a wallet or a credit
card, the customer pays directly from their bank account.
A Nordic bank then reported that it is working with card schemes to enhance its business. In some
European countries, it is increasingly considering the payment cards business as a public utility
business that is provided free of charge. The bank is even introducing a ban on making a profit. It is
discouraging cash usage and encouraging electronic transactions. There is also an inter-bank service
called Swipp, supported by various banks, for transferring money in real time between current
accounts in different banks just by knowing the payee’s phone number. The bank decided not to issue
any contactless cards as it would take too long to ask the merchants to purchase new terminals.
A second Nordic bank said that its main concerns included the need to cross-sell products from the
bank to its mortgage customers. Another issue is interchange and making the national scheme more
profitable for the bank.
6
A Southern European financial institution announced that it is facing ongoing issues of profitability
and sustainability. A member said that he didn’t see companies such as PayPal as a threat, but he
did see a challenge coming from newcomers like Google. However, his bank has been able to
gain more confidence from its customers. It is prohibited from making money from customers but
will invest in generating new sources of revenue and will provide added value for its stakeholders.
He commented that the SEPA group doesn’t know what the bank is dealing with and just keeps
damaging its activities.
The bank is also concerned about innovation, as it doesn’t know where to invest. It started
developing a contactless experience two years ago and started upgrading all of the PoS terminals,
trusting in the success of NFC. However, NFC has developed more slowly than expected. The bank
also has a type of corporate wallet, which is being developed in partnership with a telco. It is ready
to invest but is unsure of the right strategy, as there are several alternatives.
A Council member commented that the Commission and his government are talking about how
to prevent card fees from banks. Another important issue for banks is how to change consumer
behaviour, to stop them from using cash instead of cards.
A Central European banker said that he didn’t see any light at the end of the tunnel for banks. He
explained that countries are experiencing a negative growth or only slightly positive growth rates.
He didn’t see loan demands or deposits flowing in and margins are still decreasing. In cards, the
growth rates are also stagnating. As an added pressure, local decision-makers are developing new
regulations overnight that are against the banks and are eroding their profits.
“
What the council said:
European banks have a different vision from their American counterparts. They
believe that trust is important and fraud prevention is critical. However, in the
US, fraud is just the cost of doing business. It’s acceptable and they don’t care
about it in the same way – and the level of fraud there is very high.
In the Netherlands, there is iDeal (which is the equivalent to MyBank and
has some parallels with the UK Zapp concept), a four-corner model for online,
real-time bank transfers within the online retailer.
Our vision for the future is that in ten years we can say goodbye to cash.
There is a recurring theme about where to invest innovation and watching the
market - and all of the merchants are also watching the market.
We don’t have economies of scale, so we have a trade-off between innovation
that creates value and profitability.
We are waiting for a standard for NFC. The confusion is high and it’s
possible that waiting too long is dangerous. But it’s difficult to risk a big
investment at the moment.
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Cards and payments
Cards and payments in Turkey
A guest speaker from Turkey talked to the Council about regulation, co-operation and innovation in
the country. From an innovation point of view, as Turkey is not a member of the EU, it’s happy that
there is no SEPA! However, the Turkish regulator takes EU directives as a reference point, so the basis
of the country’s regulations are still coming from the EU.
From an operations point of view, outsourcing is a trend for the future, with the aim of increasing
efficiency. But in the Turkish markets, especially in payments, banks tend to keep their operations
in-house. Another difference from Europe is the co-operation within the Turkish payments industry.
If any single player produces an innovation or an infrastructural change, it doesn’t really work. The
banks have therefore decided to co-operate together to achieve some changes in the infrastructure.
Chip and PIN is one example, and another is debit conversion. There is also a new project that is the
result of this ‘co-petition’.
Turkey has a population of 75 million, over half of whom are under 30. The younger generation
uses the Internet and mobiles, so these technologies enable the banks to address this segment. From
a payments perspective, the Turkish market has over two million PoS devices. Turkey is a credit card
country, with 55 million credit cards. There are over 90 million debit cards but the purchase volume
is just 9% of that of the credit card volume. In the last ten years, the speaker’s bank has increased
the volume of debit card users at the point of sale. Most debit card usage comes through the ATM for
cash, which banks don’t like. The speaker said that his bank doesn’t like cash or ATMs!
The bank has been making progress with several innovations, including contactless payments,
NFC, biometrics and mobile payments. The contactless initiative started in 2005, when the bank
launched contactless cards to automate toll and bridge payments. Afterwards, it launched Visa and
MasterCard contactless cards. It also has contactless on watch and key chains. In 2008, taxis started
to accepted contactless payments. So far, the bank has over ten million contactless cards (credit and
debit) and more than 60,000 contactless acceptance PoS devices. A total of 15 out of 29 banks
issue and accept contactless cards in Turkey.
In 2013, the bank made a radical change to its processes of contactless acceptance. It said that
all transactions would start with a contactless touch at the PoS. Some big retailers made the switch
and the bank increased its contactless volumes dramatically. Retailers, consumers and banks are
all happy with the change. There are now national standards for banks and for merchants. Any
transaction over €20 can be contactless.
Another form of contactless is NFC. The bank has been involved with NFC for five or six years. There
are now ten banks with the technology. However, there are fewer than 2,000 NFC-enabled PoS
devices in the country as there is still a big question mark over the technology.
Turning to e-commerce, volumes in the Turkish market are increasing quite heavily. The bank therefore
decided to invest in a national digital wallet two years ago. It has provided a fast, secure and
convenient online payment and has also added peer-to-peer payments on credit, debit and prepaid
card functions.
In terms of mobile, Turkish banks have various initiatives and products. There are functions such as
money being sent by voice, mobile and ATM and Internet integrations. Ultimately, there has to be
national integration as well. There are also QR code payments and very creative uses of mobile in
terms of peer-to-peer and e-commerce payments.
From the customer’s perspective, life isn’t easy. They will choose the easiest bank to use, so each
bank has to find a way to take advantage of any trends. The speaker said that the digital wallet
8
is an example of where his bank created an opportunity from a trend. If banks don’t do this, other
companies will. The bank has also introduced biometric technologies – not only using finger vein but
hand vein technology as well. For example, if a customer doesn’t have their card, they can just touch
the screen, show their finger, and key in the PIN.
A member commented that this was substituting the card with a PIN – he would prefer to do it the
other way round. However, the speaker replied that there are some security regulations in Turkey
and the customer has to have two different verification methods. The bank believes that it’s better to
replace the card as it’s static information, so it’s better to key in a PIN.
In Turkey, if an organisation issues a card, it has to be a member of BKM. The speaker highlighted
two innovation stories:
1. BKM Express. This is a joint venture between BKM, banks and merchants, with a market share
of over 95%. Over 75 merchants are involved, reflecting an e-commerce market share of over
28%. That has given the venture the drive to increase the number of merchants.
2. Transportation. Every country has its own payment methodology for transport, which puts
pressure on the banks - people have to buy different cards in different cities. The speaker said that
his bank’s contactless cards aren’t accepted at terminals. The industry has now set up a pilot case
in a pilot city and is investing in an ideal scenario to provide proof of concept to the government,
the media, cardholders etc. It’s in the fifth largest city in Turkey, with high-tech devices that accept
MasterCard, Visa contactless cards etc. The commercial launch will begin and the industry will
try to bring all cities in Turkey into the same infrastructure and acceptance level. Transportation is
seen as key in the war against cash. If a card or mobile is accepted, banks will be winning the
war against cash.
PoS terminals in Turkey
In Turkey, the mobile PoS and the cash register are being combined in the same device. There are
300,000 merchants affected and 50,000 already have the new devices. By the end of 2015, all of
the merchants in Turkey should be using them. So, instead of having multiple terminals for different
cards, they are all being brought together into one type of terminal.
With this new functionality, the transaction comes to the bank and at the same time goes to the Inland
Revenue as well. The aim is to fight against the grey economy. It’s quite challenging for banks as the
old acquiring businesses are changing. Most of the new devices will support contactless. One of the
weaknesses of contactless in Turkey is that only 10% of the devices support this at the moment.
The government in Turkey is introducing new laws relating to capital requirements. Credit cards are
now under pressure and debit cards are becoming more crucial. Credit is going down and debit is
going up. Commercial cards are a key agenda item for Turkey. Last year, they grew by 50%.
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Cards and payments
Cards and payments systems: two case studies
Two Turkish banks gave presentations of their cards and payments strategy:
Case study 1
The first bank has 36 different types of cards
to cater for different customer segments. The
bank has a wide range of segments, from
the youngest customers (12 years old) and
upwards, and every type of card: affinity
cards, business cards etc., as well as a very
strong loyalty card programme that it has
established with merchants. It has about
200,000 merchants and customers can collect
points and redeem them.
The bank has 15 million cards: nine million
are debit and six million are credit cards. The
volume generated by debit and credit cards
is similar. However, for purchase transactions,
the debit cardholders prefer cash withdrawals,
whereas credit cardholders prefer to use their
cards at PoS terminals, with 93% of them
preferring to use cards at merchant locations.
The bank’s dream is to push debit cardholders
into using their cards at PoS terminals.
For credit cards, there are some 33 million
transactions per month. There are cash
advance transactions and cash withdrawals.
The bank started to offer instalments for
cash withdrawal: the customer can pay the
bank back via instalments, using their credit
card. Cards are at the heart of its banking
business - customers can make many different
transactions, tax payments etc.
The bank is also involved in some innovations
involving four or five new card products.
The first is a prepaid card that is especially
designed for collecting gold deposits
from customers. The gold reserve of the
nation, much of it kept by people under
their mattresses, is between 2,000 and
3,000 tons! The government is therefore
incentivising banks to collect the gold reserves
of households. When a customer goes to
one of the bank’s branches on certain days,
jewellery specialists are there. The customers
bring in their gold and they are told what this
is worth: the specialists give the exact figure
relating to the weight of the gold. This helps to
incentivise people to take their gold deposits
to the banking system.
Now, to ease the workflow, customers no longer
need to visit on certain days. The bank has an
agreement with the jewellery store - customers
bring in their gold and this is registered on the
system, using the prepaid card. The amount
goes automatically into the customer’s gold
deposit account. Every month, 20 kg of gold is
deposited in the bank system: 90% comes to the
branch network and 10% via the gold card.
The second innovation is a QR code purchasing
system. This is a new platform in the mobile
payments arena. It’s a way for the customer
to make a purchase transaction via iPhone
or Android phones, just using QR code
technology. Within two or three months, the
bank has already had 48,000 customers. The
programme can be easily installed onto the
customer’s mobile. The bank is now planning
to make it interoperable. The customer decides
which cards to use with the QR code system.
The third innovation is the use of biometrics
at the point-of-sale. The bank has just two
or three biometric PoS terminals. If people
forget their PIN or have a lot of cards, they
can use the finger vein machines that have
been combined with PoS machines. Some
70,000 customers have registered their finger
veins. This system can also be used for cash
withdrawal. Half of the bank’s ATMs have
finger vein machines. Together with the PoS
terminal, they cost about €1,200 each.
The fourth development is an agreement
with a PoS company, designed for customers
who don’t want to use their cards for online
transactions. Instead, they can pay the courier,
using their card in a chip and PIN transaction
on a PoS terminal. The amount goes to the
continued...
10
Internet company and the commission goes
to the courier. Some 250 merchants can now
make collections using this PoS terminal.
The final innovation is a co-branded card that
customers can use at a petrol station – and
they automatically receive a discount. They can
make the transaction just by giving the card to
the attendant (as there are no self-service pumps
in Turkey). The machine at the pump recognises
the customer’s number and decides which
discount to apply.
Case study 2
The second Turkish bank then gave details of
its approach to cards and payments. The bank
has an extensive distribution network with nearly
4,000 ATMs and 300,000 PoS machines.
Although it has a huge branch network, its focus
is on alternative delivery channels. A third of
its customers don’t use branches and social
networks are very important to the bank.
The bank’s credit card business is currently
showing the highest growth in the market,
and it is the highest fee-generating bank in
terms of payment systems. The bank achieves
this by having different types of products; a
sales-focused approach; segmented CRM
management; strong retention programmes;
limit management based on profitability; and
a drive to penetrate potential growth areas.
The bank aims to penetrate different segments
by repackaging products for them (such as
a cards for the younger generation). In total,
it sells nearly two million cards per year. It
increased the sales rate by 25% between 2011
and 2012. The main reason was the card sales
incentive that the bank runs in the branches. This
focuses on sales and process optimisation. It is
selling cards on Facebook, and through PoS
machines and ATMs, and is also cross-selling.
Another important aspect is the use of efficient
CRM management. The bank is taking six
main portfolio actions driven by the credit
card segments and is running nearly 100
different campaigns per month. It cross-sells
and as a result has increased the fees and
commissions ratio by 25%. The bank has a
total of 21 different segments.
The next element is a retention programme.
Retention is a big problem that Turkish banks
are facing at the moment. The bank therefore
has a proactive approach to this issue. When
it sees a likelihood of attrition, it is proactive
- it doesn’t wait for the consumer to cancel
their cards but makes them offers. A second
approach is the use of win-back offers. The
bank has about 40 different proposals and as
a result its win-back ratio is nearly 62%.
The bank is also engaged in limit
management based on profitability. The
limit set is mostly run by risk people. For the
previous two years, it was run by marketing
people. Another innovation is the provision
of an extra limit for customers based on
instalment transactions. This extra limit amount
is now 11% of the whole portfolio.
The bank is also penetrating potential areas
to gain market share. It has one of the fastest
growing commercial card programmes in
the Turkish market. It makes pre-approved
commercial card limits and delivers them via
call centres and IVR. It has also launched new
products and product features.
Finally, the affluent segment has a very
successful affluent card programme, providing
airmiles that are earnt instantly on any
purchases. This is a very fast and easy system.
The bank is enlarging the products and
privileges available. The programme is linked
to the current account, so card customers with
a strong relationship earn more. The miles
can be used not only for airline tickets but
also at various merchants.
11
Cards and payments
“
What the council said:
We prefer to use a PIN at the point of sale, to guarantee the same experience with
a card or a mobile.
Banks in Turkey are encountering regulatory changes on the issuing side. There are
also new regulations on the acquiring side as well.
In terms of innovation in Turkey, there are some interesting marketing initiatives.
12
Mobile peer-to-peer (P2P) payments in Denmark
In Denmark, banks work together well. The national bank card scheme is a good example and there is
also a national direct debit scheme that has been widely implemented. A mobile P2P solution also started
as a sector solution two years ago. However, the dialogue went in different directions. Finally, one bank
decided to drop out and went alone. The rest of the sector decided to search together to try and find a
solution. The lone bank launched its P2P solution in spring last year, just after the rest of the sector.
The other banks formed an initiative called Swipp. What motivated them to go down this route?
Every customer has an Internet bank, most have mobile banking and everyone has a debit card.
Some banks saw it as a business case to invest and saw some money in it; others saw it as a
defensive approach against PayPal, Google etc.; and yet others saw it as a way to follow the
customer from a business intelligent point of view, enabling the banks to market to them.
The bank that has gone alone won’t initially charge for its service. The multiple bank solution is also
being provided free of charge, so it’s unlikely that the consumer will have to pay for the service. If
fees are charged eventually, it will probably be on a transaction basis. However, mobile banking
solutions are of so much value to the banks in terms of having people using them that the strategic
benefits are higher than those of charging the customer.
Consumers already use mobiles and have an expectation of being able to do payments via mobile.
A small survey conducted in 2013 asked consumers whether they would use mobile payments.
Some 30% said yes. Now, one year after the launch of the two peer-to-peer solutions, 20% of the
population have already downloaded one of the apps.
For the lone bank, it’s a separate app and is card-based; for the others, it’s integrated within the
mobile banks and is an account-to-account solution. When the app is opened, the top will say mobile
banking and the bottom will be Swipp.
Security isn’t a big issue. Customers are very happy to adopt the lone bank’s solution, which offers
a good user experience. As long as they know that there’s a bank behind it, it’s okay. In terms of
Swipp, this is a sector solution with many parties involved, so it’s not always easy to co-ordinate
them. There are different priorities in the data centres etc. Because Swipp was developed by a
coalition of 81 banks and is connected to their mobile banking apps, there are 81 apps that aren’t
identical. This all affected the time to market.
To use Swipp, both the sender and the receiver must be taking part in the solution: their banks must
have Swipp. The solution is based on the banking infrastructure. There is a delay of about two hours for
clearing transactions. From November 2014, there will be real-time clearing - the money will be in the
account within 12 seconds. There are some 240,000 people signed up to the programme so far.
The sector has created a common proxy database. The mobile banking customer logs into it, with
the mobile number, and the money is transferred to the account of the receiver (the mobile number is
linked to the customer’s account). So, there is a bank at both ends of the transaction and a clearing
house in the middle to make sure that the transaction goes through.
One issue that the banks are looking at is the cost per transaction. This is why there aren’t cards
in this environment. There is a cost of five to seven euro cents, so it’s much cheaper than the card
infrastructure. It’s an account-to-account transfer - instead of the account number, the customer is using
the receiver’s telephone number. In the enrolment process, customers have to authenticate themselves
using the Danish national ID system. In other countries that are developing systems, there can be
different authentication issues.
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Cards and payments
So far, there has been no public marketing of Swipp, as not everyone is keen on product marketing.
In the future, the banks will each do different things but there will always be a similar identity
around the Swipp logo, which all of them will use in their own communications with their customers.
Summing up, this is a very cost-effective solution. The banks know their customers and there is a high
degree of security due to the enrolment process.
The lone bank’s solution has also been very successful but is more traditional, based on the existing
card infrastructure. Users don’t have to be customers of the bank. When they enrol, they get a card
number and a phone number. The bank doesn’t know the user and doesn’t know the link between the
phone number and the card number. The service is free of charge. There have been an impressive
1.1 million downloads in the first year and there are now some 33,000 transactions per day, so it
has really been taken up by people – and over half of them aren’t customers of the bank.
Unlike Swipp, there has been a huge amount of marketing around the solution. The app is very
nice, and it’s easy to enrol and use. However, there’s a merchant fee which makes it three or four
times more expensive than the Swipp solution, so it’s been costly for the bank although it has really
boosted its image. In contrast, Swipp has a very low-cost infrastructure.
A member commented that banks still need to earn some money! It’s difficult to drive new revenues.
However, another participant said that there is revenue coming from it - not from the pure P2P
transaction but from the second stage, where the merchant pays. This is the equivalent of interchange.
Another Council member reported that in the Netherlands, banks follow another route. They have
moved into a proximity environment, using a real-time bank-to-bank account infrastructure which
is guaranteed as non-commercial. With P2P, the problem is sometimes the bank-to-bank transfer.
To transfer across a border, a 16-digit IBAN number is needed. This doesn’t really work: a phone
number or something else is better. It also needs to be a co-operative model between banks.
“
What the council said:
P2P could be the last opportunity to create an ecosystem in different countries.
The merchants will only change if the consumer demands it. The only way they’ll do
that is if they get used to P2P. There has to be enough demand for the merchant.
14
Highlights and headaches in cards and payments
A banker gave an explanation of how his organisation uses cards as a payment instrument, as ID tokens
and as a marketing tool. Its mission is to enable its clients and society to grow and also to make banking
easy. The bank wants to be online in terms of transactions, selling products and giving easy advice.
The speaker started by looking at cards as payment instruments – the products and processes
involved and the main challenges. His bank is issuing both debit and credit cards. SEPA compliance
has meant opening up both the acquiring and processing sides of the market. The bank has different
types of debit cards, including temporary cards and access cards. In total, it has 2.3 million debit
cards and 565,000 credit cards.
Firstly, because it wants to make banking easy, it looked at whether everything was needed. Cards
help customers to buy goods and services. The bank wants to help them in payments but does it need
such a large number of debit and credit cards? To make it as simple as possible, it decided that only
one debit card is really needed. Although companies such as MasterCard and Visa have told the
bank that it could do segmentation, it doesn’t think that this is needed.
Ultimately, the bank will end up with one debit card and a temporary card for situations when
the debit card doesn’t function. The debit card won’t be personalised but it will be linked to the
customer’s current account and they can start using it immediately. If they lose their debit card or it’s
no longer functioning, they can go to a branch and obtain a card that will help them. The bank has
several credit cards - standard, gold, business and revolving cards. It doesn’t have any co-branded
cards. For credit, the portfolio is about 50/50 MasterCard and Visa.
A member asked whether customers could have a card without an account. The banker replied that
they can have a revolving card but this isn’t something that the bank pushes, as it’s becoming more
difficult. The Consumer Credit Directive makes it far more cumbersome to organise things if the
customer doesn’t have a current account.
A member observed that in his country, a lot of different cards have to be issued. Another said that
his bank has a card that can be a credit card, a debit card or a revolving card – it’s all the same
piece of plastic. Yet another said that it was completely the opposite in his bank, with a lot of micro
segments. The user can define what a card looks like with different colours, photos etc. Compared
with non-personalised cards, the volume achieved is 20% higher. The bank uses big data to microsegment and create the products. It is also looking at Facebook etc. to see if it can offer customers a
product that is different, with personally targeted discounts.
Looking to the future
The speaker said that the next step for his bank is to try and bring operations online. Before that, it
had simplified. It is now also thinking about mobile. It can be easy to buy something online but it isn’t
easy to see who to offer what. It only makes an offer to customers who it thinks are eligible. The bank
has to check with the national bank to see if they are eligible and it can only do that if it receives a
query from the customer: it’s a complicated process. The mobile app can be downloaded but first it
has to be linked to the customer’s account. It will be linked to online banking and the client can then
make transactions, open a savings account and buy a credit card.
In the future, the bank wants to do more online and to have limit management for the card as well. It can
say where the card can be accepted in e-commerce and outside Europe. All of these changes are taking
more time than expected. To make things easier, the bank needs a simpler process and a change in the
back office. At the moment, most things are batched, but it wants a more flexible and real-time approach.
It doesn’t want to have to tell customers that they need to wait a few days for cards etc. However, with its
current infrastructure, the bank can’t deliver that type of rapid customer experience.
15
Cards and payments
It therefore looked at how the bank is organised and whether it should put everything it has on
one platform. However, it doesn’t have the volume or scale to do all of these things internally so it
decided to go externally. It has conducted an exercise to find the best platform to use, although there
aren’t that many packages that are really specialised in terms of cards. It is also exploring the idea
of re-using the core banking application that it has been installing.
It’s a difficult exercise: the bank is looking into what it can do and what can be outsourced. For
example, are web services available for an online banking approach? For the volume involved, the
bank is thinking of managing one supplier. It already has a dual supplier for MasterCard and Visa
schemes. The bank is too small to insource all of its transactions in the country. With SEPA, it has
decided to abandon chip and PIN as this was never successful. It had this for 20 years but has now
adapted everything to become EMV-compliant.
The bank said that keeping contactless alive in its local market required a lot of investment. At the
same time, interchange fees aren’t going up and merchants don’t want to pay more. It will be settled
by next year, but it’s probably too late to influence the decision, although the EC seems to have
thought it through. They take revenues from banks and schemes at the moment – so the banks and
schemes are going to find it more difficult to invest in innovation.
There’s an opportunity for people to enter the payments market and make it more attractive. This
puts the bank in a difficult situation, because its revenues are falling. It is currently working on the
infrastructure layer, organising payments. How is this evolving today? A lot of people are stepping
in, serving customers using various infrastructures. They will be competing with the bank for the same
customers, which will make things very difficult. However, if the bank doesn’t get involved, it won’t
be successful in the future.
In the past, the bank had face-to-face contact with customers. Now fewer and fewer are visiting the
branches. The bank is now talking to customers more and uses their cards to identify them. One
approach could be to link the debit card to the person instead of linking it to the current account. It
might be too late but it would be one way to identify customers.
The bank probably won’t use the electronic identity card that the country’s government is issuing but
it hopes eventually to be able to identify a customer wherever they are. This will be managed with
one card that is linked to the person.
To improve convenience, banks need to move away from card readers but maintain a good level of
security. This might, for instance, involve the use of biometrics and other technologies. Once someone
is identified, the whole discussion on big data can begin – but it’s no use if the bank is working with
someone it can’t identify.
From a marketing perspective, the card today is a very tangible asset. Nearly everyone carries their
debit or credit cards around for most of the day. If a person has their card with them, it means that
they also have their bank with them.
If banks don’t manage payments well, they will disappear from their customers’ minds. Suddenly, they
could think: “Do I really need a bank?” Young people don’t stand still and are unlikely to stay with the
same bank for the rest of their life. Movements will increase: if they don’t feel a link with their bank,
they will go. Having a virtualised wallet on their mobile phone will therefore become important.
16
“
What the council said:
Will the growth of mobile and online payments make it harder for young
people to manage their money? It will be easy for young people to go to
a bar and buy a few drinks.
It’s difficult to find a common view of what all customers want.
Brett King said: “The 21st century is all about understanding the customer,
producing the right offer at the right time for the right customer.”
17
Cards and payments
Mobile banking and payments
A Council member presented the complete mobile banking journey in his bank, including mobile
payments and innovations. From the start, the bank realised the potential of the mobile channel. It
knew that it had to be more than a consulting channel: it also had to be a sales channel. The bank
is trying to be customer-focused and innovation is a key component of this. The bank’s strategy has
three main threads: mobile banking, mobile payments and mobile commerce.
Mobile banking
A key aspect of mobile banking is the importance of bringing as much value to mobile handsets as
possible. This involves developing payments which occur in the online environment and bringing
them to the mobile phone and the proximity environment. A bank said that it had been involved
with tests with some major retailers of bank-to-bank transfers in the proximity environment. This has
required a lot of testing and co-operation and has raised a lot of issues. However, it is now bringing
more value to the handset, with peer-to-peer payments and a simple code for making a transfer from
one bank to another.
In terms of mobile banking, the bank sends over two million SMS messages per month to customers.
For example, if someone is travelling to the UK, it sends a message welcoming them and saying
what they have spent. The bank is also seeking to push messages to customers using its banking
app. Mobile banking is currently the second most popular channel after Internet banking, as it took
over from the ATM recently – and it will probably overtake the Internet one day. At the moment, the
percentage usage is about 60/40 for Internet/mobile. Some 11.5% of the bank’s customers are now
exclusively mobile users and 2.8 million customers out of 12 million customers use mobile.
Another member said that in his country, the percentage it is already 50/50. However, the mobile
is used more to obtain information while transactions are made on the Internet. The speaker replied
that many of his bank’s customers work on their devices and don’t go to the Internet. The trends are
changing, with more services on tablets, which are now included in mobile banking.
Mobile payments
The bank has a good relationship with a telco but wants to take the lead in the mobile payments
arena. It started in 2010 with a small pilot involving 100,000 users. The main issue then involved
the devices: the SIM cards weren’t NFC-enabled. The bank’s mobile payments approach isn’t just
about ‘tap and pay’ - it includes coupons, mobile commerce etc. Once NFC is sorted out, there are
numerous opportunities for banks. They can learn from companies such as PayPal and Google, who
are always looking at new ideas.
The second pilot, which took place in a large town, was a real success. The bank spent a lot of
time and effort in training both merchants and customers and gave handsets to the customers. It has
three models involving MNOs but the actual implementation is very complicated, as each MNO has
their own needs. Some 500 retailers - with a good mix of shops, bars, cafes etc. - took part in the
pilot, which involved mobile contactless payments. The secure element was the SIM card and a Visa
mobile payments card was used.
The results showed that 90% of the customers used the device to make payments. The average
transaction was €31, and 40% of the purchases were over €20. The bank therefore decided that
it should target low-value payments. Some 35% of purchases were €6 or less (coffee and similar
items). From a social aspect, bars weren’t used so much for mobile transactions but supermarkets
were – and with higher value transactions. One reason is that paying in a bar has a social aspect people don’t need to make the payment more rapidly, as they are there for the social interaction.
18
Finally, merchants involved in the trial enjoyed a 30% increase in the number of transactions and
billing went up by 20%. As an added bonus, 75% of customers were satisfied with the solution.
As a result, the bank has decided to go for full implementation of mobile payments on NFC, which is
a huge task. However, 60% of customers say that they would use the service. The three MNOs with
whom it is working cover 85% of the market but overall it’s a very complicated ecosystem. Each of
the MNOs also has its own wallet.
Meanwhile, four years ago the bank launched the first contactless ATM machine in the world. Most
of its new ATMs are now equipped with contactless readers. These don’t bring in new business or
profit but provide customers with a good experience, with really quick withdrawals. The bank is now
also trying to refurbish some of its old ATMs with contactless readers.
The next task is to try and launch NFC mobile payments in Europe. Once the bank has all of its
wallets launched, it can reduce the withdrawal time even more by tapping the phone onto the
ATM and getting a payment – representing the fastest cash withdrawal in the world. Another future
option might be to have NFC in the cloud rather than on a SIM card. Then, even if the phone has no
battery, the transaction would still work.
In response to a question from a Council member, the speaker said that he could see MNOs moving
towards a more open environment. They realise that they’re not gaining anything by being in a tussle
with banks. If one MNO opens up, others will have to follow suit.
Members then discussed when a bank should ask for a PIN for various low-value transactions. One
bank said it would ask for a PIN after about ten transactions of less than €20. Another said it is needed
if there are over 20 transactions of below €25. Using contactless, safety has to be a key item, as
people say that paying without a PIN is not protected: security is a key concern for everyone.
Concerns over mobile payments
A Council member commented that he is concerned about mobile payments. His bank had launched
a mobile P2P solution last year, which is working well. It is now seeking to go further and is looking
at various models for taking it into the merchant side. As the bank is using an account infrastructure
similar to a faster payment infrastructure, all banks are on board, so the acquirers aren’t needed
anymore. The model could jeopardise some income streams in the cards area, so the bank carried
out analyses of how to do it before it is scaled up any further. However, it aims to have some kind of
solution in 2014.
Another member expressed concern over a decrease in interchange and fraud control. The main
development issue is the mobile – the bank has just launched a private wallet. It uses mostly SMS
authentication, but there is a potential for fraud that could occur through mobile usage. Another
problem is SMS phishing with direct credit online banking.
A delegate responded that there had apparently been extensive phishing in Greece recently but
this was a new phenomenon. However, he thought that very few customers – about two people out
of five million – had answered the SMS. Some countries have an awareness campaign on a bank
by bank basis, or a collaborative approach, or both. One bank said that it uses YouTube videos to
keep people informed. Another added that it has a disclaimer with everything it says to the customer
that stresses that it won’t ask them for personal data. It does this on all communications channels.
However, one participant said that when the phishers see that something doesn’t work, they try
different ways of getting information.
19
Cards and payments
One of the weakest markets in terms of mobile payments is Italy, which is the least developed country
in this respect in Europe. However, one bank has closed a deal with PayPal after analysing customer
needs. In conjunction with PayPal, it started a test on NFC and a prepaid card. It is trying to bring
this together with P2P payments and the digital wallet.
At the moment, there’s a lot of confusion in the Italian market and a war between telcos and banks.
This isn’t what the customer needs. It confuses them - they just want something they can use.
There are two important problems in the mobile payments market at the moment:
1. What is the best business model for the payment system? What banks are investing in meeting
customer needs and why? Some banks are investing, but most are watching at the windows, as
there isn’t a current business model for mobile payments. What is a common solution? What is the
wallet? In a recent Efma meeting, ten different solutions were suggested. It’s difficult to try solutions
but it’s crucial, because banks need to find one that meets customer needs.
2. How can banks balance the business model with the needs of the user?
A member asked whether many banks at the Council had a joint department that looks after both
mobile banking and mobile payments. A participant replied that his bank had just started and that
it’s important to have just one model for mobile customers. In mobile banking, it’s perhaps important
to have a digital wallet for mobile payment that generates daily transactions for the payment, but it
isn’t so easy. Another delegate said that it is sometime called the mobile ecosystem. Banks perhaps
need one experience for the customer.
A financial institution said that it is putting a lot of effort into prepaid payments, credit payments
and investing in new ID solutions to fight fraud on both mobiles and cards. Another reported that
its mobile payment project has now become a commercial reality. It started with the first pilot of
proximity payments in December 2011, after signing a partnership with the national telco. In
February 2013, it launched a wallet team in conjunction with the telco.
It is now working with two other telcos and launched the first solution in mobile proximity payments
with MasterCard and is also working with Visa. So, the bank’s solution is a multi-telcos and multipayments scheme. It has also developed its wallet for mobile payments - not just proximity but also
remote payments.
Mobile commerce
The speaker then detailed how his bank had developed the first MPoS solution. It had approached
a number of providers but this could be very expensive. Another option was for the bank to
produce its own app, which talks between the MPoS terminal and the handset. The bank has to
offer something as they can throw away the terminal. It tried this approach initially by focusing
on smaller merchants, although in the longer term it will have to target bigger merchants. Other
initiatives it has tried include designing a closed ecosystem to sell the merchant’s products; a
reward programme; and a QR-based initiative.
Apps
The bank has over 70 mobile apps, including both banking and non-financial apps, educational
apps etc. There are some 250,000 downloads per month, as the bank has its own App Store as well
as loading them onto Google. In total, it has over 100 million transactions per month. However, even
if a customer checks his account, this is considered as a transaction.
20
Why does the bank have so many apps? They include educational apps, apps for Google TV
and smart TV, apps for car insurance, a social app for exhibitions etc. It has an app container
that gives customers more freedom, as they don’t have to log into mobile banking to access the
app. It would like to have all native apps, but can’t afford it. It therefore has some native and
some embedded apps.
Even though Google Glass is not freely available yet, the bank has created two apps for this. The
first enables customers to find the nearest branch. The second is a currency converter. It has also
developed a solution for a smart watch that allows customers to buy, exchange and manage their
stocks. When they tap on the watch, the details are shown on their smartphone screen.
“
What the council said:
We feel close to the customer. There’s also a feeling of security as they
know we are there for them.
In 2008, if we wanted to get 100,000 customers accessing mobile
banking, it would take a year. Now it takes about an hour and a half to
get that number.
If banks are unsure of mobile or online banking, they shouldn’t pursue it.
Sometimes they overdo it and make it too complicated.
There is a lot of confusion in the market at the moment. For mobile, all
solutions are difficult to understand and are very different.
One of the challenges we all have in mobile payments is that there are so
many competing technologies that it’s sometimes difficult to innovate.
21
Cards and payments
Digital wallets
Two consultants visited the Council to talk about digital (or mobile) wallets. There are numerous
initiatives designed to encourage people to embrace something new. However, banks have the
benefits of trust and a lot of information and merchant partners. So what would happen if banks
really embraced the wallet? A survey was conducted on what they think of the wallet and how they
can make it friendly. It changes the role of the bank - it becomes almost like a merchant. But how do
banks cope with associated aspects such as big data?
Some 200 banks were surveyed globally. They were split into developed markets (such as the US
and Europe), e-commerce and emerging markets. Most of the banks surveyed said that they fully
understood how wallets fit into the total mobile banking landscape.
A Council member remarked that looking at it from a payments perspective, there are different ways
of integrating cards into a virtual mobile wallet. He thought that it will replace the user’s identity. It
will be far more than just mobile banking: it will have aspects of the person in it. Another member
suggested that mobile wallets might be just another fad which won’t really dominate the payments
sector. This is possible because there are so many different types at the moment.
There are two basic models of wallets. One is a scheme-based wallet that resides in a mobile. The
other is a bank-centric wallet that resides in the secure infrastructure of the bank and is accessible
through any channel. The first type helps to propagate specific mobile or smartphone models, such
as iPhones or Google Android phones. The companies are saying that the wallet should be the
passport feature on the mobile phone and that their wallet should be the one used on the mobile.
PayPal is a cloud-based model, where the wallet is accessible by any device. The company is like
a proxy to the bank, as they have built their success around using credit or debit card details which
have been stored by the user’s credit or debit card in the bank. They have done some interesting
things, but there are two distinct models: a wallet that sits in the handset and one that sits in the
cloud. The third and possibly most threatening development is from MasterCard and Visa – in the
form of MasterPass and V.me. These are the biggest brand disintermediator imaginable.
Those surveyed overwhelmingly said that they prefer a bank-centric wallet. But what are banks doing
about this? Can they add value by making relevant commercial offers? If the bank offers the ability
for customers to transact with a merchant, all that is happening is that the bank is fitting in at the end
of the value chain where payments are facilitated. It only sees the amount transacted.
In the EU, there are some very interesting challenges, with regulators saying that the maximum
interchange is 0.3 on a credit card and 0.2 on a debit card. On commercial offers, that’s very regionally
specific. In the US and UK, the situation is quite interesting. There’s not so much in other markets but for a
bank to survive amongst all of the wallets, it needs to do more than just be a facilitator.
However, there’s a perfect product that banks can take advantage of in the wallet - the bank
account. The problem is that it only stores money. Banks must not only be a custodian of money but
of value (including points, tokens etc.). They are in a far better position to make this a success than
organisations such as Groupon.
22
So, from a bank’s viewpoint, a mobile wallet should be bank-centric, not scheme-based; it should
add value; and it should be the custodian of customer value. There are three key lessons that came
out of the survey:
• The customer experience. This is very important and needs to be much more than just a
payment. It’s important for banks to offer more, especially with the different versions of the
Payment Services Directive, which will open up the market to others.
• The uniformity of service from any channel. The wallet shouldn’t just sit on the customer’s
mobile but they should be able to access it from whatever and wherever they want. It’s a digital
device and could potentially be a card. Perhaps MasterCard and Visa will become just providers
of international transactions.
• Brand image. The wallet is an extremely important ‘brand wrapper’ for a bank and should be
taken seriously.
The wallet is all about ‘me-commerce’ - targeting someone individually. The other side is mobile
and electronic commerce. Some 10% of all retail transactions in the UK are now made online - and
20% of these start from a smartphone or tablet. The economy has gone digital and the way people
shop has completely changed. They used to research online and go to a physical shop. Now it’s the
opposite way round.
A member remarked that he thinks that there will be a convergence between mobile banking and the
payment wallet. Mobile banking has a close link with the digital wallet for everyday purchases.
Another view was that the development of the wallet is a ‘must’. It’s just a case of the time involved
and who could develop the investment. Today, it’s difficult to understand when it will be possible
to do this in the new environment. Other new developments include co-operation or competition.
The former is becoming more important: to compete effectively with other operators, banks have to
work together. With big data, if they work alone, they don’t add so much value to customers and
merchants. Banks must work together to create a new model of co-operation.
A bank announced that it is working on a mobile payment solution involving proximity payments. It
also wants to optimise the customer experience in relation to the digital wallet. At the moment, the
number of passwords or passcode digits is very high for the customer and it’s difficult to guarantee a
simple and easy experience. He suggested that solutions such as MasterPass and V.me aren’t oneclick checkouts but two or three-click checkouts. There are also issues relating to the identification of
customers. This is sometimes difficult online.
A member commented that the authentication process on systems such as MasterPass and V.me is far
too complicated. The ‘holy grail’ for banks is to achieve a one-click checkout. Some customers say
that they want an Amazon type of experience but they also say that if there’s not enough security, it’s
not going to be something they will want to use, particularly on the mobile.
One bank said that it has a traditional identification solution, with a code or a one-time password:
there is no real difference in risk. If there is a common standard, customers know they don’t have to
give the code to anyone. Another financial institution said that the customer could be offered two
lines of authentication so that they could then choose the one they want.
23
Cards and payments
With new payments, there doesn’t seem to have been any business model for the innovations that
have been discussed by the Council. A company said that it can’t force an NFC model on a mobile.
It needs to find other, cheaper ways. Another question revolves around the value of the wallet - which
one will be chosen by the customer and who will pay for it? If there is no advertising, where does the
money come from? To get the customer paying for it might be difficult.
A Southern European bank commented that there are very few new things happening. The big
challenge is how to be present and relevant in the payment value chain. The bank has created its
own digital wallet and is working with telcos to develop another wallet.
Another bank said that in its country, merchants aren’t growing in terms of e-commerce but that
spending in e-commerce is growing significantly - because customers are buying through Amazon
and PayPal etc. The bank hopes to change this. It was asked whether it was looking at the possibility
of a wallet that small businesses could use. The bank replied that the wallet was a system for the
development of e-commerce for SMEs, and wasn’t as important as it had thought.
“
What the council said:
One question is: how innovative do you think you are? Bankers think they are,
but customers think they aren’t. We need to see their view.
Our bank doesn’t have more than six digits for online banking – but that’s the
minimum number that is needed.
Banks can look at mobile wallets as a way of generating new revenue streams.
24
Contactless payments
Contactless cards
A bank explained its strategy for developing and deploying contactless cards. It wants to make the
customer journey as simple as possible, so it believes that contactless is about increasing the usage
of cards. Most people use cards for small purchases. The bank wanted to increase expenditure
through the use of credit cards, so contactless was a good way of doing this.
The bank sets a predefined limit of less than €20 for transactions that don’t need authorisation.
However, if the user feels uncomfortable with this, they can change it to a lower amount or even
zero. Since the launch in 2012, it has issued 3.2 million cards, representing some 85% of the total
contactless transactions in the country.
Contactless cards work well in the transport sector, such as the London Underground or Spanish taxis. In
Spain, there are now 5.5 million contactless cards. With contactless, transaction volumes have increased
by 12% and PoS volumes have gone up by nearly 11% after a year – so it makes a difference.
So why should banks offer contactless methods? Firstly, contactless increases card and mobile usage.
It’s convenient for cardholders and merchants and it’s valuable for low-value payments. Contactless
cards and stickers also help to educate customers in the benefits of NFC. In France, banks are
obliged to offer customers the choice of whether they use contactless or not and they can deactivate
it if they don’t want to use it.
Contactless and business models
One key question is: with the new contactless solutions, where is the revenue and who really
benefits? It’s a few seconds faster for the retailer and there are some cost savings on the terminals.
However, it’s difficult to find a business case so that banks can put money into the development of a
contactless solution. Perhaps the biggest issue is that it substitutes cash, so there are a lot of incentives
to use it, with less cash and more payments.
A Council member remarked that with contactless, the question isn’t the business model, as there is no
improvement or innovation taking place. His bank started with contactless cards in 2009, without a
business model. All of its cards will now be contactless. The bank doesn’t have a business model but
it’s a way to have a critical mass to guarantee the future of a mobile proximity payment. It is continuing
to develop contactless and the digital agenda could help it to develop a new method of acceptance.
Mobile payment is also a new line of acceptance - a new mobile PoS with contactless acceptance.
The bank decided to develop proximity payment with a SIM-based solution. But it is now asking itself
if the SIM in the cloud would be a better solution. It’s important to test all of these experiences.
As an industry, the financial services sector needs to displace cash. Any opportunity that banks have
to displace it will change customer behaviour. In the long-term, contactless solutions will come. For
mobile, if banks aren’t there, some other organisations will replace them. So far, payments have
been the model of banks, but with so many new entrants, banks could become irrelevant.
A member commented that in Sweden, micro merchants and even people selling a magazine for
homeless people are using MasterPass. It is even being used for collections in churches!
25
Cards and payments
Contactless isn’t just for low-value payments. Last year, the main contactless user was McDonalds.
This year, it was a supermarket, which aims to be the number one in contactless transactions, with
60,000 PoS terminals. This is an important message for countries such as Italy, which is the European
leader in prepaid cards. Similarly, in the UK, there is a drive towards more prepaid solutions.
But once WorldPay struck a deal with McDonalds, it started a sea change which is creating a
momentum. It’s creating an experience of contactless, but there is still a need for a business plan.
In Greece, a system has been set up with low interchange fees on a local base. The processing costs
have been reset to a tenth of the previous costs. On the other side, the banks have to be open to
processors who ask for a bigger processing cost rate for higher transactions. One bank said that it
has issued contactless cards and is discussing mobile. Another trend in the country is a movement
from credit cards to debit cards, which have increased by double digit numbers, and will lead to
lower commissions and interest income.
Using contactless
In some areas where contactless has been introduced, the PoS staff aren’t trained in its use. This is
often because the merchants themselves aren’t trained. Chains such as Macdonalds and Starbucks
have training but smaller shops often don’t.
One bank had encountered a problem when it had issued a contactless card and at some point
it became possible to guess someone’s PIN code. The chance of fraud was very low but the bank
decided to do a product recall. Another member said that in Germany, some banks offer the option
of changing the PIN but some don’t. However, PINs of four identical digits or four digits in a row are
blocked for contactless cards.
On mobile it will be possible to change the PIN. A participant observed that in Denmark, customers
can’t choose their PIN but can have the same PIN for all of their cards. However, people usually prefer
to choose their own PIN as it’s more difficult to memorise a code that they haven’t set themselves.
In 2014, NFC and contactless are taking off in Germany - but not on the mobile. MasterCard and
Visa have increased the number of NFC terminals in Germany. Most German stores typically only
have one terminal, which has to do everything. These are expensive and are changed about every
five years, so it takes time to substitute them. But some big chains have renewed them in the last two
years and MasterCard and Visa have invested money to support the change to NFC.
This is in contrast to the situation in countries such as the Netherlands, where the merchant owns the terminal
and not Visa or MasterCard. Banks therefore have to wait for the natural replacement of terminals and need
to convince merchants of the benefits of any changes. Banks also subsidise new terminals to some extent.
A bank reported that it is involved in a couple of projects on contactless. It has carried out some tests
on rolling out contactless cards. It conducted extensive market research on the perception of safety,
as it’s all about communication with the consumer. There is no way back once a bank has issued a
contactless card. When there is a greater contactless footprint in a country, retailers have the incentive
to have contactless terminals, as they control them. The next phase is mobile proximity payments.
The organisation carried out a test with two banks on about 1,000 mobile handsets, with the
interface on the handsets. It realised that mobile payments won’t be on the SIM card as it isn’t very
cost-effective and there are other business models. One favoured solution again is to put it in the
cloud. This will make it more interesting to roll out contactless mobile payments. Banks have to be
involved with these technologies and move forward.
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Contactless limits
A bank commented that when it implemented a new contactless programme, it said that customers
could pay any amount: there is no restriction for contactless. However, for amounts over €20, a
PIN is needed. Some people thought that €20 was quite high, especially for students. However,
customers can choose the best limit, from €0 to €200. It’s important to let the customer decide the
amount with which they are most comfortable.
A similar discussion had taken part in another country. The banks had decided on a limit of either
zero or €25. Setting the default makes it difficult for retailers at the terminals. There are only two
options – the customer always puts in a PIN or needs one just for amounts over €25. If a prepaid
card is involved, it’s easier not to have a limit. However, for normal cards, customers are much more
scared of not entering a PIN.
Another member said that his main concern was related to regulatory issues that affect credit card
limits. The bank has to follow the legal guidelines. The regulators are asking if younger people can
control their budgets and are therefore trying to control the limits.
“
What the council said:
For contactless, there are three different methods: cards, NFC or stickers. The
sticker is for someone who wants the payment device in their wallets - it’s a
halfway stage.
There is a problem in the UK with contactless – if someone has an Oyster card
and a contactless Barclaycard in the same wallet, it can take the money twice.
The communications plan is key to the success of a contactless strategy. As
part of this, people have to be made aware that NFC is as safe, or safer, than
chip and PIN.
On contactless, the amount of small payments through credit cards has
increased. One of the challenges is that people use plastic for small payments.
We will start tests on mobile proximity payments with NFC in 2015, working
in conjunction with mobile network operators (MNOs).
In Germany, I tried to pay by contactless at a petrol station and was told it
takes too long and it was better to pay by cash!
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Regulations
A credit company which deals mostly with retailers said that one of its pressing concerns is the
forthcoming Payment Services Directive (PSD2). This could have an impact on private label cards
and could change a lot of things. The company said that it has to keep a close eye on the reduction
of fraud levels by customers. There is an interesting definition of limited networks and there is also
interest in the way overlays will access current accounts, which is very dangerous. A Council member
also said that the PSD2 represents a major problem for many banks. This has caused some to grow
afraid of investing in innovation.
A member commented that he had originally viewed PSD as an opportunity. However, now it is getting
closer he is more worried. Banks in some countries, such as Turkey, can adapt more easily to the new
developments. However, Western European banks have more legacy and might be too slow to adapt
and bring enough added value to the customer to stop them from moving over to third parties.
Another participant replied that there was some good news, as banks will now be able to charge
third parties if they give them information about the account (e.g. whether there are sufficient funds
etc.). In one country, there is a potential issue about faster payments and whether access can be
provided via a bank or whether people can go directly into it.
In the UK, the payment systems regulator has a remit to promote innovation as well as competition.
But can (and should) regulators promote and drive innovation? A member remarked that the purpose
of the regulator is to provide a level playing field for all market participants and to protect them and their customers - against the insolvency of the system, banks and the individual marketplace.
Regulators can’t promote innovation except indirectly, as a consequence of their actions.
Another view was that in counties such as France, there are too many regulations and this can
kill a business. New regulations always add new cost and make it difficult to invest. There is also
increasing fraud with the use of new technology, mobile etc. For example, users might say that they
have lost their mobile and the MNO therefore sends them a new SIM card - but this can generate
fraud. Every time banks find out how to cut fraud, it goes somewhere else
“
What the council said:
By bringing in the regulators, is it creating an issue for banks in the future?
No matter what happens in relation to regulations, there is huge pressure on
the sector from start-ups and other models.
We need to remind customers constantly about security.
Regulation will erode margins and will change the landscape substantially.
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Interchange
A Council member explained his bank’s vision in relation to innovation in the payments sector. He
commented that Turkish banks are particularly innovative: there’s a lot happening in this area, and
they approach the topic in the right way. However, some countries are facing problems, especially
from one or two regulators who have a bad view of banks and are making life difficult for them. The
EC is suggesting that banks have to foster innovation by opening areas up to non-banks.
Banks are responding by saying that if interchange is taken as an example, the Commission at
least needs to decide what its long-term strategy is – otherwise banks can’t invest. At the moment,
one bank said that it is investing in mobile banking, digital wallets and security and there is also a
continual need to improve fraud prevention. Although this bank welcomes competition, this must be
on a level playing field between banks and non-banks. At the moment, the bank is losing money on
cash and cheques. The only payment method where it can gain a little money is on cards.
The Council member commented that Europe will be the continent with the lowest interchange
rate in the world but it’s uncertain yet whether this will be a good or bad thing. One survey has
shown that when the interchange is reduced, the benefits aren’t passed on to the consumer - they
are kept by the distributor.
The bank believes that it will end up with a 20 or 30 basis points interchange (20 for debit, 30 for
credit). If so, it will be happy, as there was a risk of the interchange falling to zero, as in Denmark.
The Bank of Italy recently proposed a document about weighted interchange to try to find a solution
for each country, as the economies of single countries are different and interchange can’t be applied
the same in Italy as it is in Denmark.
In countries such as France, interchange regulations can affect 50% of a bank’s revenues, as most of
the payment revenues come from cards. It’s difficult to see how banks can make money from direct
debit, so cards tend to be one of the main revenue streams. Banks will have to find other revenues
or other customer services. The new regulations don’t favour the customer as merchants won’t lower
their prices, so banks will have to increase the card fees.
In France, people mostly have just one card that they use. Customers have the choice either to
have just a card or to buy a package with insurance and some services. There is a fee just for
the card. In Spain, the reduction of the interchange fee happened some years ago. The Spanish
regulator forced an agreement between the banks to reduce the interchange rates over a two year
period. It reduced profits and the reaction of the banks was to find alternative revenue sources - the
main one was card fees. There was also an element of cost reduction. In some cases, there has
been a reduction in the benefits of having cards.
In Germany, banks could also lose a large proportion of their interchange income due to interchange
regulations. This might not happen immediately, but they are already trying to prepare some
strategies for generating other income streams. The country has a strong debit card market and a
domestic scheme linked to the current account. The merchant fee on Giro card transactions is very
low - between 0.2 and 0.3 basis points. It is therefore close to the regulated interchange fee, so on
debit cards, banks don’t lose anything. Some 98% of transactions go through domestic schemes.
On the other side, there are two credit cards models in Germany. Some big banks link the credit
card to the current account and the card is used like a charge card. They don’t charge fees and don’t
have a revolving credit business and they don’t charge any cash advance fees because they have
no ATMs in Germany. These banks will lose all of their interchange income. Other banks offer credit
cards on separate accounts with a revolving function. So, there are some very interesting interest fee
incomes and annual fees. It remains to be seen whether or not banks will increase other fees.
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Cards and payments
In terms of finding additional revenue to replace interchange losses, a bank said that it had been
looking at new services and new fees, as well as cost reduction. In its particular market, customers
have a strong affiliation with instalments. A long time ago, people used to use cheques and could
leave several cheques with the merchant and they paid out in monthly instalments. Card issuers and
banks are now offering a similar functionality on cards. Banks have found out that they can go the
extra step and have now introduced instalments on debit cards as well – although a Council member
remarked that this was a contradiction in terms!
Banks have adapted the PoS applications so that when a customer wants to pay an instalment on a
debit card, the merchant has to key in several parameters, including the number of instalments. It’s
a type of loyalty scheme as well, so there is a competitive advantage for the merchants. Now other
banks have followed suit and the merchants each have about ten PoS terminals! It’s a bit like having
post-dated cheques, with the risk being taken by the bank.
However, this approach provides an opportunity in the market, as some entrants are coming in and
offering the merchant the chance to combine the PoS terminals as there are so many devices on the
market, each one working for one or several banks. It’s therefore an opportunity for entrants to come
in with just one combined terminal. This already happens in countries like Turkey.
“
What the council said:
The banking industry is able to process payment transactions at low cost.
As we operate in many different countries, it’s in our interest to have a really
unified marketplace.
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Aggregators, new entrants
and access to information
Another important issue is access to bank accounts. One recent development has been aggregators
who put themselves between the bank and the merchant. They want to be able to access the
customer’s bank account and provide services to them, or to aggregate all of their accounts in a
single report. The EC has said that this should be happening in Europe.
However, the customer should be made aware that this will mean that he’s essentially giving secrets
to a third party. Banks must be informed if the customer has given his password to a third party, as
they can then enter the bank’s online banking system. It could create risk in the system. The customer
trusts the bank to keep their information confidential. If banks breach this trust, they won’t survive,
especially as their image is already poor. However, the speaker felt optimistic that the system will be
regulated in a way that won’t put the banking system at risk.
Some central banks have understood the seriousness of this issue. For instance, the Bank of Italy has
said that if the customer provides this confidential information, it’s at their own risk. Secondly, the
bank should be allowed to accept or to refuse the customer giving access to a third party for online
banking. This is also the position in the Nordic countries.
A participant commented that one aspect that is still lacking is the customer’s opinion. With the
advent of social media, the next generation will deal with information in a different way. How will
banks treat this information? They have to make sure that they know if their customer has given
information to third parties. It’s up to the third parties to prove that they have the agreements.
This is similar to the position with SEPA on direct debits. This could result in a system in which banks don’t
have to invest heavily in all kinds of solutions to capture and store this information from their customers.
Then they can offer services such as data mining etc. and it will all be easier for the banks to manage.
A member remarked that wherever there is a threat, there is also an opportunity. Overlay services
can ultimately be for the benefit of the bank. They can provide an opportunity to aggregate
multiple players as the primary financial service provider, so this gives banks the chance to provide
themselves with overlay services. However, another delegate said that although there are two sides
to the argument, so far banks have seen more of the threat than the opportunities. What is needed is
a clear framework so that banks can be secure and can then look at the opportunities.
A member commented that the third party could be another bank that could access the accounts of
its competitors. It’s sometimes an IT service company, so it isn’t regulated like banks and it’s difficult
to enforce anything. Another said that most of the players with overlays are start-ups, with no
transparency. If there isn’t a level playing field, the situation can become very dangerous.
The speaker said that his bank believes that payments is a part of its franchise. In France, it made a
deal with another bank ten years ago to create a joint platform as it had decided that it didn’t have
the critical size by itself. In France, the acquiring business is very competitive and the margin for
the large retail banks is very low. The group decided to extend this approach to its banks in Italy,
Luxembourg and Belgium, so that there is one platform for processing cards for different countries.
This can bring savings of up to 30%.
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Cards and payments
New entrants
A bank observed that there are many new players coming into the market. But what are the threats
facing banks? In France, for many years they were very afraid of co-branding. The new threat is
overlay services. The bank believes that a much bigger threat will be if the large Internet players start
to focus on payments, because they believe that by controlling the customer’s payment activities they
can increase their own business. They have strong brands, are famous and consumer-friendly. Banks
aren’t consumer-friendly. The Internet players have a lot of money: in its headquarters, Google has
some 400 people working on its wallet. It has failed twice because of security but it will eventually
come up with a solution. Banks can’t afford those kinds of resources.
The concern is that it’s a catastrophic scenario – banks could become the back office of Google,
Amazon etc. and lose the relationship with the customer. This could happen in the next ten years if
banks don’t act today and start to be innovative. The bank has therefore decided to develop its own
wallet for at least its best customers, to protect the future. Recently, a large French retailer decided to
develop its own wallet as a defensive move. In the US, Walmart has federated other large retailers in
order to develop a common answer to protect themselves. Banks need to think about these issues.
In the UK, Tesco Bank is about to launch a current account. If it combines this with its store loyalty
card etc., it will have a lot of data for analysis and can monetise it. Retailers with a bank constitute a
new threat to established financial institutions. However, a member pointed out that very few people
actually have their salary account with a retailer bank.
Another participant questioned what the consumer is likely to do. He said that in his country, despite the
ease of using a debit card, 70% of the transactions are still carried out in cash. The threat is that retailers
will change the whole way of shopping and will look at the overall shopping experience. It’s difficult for
banks, as their business revolves around the account. For Google, their business is using data.
PayPal recently said that it doesn’t want to create the same experience as banks but to create a new
shopping experience. The Apple Wallet is also on its way, merging the loyalty programme with the
payment method to create a whole new experience. The idea is to change consumer behaviour by
saying it will make it easier and give them benefits. Banks haven’t reached that position yet.
The speaker replied that payment habits are very slow to change. Twenty years ago, people
predicted that cheques would disappear in France by 2010. However, the country still has nearly
four billion cheques! So, it’s not moving quickly but it is moving. A new generation of consumers who
will enjoy the benefits of that. The idea that plastic will disappear in five years is wrong.
Two Council members said that their banks are already collaborating with PayPal. But is this a case
of ‘sleeping with the enemy’? One bank said that it had brokered its first deal with PayPal in 2005.
At that time, it was the cheapest option and the arrangement worked very well and there was an
associated increase in security.
Another said that it is trying to follow the market. The new generation has a different approach to
the market and PayPal helps the bank to target a certain segment and service them. He agreed that
MasterCard and Visa could become competitors to banks in the future. However, from his bank’s
viewpoint, it’s very complex to work with big data and this isn’t the moment to invest in it. A big
chain can cope with big data and can use it to make business. However, small businesses sell today
not because of big data etc. but because they are specific in the service they offer.
32
Perhaps one issue is to incentivise the customer to use a wallet. It will come eventually - Turkey has
already been successful with the wallet as the banks have worked together. In France, everyone is
going their own way. So, payment habits are slow to change and at the moment, card transactions
are by far the most prevalent payment method. Of the Council members present, five said that they
had launched a mobile wallet.
Partnerships
In relation to partnerships, a large banking group said that it has a full MNO company with two
million subscribers. It is using the MNO to develop its mobile acceptance and mobile payments
models. For the wallet, it is trying to bring something together for payments. It said that the key issue
is to have a lot of innovation but to be sure that it also has liquidity. Without the infrastructure, the
acquisition won’t happen. The delegate observed that NFC is still just at the beginning. Banks need
to act quickly or competitors will enter the market and they will be disintermediated.
“
What the council said:
Telcos won’t really play a role in payments but they will play a massive role in
places like Kenya.
From the consumer point of view, with so many apps available to them, how
can a bank win the game? Everybody wants to interact with the customer.
In terms of new technologies, it’s hard to know which will win
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Other issues
Big data
Threats to the dominance of banks will come from organisations such as PayPal or retailer banks like
Tesco or Sainsbury. They have a relationship with the customer that is much deeper than the bank’s.
So what makes Tesco, Amazon and Google different? They have a lot more structured data about
individual customers. Amazingly, 90% of the world’s data has been produced in the last 12 months.
Most is unstructured data. The traditional relational database model can’t handle it – it is big data.
In Google, the adverts on the web pages are about items or services that the users have searched for,
and Amazon tells the customer what other people with similar interests have bought. Banks can’t do
this as well, as they have a very fragmented view of the customer. They have data all over the place.
However, there is some basic but powerful data that can be obtained easily from Twitter. A bank
can therefore build a network of data that is in the public domain. This will help it to understand the
customer much better than just seeing the total amount of money they spend at a supermarket.
The problem is that banks don’t have the tools to analyse this information. Big data refers to both the
volume of data and the variety of data. How does a bank’s database help it to understand the data?
Oracle or relational databases can’t do this in real time. New database analysis is in real time and
gives scores, recommendations and profiles that can be used to target the individual. So banks need
a big data strategy as a key to the workings of the wallet.
Organisations such as Groupon send e-mails with offers as a ‘pull’ mechanism but banks could use
the mobile as a ‘push’ mechanism, so the customer receives an offer when they are in the store,
when they’re most likely to use it. To do this successfully, they need to employ big data techniques to
understand the customer and their preferences. In short, they need to look at data differently.
Banks can also use the bank account by transforming it into something that stores value. It sits firmly
in the middle of commerce, between the consumer and the merchant. They can approach merchants
to propagate their offers and can say that they can match the offers to the profiles of their customers.
Coupons can be stored inside a bank account and the customer can transact with them. This means
that a customer could walk into a shop, get an offer and make a purchase with a mixture of money,
vouchers and tokens. This also allows the bank to incentivise customers to pay by the cheapest
method. Offers can become intrusive, but this system is constantly learning and won’t send more
offers to the consumer if they don’t seem interested.
A member commented that big data is a huge issue for every market. He had always seen the role of
the bank as being the best enabler that could exist in the market for the customer. On the other side,
this puts the role of the bank between the market and the customer. Being in the middle changes the
business of the bank – and this is a huge change. The speaker replied that the bank doesn’t become
a merchant - just a facilitator of services between the merchant and the consumer. If the bank remains
just the organisation at the end of the process, it needs to see how to stop being just the dumb pipe.
A Council member commented that banks have to be relevant in every stage of the buying process.
His main hesitation was that banks could almost become like Google. Using all of the of bank’s
expertise to become like Google is a step too far.
A consultant explained that the whole concept of CRM will change in the future. Big data is more
related to the behavioural angle - and the CRM elements that have been missed in the core banking
application will be picked up by the next generation of real-time communication. Bankers will all have
a Skype-type dashboard: this isn’t that far away. However, it’s very investment-heavy. Some banks
have destroyed data warehouses for CRM purposes and have replaced them with these types of new
initiatives and the investments have been much lower. Many banks are maintaining very stodgy CRM
systems and the maintenance and licences are very costly. These are wasted investments.
34
Marketing and PR
The marketing of payments initiatives is changing dramatically. For instance, the trend for
companies like MasterCard to pay billions on TV advertising might change. New techniques such
as crowd sourcing are being used. Perhaps traditional marketing won’t be used as much in the
future. Banks need to stop thinking in silos and about products and start thinking holistically about
a day in the life of a customer.
However, a member disagreed and said that marketing is still important – and banks still need some
traditional marketing as well. Some direct banks have disappeared as they were too far away from
the customers in terms of trust etc.
One banker reported that in his country, customers are now looking for other solutions for their
banking needs. This is a nightmare, so his bank is trying to find a way of stopping the attrition of
its customers to other banks and card issuers. It has found that the most important factor is PR – this
has caused the public to have a negative opinion of banks, although 70% of it was sensational
reporting. The bank has been fighting back with its own PR to show that the bank is still solid and is
proving this by providing strong service levels and generating good customer satisfaction.
Identity
Another big topic is bank ID and electronic ID. In the UK, some companies are lobbying for the idea
of a universal identity but commercially the banks can’t see any interest in it. However, a member
commented that if banks don’t do it, other parties will. If the mobile handset is used as a central
device, identification is a key topic - but banks can set up the necessary infrastructure. Each bank
is at the same level of thinking. It’s also being pushed by central government – so it’s all coming
together at the right time and place.
That time should be 2015. It has to be built from scratch. Various factors, including SEPA and PSD
requirements, mean that there has to be co-operation in the existing infrastructure and by modifying
this, new opportunities arise with identification. A delegate questioned whether this is electronic ID
or mobile ID, because the latter is slightly different. Who will manage it? A third party might have to
step in and take control. The handset itself has different levels of security and perhaps electronic ID
demands the highest level.
In countries such as Denmark, it’s run by a service provider and developed on behalf of the
public sector and bankers. This has been much more costly than expected. There’s been some
disagreement on further development. Players with a further reach are looking for a solution that
is cross-border rather than a national scheme. It’s not just used in the banking environment but in
others, such as taxation.
What is the commercial benefit to the bank? It isn’t a money maker and might be a loss maker.
Outsourcing
A financial institution said that it had learnt a lot from the past. For cards, a major headache
involved processing, and whether this should be internal or external. The bank had internal
processes but decided to outsource these services to a processor who started to work on a
project. However, the processor didn’t produce any innovations or additional products and there
were a lot of hidden costs behind the initial offer.
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Cards and payments
The processor said it would introduce new services but the bank found that it could provide these
services itself and after two years decided not to outsource anymore. So, it lost two years of
innovation and is now trying to catch up and establish proper governance and a processing centre.
The bank had concluded that the dilemma between third party processing and internal processing is
now balanced in favour of the internal approach. External processors can cause a lot of headaches
by increasing prices and the economies of scale don’t work.
“
What the council said:
I think big data is another way to define the old concept of CRM.
We want to go beyond payments. If you’re going just after payments,
eventually you will lose out.
36
Conclusions
The cards and payments sector is facing difficult times, with many changes arising from new
regulations, increasing customer demands and changing customer behaviour; as well as the
development of new technologies and potential new payment instruments.
Banks need to rise to these challenges: they can’t afford to ignore them, as other players are waiting
in the wings, ready to take advantage of any new opportunities that might appear. Many banks are
already responding by developing new contactless solutions and their own digital wallets.
However, there is still an air of uncertainty: banks are hesitant to invest in new solutions that aren’t
fully tried and tested. This means that they need to experiment to try and determine whether new
technologies and new strategies can also bring in new customers and new revenues. In some
cases, they may need to overcome their natural caution and press forward – otherwise they risk
stagnating and losing the customers they already have. However, the issue is compounded by further
uncertainties about some of the new technologies that have been developed – for instance, there are
still some question marks over the future potential of NFC.
In addition, a new generation of customers is emerging who are likely to be even more demanding:
they have grown up with technology and are very familiar with it - and expect banks, like other
organisations, to offer easy payment solutions on devices such as mobiles and tablets.
The next few years will therefore be both interesting and challenging for retail banks and it will be
fascinating to see what new payment models and strategies evolve. The Efma Cards and Payments
Advisory Council will continue to hold lively debates and discussions, with members sharing issues
of concern and often widely differing solutions. We look forward to the future of cards and payments
with a sense of both trepidation and anticipation.
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38
About us
As a global not-for-profit organisation, Efma brings together more than 3,300 retail financial services
companies from over 130 countries. With a membership base consisting of almost a third of all large
retail banks worldwide, Efma has proven to be a valuable resource for the global industry, offering
members exclusive access to a multitude of resources, databases, studies, articles, news feeds and
publications. Efma also provides numerous networking opportunities through working groups, online
communities and international meetings.
For more information: www.efma.com or [email protected]
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Cards and payments
Are banks ready to meet the challenges of an uncertain future?
June 2014