Value-added Services beyond (e)payment - a view from Banks and Europe

Transcription

1 Value-added Services beyond (e)payment - a view from Banks and Europe AK epayment München, Dr. Michael Salmony

2 TAI AG: European Full Payment Service Provider Founded 2003 Shareholders DZ BANK AG, Frankfurt (95%) KBC N.V., Brussels (5% ) Deutsche Bundesbank Bayerische Landesbank WestLB other Sparkassen and Landesbanken 6 % Market share Germany 8 % 21 % 11 % 5 % 16 % Market in Germany 21 billion domestic Interbank-payments (2003) 7 % 5 % 4 % 8 % 8 % Other Commerzbank Private Banks Other cooperative banks Postbank Deutsche Bank Dresdner Bank Germany Market share Europe 25 % France *Netherlands 5 % 23 % 5 % Spain 5 % Market in Europe 58 billion payments in total (2004) 6 % 22 % Italy 14 % UK Others * MoU with Interpay on Joint Venture

3 Institutions which Process their Payments through us Following MoU with Interpay:.

4 Legislation in the EU Payments Area European ZKA EU Commission / Parliament EU Law 62 banks/associations for 500 M customers EU law increasingly dominates national law (e.g. Schengen, Competition, ) Already significant impacts on payments (e.g. price EU payments = price national) Now creating SEPA Single Euro Payments Area Nat l Nat l LawsNat l LawsNat l Laws Laws

5 Commission and EPC are well aware of Benefits of Innovations beyond classical Payments EPC e- & m-payments TaskForce since 2003 Cost-saving opportunity current non-stp payment methods (cash, cheques, ) cost Europe over 50bn /year use of electronic payments instead of cash/cheques yields savings for banks of 5.3bn /year SEPA Incentives Paper by European Commission & NLF Directive of European Parliament on e-invoicing Commission attaches utmost importance to this area Use SEPA as a catalyst to launch e-invoicing Non-theoretical, conservative savings exceed 100bn /year Banks are ideally placed to make these savings a reality

6 Positioning of Payment-based Innovations Value-added Services e-payment e-invoicing eid (m-payment) Re-use existing Bank infrastructure User habits SEPA Payment Schemes CT DD Cards Payment Infrastructure Clearing & Settlement

7 Example: e-payments Thoughts from EPC e-payment TF Task Force team of experts Working Group EPC Plenary EU Commission EU Law Banks EPC e-payments TF TAI AG (DZ BANK AG) represents all German Banks ToR: Model, needs analysis, scenarios, link to SEPA, areas for collaboration, recommendations for action

8 ecommerce - still a bubble? Already in 2003 ecommerce accounted for 5% of Western Europe s GNP ecommerce revenues B2C USA 2006e: 106bn$ (= global revenues of citigroup) economy > most countries (e.g. Kuwait) & growing at +40% y/y Growth rates (users, merchandise volume) ebay UK/F/I >100% y/y Increasingly new items and new categories (e.g. 11bn$ car sales 2004) B2B ecommerce revenues 6-7*B2C e.g. BASF 6,8 bn ecommerce in 1-3Q2005 During xmas time 41 items sold per second at Also: Travel/Tickets, Gambling, Sex,

9 Current status: Over 300 epayment Mechanisms in Europe

10 Convincing User Paradigms from Non-banks

11 Significance epayment Many e- & m-payment initiatives continue to collapse: Deutsche Bank Paybox, NatWest FastPay, Citibank C2IT, ahoo/hsbc PayDirect, 350m mobile user Simpay, Worldwide Volume of Electronic Payments exceeds Paper payments since 2000 Non-bank service providers increasingly active Paypal (potential: 147m ebay users and beyond) 96M registered users worldwide (>> population of Germany) Net revenue 4Q05 to ebay from Paypal: 304m$ (= +48% y/y) cf. 526m$ ebay s revenue through US shopping Paypal increasingly targeting payments outside ebay (30% in 2005) Google (potential: internet users) => Threat to banks (disintermediation, revenue, trust, )

12 To Banks Disintermediation/Branding Less regulation cheaper for Paypal P2P to replace bank transfers Lose float Price/Merchant fees Threats from PayPal To Merchant Less tools against fraud than CC Chargeback months later (Paypalwarning.com) To Customers Lack of identification of counterpart Terms of Service: can not sue them Phone no. intentionally hard to find to save costs Paypal may freeze account (Paypalsucks.com) What if Paypal closes? ( we believe your funds will be protected ) To Economy Money laundering

13 Major Demand-Driven Scenarios What is the best epayment solution? Web Auction ebay etc. Web-shop for physical goods Amazon, hardware, Virtual goods & services on the Web Virtual Goods (software, music, texts, adult, ) Services (betting/gaming, travel/tickets, ) egovernment (license/tax/toll/parking ) Scenarios may require differing attributes: Guarantees Anonymity Micropayment

14 Requirements on epayment Solution common attributes easy-to-use, secure, standardized, transaction based: clear when payment made (once only!) for end-user cheap (71 % want it free!) revocation option (62 %) goods first, pay after (59 %) reputable epayment provider/brand choice of underlying payment systems integrates in user's workflow (e.g. use same payment method in web and real life integrates in user's environment (e.g. no card reader) fast anonymous guaranteed delivery of service/refund on failure allows access to good content/partners choose means of payment for merchant fast integrates in company's workflow integrates in company's environment cost-effective identify buyer in case of dispute guarantee of payment (cf end users want revocation!) money asap binds client to merchant choose means of payment e-reconciliation liquidity mgmt: certain date of payment for bank revenue (unlike paper-based, DD, online CT) not excessive load on system integrates in bank's workflow integrates in bank's environment business case CRM with PC/BC new revenue opportunities customer satisfaction

15 Satisfying Requirements no easy Answer Many attributes (easy, secure, cheap,...) Cannot prioritise (order differs on scenario) Attributes within user group conflict no single e/mpayment solution satisfies all many needed (1 < x << 300) Attributes between user groups conflict

16 Requirements on epayment Solution mostly satisfied by Cards common attributes easy-to-use, secure, standardized, transaction based: clear when payment made (once only!) for end-user cheap International (71 % want it free!) revocation option (62 %) Critical mass (cust+merch) goods first, pay after (59 %) reputable Brand epayment provider/brand choice of underlying payment systems Trusted payment Margin method for Banks in web and real life reader) Good for repeat payments Fast P2P coming integrates in user's workflow (e.g. use same integrates in user's environment (e.g. no card Anonymous guaranteed delivery of service/refund on failure allows access to good content/partners choose means of payment for merchant fast integrates in company's workflow integrates in company's environment cost-effective Multi-currency identify buyer in case of dispute guarantee of payment Close (cf end to users banks want revocation!) money asap binds client to merchant STP Massive choose means investment of payment in security e-reconciliation liquidity mgmt: certain (3D, date of chip, payment...) for bank Easy to use Risk Managment revenue (unlike paper-based, DD, online CT) not excessive load on system integrates in bank's workflow integrates in bank's environment business case CRM with PC/BC new revenue opportunities customer satisfaction

17 More and more Demands are being solved by Cards Online real-time Statement vs. monthly paper VISA direct, Mastercard MoneySend Individuals who wish to accept card payments without paying merchant account fees P2P , SMS initiation and confirmation RFID contactless payment Scratch Cards (e.g. Paysafecard) Anonymity Low value payments/micropayments Payment Chip Cards Low value payments/micropayments White cards: anonymity

18 But Cards do not solve Everything Solution for those who do not have/want cards e.g. 92% no cards in Lithuania, 75% no credit cards in Germany, 43% no bank cards in Italy, Solution for those who do not have/know of debit/wallet card use in Internet Solution for those who do not trust credit card use in Internet Enhanced Efficiency/STP/Convenience (e.g. no registering CC at each merchant, workflow) Micropayment/wallet solution (cf. Telco Bill) Alternative(s) to card-based mechanisms required

19 What epayments best Satisfy Requirements? Attribute matching Scenario attributes Scenarios micropayment anonymous Ímmediate notification quarantee to payee ereconciiation/stp pre-paid/ online/ post paid refunding mechanism who pays payment fee payment fee sensitivity hi/lo aggregation Remarks Auction m H Webshop physical goods m H Webshop digital goods m H E-Government c L Current Solutions E-pay via Online banking onl m L PayPal pre m+c H FirstGate post m L Credit Card post m L TelCo Account post m

20 Current Focus of EPC epayment TF SEPA Schemes Online-Banking based Aggregated (maybe anon., µpayment) Cards with 3D secure DD giropay (D) eps (Ö) ideal (NL) NetBanka (CZ) edancard (DK) Interac (CA) solo (FI)... ewallet Firstgate Two Thrusts of epay TF

21 Online Banking Based epayment Payer s View Select OBeP as preferred payment mechanism Select bank

22 Online Banking Based epayment Payer s View Sign in to online banking Online Transfer - already filled in just add authentication

23 Online Banking Based epayment Payer s View Bank Confirmation Shop Confirmation (Merchant has already received payment guarantee from bank!). Goods delivered immediately.

24 Benefits of Online Banking-based epayment Large base Existing national schemes + 84M online-banking customers in EU by 2007 Customers Known Online Banking Immediate goods delivery Integration in application No multiple CC detail entries, banking details not disclosed to merchant No new userid/passwort/registration Merchants Open market national Europe Immediate, irrevocable, guaranteed payment No acquiring contract ereconciliation Banks revenue (unlike paper-based, DD, online CT) STP Existing (online banking) infrastructure Bank-controlled (unlike Paypal )

25 Challenges regarding Online Banking-based epayment Security Issues (to be treated by EPC security TF) Bad site phishes bank authentication data rely on robustness of online banking authentication Creating single point of failure and aggregating European volumes honeypot for hackers Phishing: don t follow reroute to bank OBeP: do follow reroute to bank inconsistent communication to customer Multi-level authentication ebay Paypal OBeP bank sign-on transaction Routing to 8000 European banks, branding Interoperability of existing OBeP solutions in Europe

26 Business Case Plausibility of epayments Future European investments for SEPA epayment limited due to re-use of existing (online banking, card, authentication, ) infrastructure New revenue opportunity for banks: Merchants willing to pay 1.75% premium for guaranteed payment [source: IZH3 2005] estimated additional revenue for European banks of 400M in 2008 Cost-saving opportunity for banks: current non-stp payment methods (cash, cheques, ) cost Europe over 50bn /year [source: EPC cash WG] Net costs to banks due to cash handling in bn EUR / year Cash can be substituted, e.g. cards [source: McKinsey] Relation: card payments cash payments Card payments per head DE IT UK ES FR PL NL BE SE Rest 5,50 2,90 4,00 3,10 2,10 1,45 1,08 0,50 0,51 4,46 25,60 Cash payments per head

27 Positioning of Payment-based Innovations Value-added Services e-payment e-invoicing eid (m-payment) Re-use existing Bank infrastructure User habits SEPA Payment Schemes CT DD Cards Payment Infrastructure Clearing & Settlement

28 Why e-invoicing? 97,5% of all invoices worldwide are paperbased Biller Paper-based process Order Payer Invoice Electronic process => very cost-intensive process Payment order Credit note Possible potential for cost reductions per invoice for Biller approx. 5, for Payer approx. 30 (on average incoming invoices are copied 7x, are forwarded 5x by internal mail,!) Bank A Payment/clearing Bank B x invoices annually in Europe [Source: CSC Ploenzke AG, Bayern LB, Nordea] = 100 bn$/year savings in EU

29 e-invoice within Online Banking 2. TAN 1. Selection 3. Confirmation

30 Opportunity for Banks Private clients Billers Re-uses existing Billers Private clients Banks Bank investments (network, online banking) User habits (pay online bill online) Corporate clients Banks Corporate clients Everybody has a bank account! Using standards available (ECBS, epi, ) online banking as interface to customers An infrastructure to transport the e-invoices sales power to reach critical mass

31 Positioning of Payment-based Innovations Value-added Services e-payment e-invoicing eid (m-payment) Re-use existing Bank infrastructure User habits SEPA Payment Schemes CT DD Cards Payment Infrastructure Clearing & Settlement

32 eid with Firstgate re-use Information on Banking Customer User details from Bank account reused for third party registration Select easy check-in

33 eid & eauthentication Examples beyond Banking Pension system in Finland Tax return in Estonia [Source: Nordea]

34 Proven success of eid in Finland [Source: Nordea]

35 Further Value-added Services Corporate Services along financial value chain Qualification Financing Pricing Risk Management Fulfillment Billing Dispute Payment e.g. Shell Cross-border payments cost us 20 each. Optimising bank charges (ca. <1 ) - who helps us to optimise the remaining 19!? Tracking of payments (like UPS & FedEx) Archiving services (edoc) Data Mining (re-use payment data in accordance with data protection laws) Benefits to banks of re-using their infrastructure Added revenue Cost savings Customer retention through value-added differentiation

36 The Key to Success is Co-opetition Competition in the front (pricing, service, ) Cooperation in the back (standards, infrastructure, ) Everything is connected in the eeconomy epi epayment EBPP ereconciliation Firstgate Tax Return eid & eauthentication evoting einvoicing Integrated debt collection Other eservices

37 Summary A number of value-added services based on payments are emerging Large financial benefits for customers and banks Key: Re-use existing infrastructures and habits Co-opetition (develop standards, back-end services together) Examples epayment online-banking based epayment einvoice 100bn$/year in EU savings potential eid Financial value chain