Cross-Industry View on Open (Payment) Systems

Transcription

1 Cross-Industry View on Open (Payment) Systems Tomorrow s Transactions Forum Michael Salmony London, 19 th March 2014 Classification: external Status: final Michael Salmony Personal Background Computer Science PhD in Computer + Networks = New Media International Business Transformation of Industries through Technology Banking New Services / New Processes Payments Innovations, Regulation, Industry Relations 2 XS2A -Access to Account -Salmony 1

2 IBM Experience Hosts, Communication Controllers, Establishment Controllers, SNA, Token Ring, 3270 Terminals 3 Lesson Learned Open systemsaregood! BenefittoIT economy BenefittoIBM 4 XS2A -Access to Account -Salmony 2

3 Deutsche Telekom s Experience Resisted liberalisation tooth& claw Nowhave50% ofa HUGELY biggermarket 5 Apple hadtolearntoo 6 XS2A -Access to Account -Salmony 3

4 General Lessons Learned Open systemsaregood! Benefit to telco/music/ economy Most benefit to incumbent (ifhe getsitright) Maybehe hastobeforcedintohisluck (regulator, jailbreak, ) 7 Will Banks Benefit? PSD2: Access toaccount forthird Parties! Benefit to payment/banking/economy? Most benefittobanks? (iftheygetitright) 8 XS2A -Access to Account -Salmony 4

5 We already have Third Parties in Payments Paypal is an Overlay Service Uses bank infrastructure(ach, network, debit, security, ) without paying Provides serious convenience and added value over pure bank services World-wide service(pay anyone in any currency with my local account/card) Regulated(Luxemburg) POLi, mazooma, Payment Network AG/ Sofortüberweisung/DIRECTeBanking, T-Pay OnlineÜberweisung, PinTanGo, ebank2pay, Citadel, Przelew, mazooma, yodlee, Trustly, ebank2pay, UseMyServices, UseMyBank/UseMyFunds An overlay of overlays! Rise of new Overlay Services Also use bank infrastructures, most without paying, mostly without contracts Add serious convenience and added value to merchants and users Typically national, beginning European-wide service Mostly not regulated 9 Banks are being disintermediated in Online Application Platforms Zynga credits Facebook credits App Store 888/WoW Buxter mpaypal/bump Boku Non-Bank - VAS Click&Buy PayPal Voucher Mobile Prepaid/Bill Voucher Non-bank Overlay of overlay UseMyFunds Non-bank - Overlay Sofort Bank -VAS OBeP Credit Card Biometrics web/m banking Bank -basic payment instruments CT Debit Card DD Cash e-purse Bank Account 10 XS2A -Access to Account -Salmony 5

6 Banks are being disintermediated in Online Application Platforms Zynga credits Facebook credits App Store 888/WoW Buxter mpaypal/bump Boku Non-Bank - VAS Click&Buy PayPal Voucher Mobile Prepaid/Bill Voucher Non-bank Overlay of overlay UseMyFunds Non-bank - Overlay Sofort Bank -VAS OBeP Credit Card Biometrics web/m banking Bank -basic payment instruments CT Debit Card DD Cash e-purse Bank Account 11 Landslide Shift in Payments Revenue (N.B. all payments not just online) payments not initiated through a bank current account. In-wallet or wallet-to-wallet transactions without bank involvment European Payment Strategy Report May 2013 Howcanbanksreversethistrend? 12 XS2A -Access to Account -Salmony 6

7 PayPal in Germany recent Evolution The fightin online islost? 14 XS2A -Access to Account -Salmony 7

8 Paypal in Perspective after 15 years 15 Only with banks will true volume be achieved? 16 XS2A -Access to Account -Salmony 8

9 Some Bank Answers Clone PayPal e.g. V.me Or: OBeP Online-banking based payment ideal, giropay, eps, post finance, Przelew, EBA MyBank, currently few & at best national successes Or: local, (sub-)national solutions PayLib, Pingit,... Or: pan-european e-payment Framework EPC work for 7 years Stopped by DG COMP in June Payment as a Platform European Taxi App Twitter services Google services Facebook services Controlledaccess/ process app app app app app app app Data Mining service Personal Finance Mgmt In-Game services Networth service Identity Service Standard interface Standard interface Apple iphone Bank account 18 XS2A -Access to Account -Salmony 9

10 Possible Standard Interface to Bank Account CAPS = Controlled Access to Payment Services CAPS i/f 19 Paypal hasbeenshowinghowit sdone(again) for years: Open Innovation Opened up to Developer Community provide API, tools, community(pp Innovate 2010 the only developer conference dedicated to payments), leverage PP assets: merchants, customers, fraud prevention, brand, Result Banks have much better assets! Initiative to all developers to embed their apps directly on PP website Tools to allow design of apps across platforms: Android, iphone, etc. One solution for laptop, mobile, tablet 20 XS2A -Access to Account -Salmony 10

11 21 Some Banks are already doing it 22 XS2A -Access to Account -Salmony 11

12 Stripe: API for Cards Offers API for merchants to easily accept credit card payments VISA, MC, AmEx Advantages to merchants: don't need merchant accounts, no need to worry about PCI compliance prior to stripe, merchants had to work with various third parties including merchant banks, gateways, compliance and recurring payment services, just to begin accepting payments online. By implementing stripe technology, businesses only ever need to work with stripe and are never caught in the hassles between third parties does currency conversion (USD, GBP, EUR) on behalf of clients -allowing e.g. UK merchants to show potential customers pricing in their domestic currency Status: 8/13 processing $1ma day got 40m$ in funding going to US, Australia, Germany (already in Canada, Belgium, Ireland, France, NL) simple flat pricing 2.4% +20p/Tx 23 Everybody now doing APIs CES XS2A -Access to Account -Salmony 12

13 Controlled Access to Payment Services (CAPS) Extended possibility: Account aggregation services E-Mandate/ signing services Data Mining services, andmaybenot onlyforpayments? E-Id, E-Age, E-Authent, services 25 Scale of Scary-ness 26 XS2A -Access to Account -Salmony 13

14 Risks Risk to Banks Banks have to develop new infrastructure at great cost Third Parties benefit commercially and improve position vs customer Bank receives no revenue, become increasingly disintermediated, degraded to commodity provider Medium term reduction of card volumes, card revenues Risk to Economy (UnlikeIBM, Telecom, Apple ) Ifinfrastructureishacked/compromised, all funds/payment endangered 27 Prerequisites for CAPS Third parties: Are regulated(psd)/certified Are committed to joint legal framework with bank, merchanttoensureliabilitypartitioning, joinedupusercommunication, disputeresolution,... Are secure(cf SecuRePay), preserveprivacy, reliably identified(no impersonation), Are fullyunderusercontrol (allowwhotoseewhat) Pay fee(use of infrastructure, new service etc.) 28 XS2A -Access to Account -Salmony 14

15 Preamble to PSD 2013 YES!! But Coverage of new services and service providers enabling access to payment accounts The current PSD does not cover these actors insofar as they do not dispose of the payer s or payee s fund at any time. The fact that these TPPs are currently unregulated, at least in certain Member States, has raised security, data protection and liability concerns, despite the potential benefits brought by these services and service providers. The proposal bringsthird party service providers offering notably online banking based payment initiation services under the scope of the PSD. This should enhance new low cost e-payment solutions on the internet while ensuring appropriate security, data protection and liability standards. In order to be allowed to provide payment initiation services, TPPs would be required to get licensed or registered and supervisedas payment institutions. Like other payment service providers, they will be subject to harmonised rights and obligations, and in particular security requirements. The envisaged ruleswill in particular address conditions for access to account information, requirements regarding authentication and rectification of transactionsand a balanced liability repartition 29 Direct to Bank Account! Application Zynga Bank API Bank Account 30 XS2A -Access to Account -Salmony 15

16 This will happen! Market demand/pressure Regulator Open systemsalwayswinin the end 31 Howwill thismove? Standards Euro Retail Payments Board Thebodyfor agreementon payment services between banks and stakeholders Regulator Coalition of the willing? 32 XS2A -Access to Account -Salmony 16

17 34 Salm ony - Cross - Indus try View on Open (Pay ment ) Syste ms Lond on, 19th Marc h /03/2014 Summary HistoryofsuccessofOpen systemsvsclosed It s now the banks /payments turn Better to disrupt yourself rather than let others disrupt you Open standard interface for Controlled Payment (+ Card) Services: CAPS to unleash creativity of the market with Third Parties Good for banks, merchants, users: Ends currentpractices(passingon private credentials, unrestrictedaccesstoaccts, screen scraping/impersonation, unregulated, ) Links users/merchants directly with bank(no disintermediation, better security,...) Prerequisites(regulation/legality/security/control of access) somewhat given in new PSD regulation but many questions/concerns open Potential to lead to explosion of innovation, competition, new services Maybe biggest winners will again be the incumbents(banks) BANKS NEED TO POSITION THEMSELVES Itwill come, so shapetoyouradvantage(valuechainposition, prepareservice, partner, use solution for value added services, lobbying, ) should watch(and maybe lead/drive) this Follow orembrace? CoalitionoftheWilling 33 Michael Salmony T [email protected] Executive Adviser Board of Directors/Strategy [email protected] twitter.com/equens Thank you Sound solutions, solid results XS2A -Access to Account -Salmony 17