Evolution of Payments Ottawa 2013
Bringing Together Conference Themes Members Access to services Convenience Innovation New entrants Partners Delivery Technology Mobile Cloud / SAS 3 Common Elements of Payments Cash, Debit or Credit to an account 4
Variables Across Countries Evolution of payment platforms Reaching the underserved 5 Growth in Phones Projected to exceed population Billions World Bank IC4D 2012: Maximizing Mobile 6
Building Blocks SmartPhone It can talk Knows who you are It can listen Knows your friends It can see Knows when you arrive It can remember Controls other things Knows what you like Knows where you are Runs your apps Can get your attention It can replace your wallet Can access the cloud But does it know where you shop? 7 Mobile Enables New Services Redwood Credit Union Mobile Banking 8
Key Themes 2013 Global Cloud / SAS Service delivery models Mobile New Regs POS Rethink Faster Money Social & Virtual Currency Digital Payments 9 The New POS 10
EMV Worldwide Status U.S. Market Has Been a No-Show Region Cards Terminals Europe - Zone 1 81% 95% Canada, Latin America 49% 78% Africa & the Middle East 29% 77% Europe - Zone 2 15% 73% Asia Pacific 27% 51% United States 0% 0% Source: EMVCo Q4 2012 11 Three Types of Chip Cards Contactless Card Magstripe Emulation Chip and antenna embedded inside card Contact Card (EMV) Chip and contacts exposed on card surface Dual Interface Contact + Contactless (EMV) Contact chip and contactless antenna in card 12
The New POS 13 EMV U.S. Roadmap October 2013 PCI reporting relief V/M April 2013, Acquirer/ processor (V/M/D/A) October 2013, PCI AmEx, ADC relief MC (50%) October 2015, Fraud Liability Shift October 2017, U.S. fuel merchants American Express, Discover, MasterCard and Visa have harmonized their U.S.-specific compliance and liability shift dates for counterfeit cards 14
The New POS 15 Simplicity in Pricing 16
The New POS 17 Faster Payments 18
Innovation in Core Payments Systems Move to accelerated clearing times for bank transfers 19 UK Faster Payments New core payment system Push payments (credit transfers) processed in real time Bank-to-bank settlement is done in mini batches during the (same) day Used for consumer and small business bill payments Impetus was bank regulators wanting to reduce risks and inefficiencies in current systems Now used for all bank-initiated phone and internet payments 20
Mexico SPEI Real-time (not batch) push payment system operated by Banco de Mexico (the central bank) Introduced in 2004 and very successful Being used for vendor payments, bill payments, even payroll in some cases Payments are made via online banking. Once initiated, the payment is final to the receiver within one minute Central bank is considering extending service to enabled unbanked consumers (80% of population) to receive payments via mobile phone 21 Bank of Japan - Zengin Central bank operated system for large or small value transfers 22
Reserve Bank of Australia there are some market failures that may prevent innovation in the payments system market forces might not be sufficient to produce some types of innovation that are in the public interest All Direct Entry* payments should be settled on the day payment instructions are exchanged by the end of 2013. There should be the capacity for businesses and consumers to make payments in real time, with close to immediate funds availability to the recipient, by the end of 2016. *Similar to U.S. ACH system 23 Canada: Interac etransfer Send through online or mobile banking Offers guaranteed funds Funds are available immediately (within half an hour) upon deposit by the recipient 24
U.S. NACHA Same Day ACH is going nowhere Request for Comment from NACHA 2011 Rejected by NACHA bankers in August 2012 Same-day batch system (not real-time) Both credit and debit ACH payments Positioned as an enhanced service for originating banks to offer originators Mandated for the part of banks Federal Reserve Bank continues to study the issue 25 Core Processors Enter the Fray PayNet A non-card-based solution for E- commerce, personto-person (P2P), bill pay, mobile and international money movement Popmoney Instant Payments Enables consumers to send and have it credited to the recipient's account within seconds 26
Mobile Wallets 27 What Is a Wallet? A single payment app that does everything? 28
What Is a Wallet? One of many apps that handles payment? 29 How Viable is the Normal Checkout Process? Okay Not So Easy No Way 30
Wallets North American Examples 31 Mobile POS Wallets 2 Approaches 1 NFC/SE: 2 Cloud: Payment data on the Payment Data phone in a secure element in the Cloud 32
Wallet Wars From Telcos to Banks to 3 rd Parties / Merchants Deutsche Telecom CIBC / Rogers Starbucks 33 Telco Involvement in Mobile Wallets Extension of peer to peer - especially in developing world Mobile P2P wallets provide banking services to unbanked, often rural populations Usually provided exclusively by a mobile carrier, or in concert with one or more banks Expanding to incorporate: Domestic purchases at merchants Bill payments Cross-border remittances Often SMS based 34
M-Pesa, Kenya 35 Isis Verizon, AT&T, and T-Mobile NFC/SE platform 36
Telecom Consortiums for Payments Canada Entrust: Rogers Wireless, Bell Mobility, TELUS Mobility U.S. Isis AT&T, Verizon, T-Mobile UK Everything Everywhere: Vodafone, Telefónica, France - "Buyster" - Spain Orange, Telefónica Movistar, Vodafone Bouygues Telecom, Orange, SFR Italy Telecom Italia Mobile, Vodafone Italia, Wind, 3 Italy, Fastweb, PosteMobile Germany mpass - Telefónica Germany, Deutsche Telecom, Vodafone Taiwan - Chunghwa Telecom, Taiwan Mobile, Far Eastone New Zealand - Telecom New Zealand, 2degrees, Vodafone 37 Banks Partnering with Telcos 38
Mobile Payments vs. Mobile Commerce 39 CardSpring/ First Data OfferWise Developer platform for card linked offers 40
Key Considerations Does the wallet: Want a relationship with your customer? Have a payment method of their own? Have a role in the transaction or store credentials? Assume fraud risk? Provide offers to consumers and with what data? Use NFC, SMS or other technology? 41 V.me by Visa 42
We're designing an easy way to speed through checkout lines with a whole lot of peace of mind. 43 PayPal Digital wallet Send money without sharing financial details 128 million accounts Global capabilities: 193 markets and 25 currencies Expects $20 billion in mobile payments in 2013 44
Apple itunes App store - beyond music and video ~ 575 million cards on file as of June Efficient transaction aggregation system Simple, singlepayment method wallet 45 Apple Passbook Geo-aware Balance updates Alternative to email alerts Time aware Dynamic updates Access from lock screen Prepaid Cards Alerts Boarding Pass Coupon Loyalty Card Event Ticket 46
Square Wallet Cloud model Give your name at checkout Participating merchants know you are near Pay without touching your phone or wallet 47 Data Usage and Ownership Big Issue and key consideration for partnerships Purchase data and personal information are key to effective wallet marketing programs Bank payment data from: Issuer? Card network? Consumer opt in to use their data Merchants view of productlevel data 48
Merchant App or Wallets Merchant Apps Cross Merchant Apps Pharmacy Quick Service Apple Passbook Square Wallet 49 A Cross Merchant Wallet Much-rumored mobile payments initiative coming into public view dedicated to offering consumers a versatile mobilecommerce experience will combine the convenience of paying at the register with customizable offers Participants include 7-Eleven, Best Buy, CVS, Lowe s, Publix Super Markets, Sears, Shell Oil, Target, Wal-Mart and others Partnered with Gemalto - No details yet 50
LevelUp Your personal QR code Cloud model Free payments make money from merchants by helping them bring in new and existing customers 51 Virtual Money
Expansion of Virtual Currencies? Spend Anywhere? Spend at Issuing Merchant Spend at Affiliates of Merchant 53 Bitcoin Global, largely anonymous digital cash Both a commodity and a payment system Uses a distributed, token-based currency Push payments: no reversals / chargebacks Currency conversion fees, no transaction fees Based on public/ private key cryptography 54
MintChip Royal Canadian Mint Secure, central-bankissued form of digital money Challenge to developers: create payments applications 55 Innovation 56
Types of Innovation Consider these four ways to enter with innovative services New customer products Utilize vendor innovation New technology solution Business model innovation 57 Product Innovation 58
Darker Side of Tech Innovation ATM Card Skimmers Utilize Vendor Innovation FIS Paydiant Visa Monitise Network wallets 60
Business Model Innovation Innovation in Distribution 15 years ago prepaid gift cards created to replace gift certificates 5 years ago innovation in distribution changed the market 61 Cloud Enables Shared Technology Pooling investments in a platform 62
Shared Service Model Co-Op shared branch network 63 Access to Payment Services Represents the interests of almost 500 credit unions in Ireland Membership of the ILCU is open to every credit union in Ireland The functions of the ILCU include: Promoting the credit union idea and ethos Representing affiliated credit unions with Government, the EU and other agencies Providing central services to credit unions 64
Service as a Competitive Advantage Take service oriented nature and apply to payments 65 Why Evolve? The goal of payment strategies is to extend what services an institution is capable of providing to match the delivery methodologies members want and need New entrants represent a threat and opportunity Need to be at the table 66
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