Digital Payment Trends

Jean Sideris

Principal, Dubai Office

Nicosia, 18 February 2020

© Edgar, Dunn & Company, 2020

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Edgar, Dunn & Company is an independent global financial services and payments strategy consultancy

Financial services and payments focus

Six office locations worldwide

Independent - owned and controlled by EDC Directors

+1,000 projects completed

+250 clients in 40 countries & 6 continents

EDC Key Metrics

EDC: Independent, Global, Financial Services

Founded in 1978, the firm is widely regarded as a trusted advisor to its clients, providing a full range of strategy consulting services, expertise and market insight, and M&A support

EDC has been providing thought leadership to its client base working with:

More than 40 European banks & card issuers/acquirers

Most of the top 25 US banks and credit card issuers

Many of the world's most influential mobile payments providers

All major international card associations / schemes & many domestic card schemes (including playing a key role in the establishment of such schemes)

Many of the world's leading merchants, including major airlines

Many Central Banks and Government Bodies across the world

EDC Locations

London

Sydney

FrankfurtParis

San Francisco

EDC Office

Dubai

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Consumers digital payment trends

Today we will discuss key trends in payments from 2 separate perspectives

B2B & B2B2C digital payment trends

1 2

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There has been an explosive development in payment options and it appears that alternative payments will continue to grow

Cards are not the only way to pay online

Customer preferences vary by demographic, country and product / service consumers buy - understanding local

preferences is key to increasing conversion

Alternative Payment Methods(>300 different types worldwide)

202019901980197019601950

Physical Digital

Cloud computing

2000 2010

Explosion of digital customerpayment instruments

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The payment ecosystem is becoming crowded as new players exploit opportunities unserved by incumbents

Traditional Banking New Challengers

Financial Services LandscapeAlternative Players

Traditional Challengers

Large Banks

Retailers Savings

Building Societies

Wallets

Prepaid CardsCrowd Funding

Full Service

Digital Front End

(US)

(GER)

Loans / Invoicing

(US)

MarketplaceLending

(US)

Money Transfer/ FX

(US)

(US)

(US)

(GER)

High Net Worth / Direct

Digital Only Banks

(US)

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Consumers digital payment trends B2B & B2B2C digital payment trends

1 2

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68% Want Instant P2P Payments

Source: Accenture US Data

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Consumers Prefer Natural Language Interface

Voice

or Text

Source: PPRO

9Source: Telstra

Source: PPRO Online Only

About 50% of Consumers Will End a Transaction if

Their Preferred Payment Option is Not

Available

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Source: GlobalData (2016), National Associations (2016), Postnord (2016)

Europeans Vary In Their Use Of Payment Methods

12%

28%

12%

45% 45%

27%

42% 44%37%

31%

20%

54%

5%

4%

6%

7% 5%

14%

11% 8%

4%

2%

4%

10%

10%

62%

16%14%

12%

9%

22%

21%

53%

60%

5%

23%

20%

6%

9%22%

23%

25%

12%

19%

12% 16%

25%

21%

30%

18%

20%

6%

5%

9%2%

9%5%

13%

25%

13% 14%20%

4% 2%

12%

Germany Austria Netherlands Sweden France Italy Spain Denmark Norway Finland Switzerland UK

Card Cash Bank Transfer E-Wallet Open Invoice Direct Debit Other

Payment Types By Country

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The Mobile Device Has Become A Key Force In Commerce

41%

45%

48%

52%

55%

59%

0%

10%

20%

30%

40%

50%

60%

70%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2018 2019 2020 2021 2022 2023

M-C

om

me

rce

as

a %

of

tota

l e-c

om

me

rce

(%

)

M-C

om

me

rce

(U

SD

$bn)

M-Commerce Value (USD$bn) 2018-2023

M-commerce ($USDbn) M-commerce as a % of total e-commerce

26%

38%

28%

46%

55%

41%38%

66%

48%

77%

70%

59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

NorthAmerica

Latin America Europe MEA APAC Global

M-Commerce as a Proportion of Total E-Commerce (%) 2018 - 2023

2018 2023

The prevalence of the card online is expected to reduce looking forward

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36,6%

33,7%

13,0%

7,8%

8,9%

Payment Card

E-Wallet

Bank Transfer (includes DD)

Cash

Other (prepaid, postpay, invoice, carrier billing, etc)

18,5%

46,7%

19,5%

6,6%

8,6%

Payment Card

E-Wallet

Bank Transfer (includes DD)

Cash

Other (prepaid, postpay, invoice, carrier billing, etc)

2018 2023

Confidential 13

Airplus – 2018 International Travel Management Study

95%

84%

59%

39%

28% 27%

5%

16%

41%

61%

72% 73%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

China India USA Germany Austria UK

Use mobile payments Do not use mobile payments

China is Leading Mobile Payment Usage Globally

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Mobile devices offer great tools to engage with customers on a regular basis

Apps

▪ In-app ordering/purchase

▪ Purchase/shipping status

▪ Receipts/purchase history

▪ Refunds/exchanges

▪ Reviews/feedback

▪ Customer service

▪ Account information

▪ Other types e.g. gamification

Operations

Mobile Could Make A Significant Impact To Customer Loyalty

Confidential 15

Ecommerce Entertainment

Car Sharing

Food Delivery

HotelMovie/Concert Tickets

Train/Bus/Flight Tickets

Car & Bike Sharing

Financial ServicesPayments

TravelTravel

Market Places & Food Delivery

Housekeeping

Alipay and WeChat Pay have created their own digital ecosystem covering consumers’ daily needs, surrounding payments

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Activities & tasks earn energy

Alipay Uses Gamification And Social Influence to Drive ConsumerBehaviors And Loyalty

Clear goals to achieve

“Energy is too low! I will die!”

Plant a virtual tree

450 million “carbon accounts”

20% of Chinese participating

13.3 million trees planted

Confidential

Alipay collects and uses data from the Alibaba environment (plane tickets, ecommpurchases, smartphone location etc.) to push relevant notifications based on location.

Coupons

17

Confidential 18

19

Source: Statista 2019

The Number of IOT Connected Devices Is Growing At An Unprecedented Speed

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The IoT Sector Is Currently Experiencing Significant Growth And6 Key Trends Shape The Future Of Connected Objects

1. Multiplication of devices 2. Data will drive value

6. Solving concrete pain points4. Fragmented ecosystem

3. Significance of payments

5. Consumers interest

Biometric authentication to access banking apps including

Touch ID and Face ID

Banks Everywhere Are Introducing Biometric

Authentication For Banking Apps

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Bank of China Hong Kong, China’s fourth largest bank, is rolling out finger-vein authentication at ATMs

China Merchants Bank and the Construction Bank of China, Agricultural Bank of China's (ABC) all

introducing facial recognition technology at its ATMs

Chinese Banks Are Rolling Out Biometric ATMs

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Confidential 23

Consumers digital payment trends B2B & B2B2C digital payment trends

1 2

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New players have entered processing by providing direct issuing solutions to industry verticals, either in association with issuing banks or bypassing them completely

Processing 2.0

Processing 1.0

Payment

Processor

Issuing Processing /

Card Management

Acquiring Processing

Interbank Switching

ATM Management

Fraud Risk Management

Merchant Services

Loyalty Solutions

Mobile Banking

Data Analytics

Online Payments / Gateways

Digital Platforms

Merchant Wallets

Open API Services

Tokenisation & IoT

Targeted Instant / Virtual

Prepaid Card Issuance

Industry Verticals

Open Banking

Real Time Payments

In-Store Experience

Omni-Channel Solutions

Processing 3.0

Evolving in line with digital

payments innovation, new

verticals are addressed through

tailored / packaged issuing

processing solutions:

Market places (e-commerce)

On-demand delivery

Disbursements

Alternative lending

Expenses management

Digital banking

Pay-outs

▪ Support companies in paying contract workers

Provide digital-first banks, non-banks, and financial service providers solutions for delivering convenience of day-to-day spending features to their customers through modern card programs

Configure purchase cards and control expenses made by companies’ employees

SMEs financing

▪ Open API enables lenders to provide flexibility to offer multiple card form factors to meet SMEs needs

POS financing

▪ Support lenders with virtual cards than can offer borrowers choice of merchant, easy onboarding of merchants without merchant integration pain, and approving and funding transactions in real-time without the need for lenders to integrate with each individual merchant

Insurance claims

▪ Support insurance companies to be more efficient in settling & paying claims

Support online retailers who use drop shipment by providing a virtual card that allows multiple supplier payments from a single transaction ensuring faster order fulfilment

Seamless payment operations for delivery companies (food & non-food) that typically operate with a fleet of couriers

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Examples of use cases within industry verticals

Disbursements

On-demand Delivery

Market Places

Alternative Lending

Expenses Management

Digital Banking

Processing

3.0

Incentives

▪ Improving rewards with flexible, on-demand funding

Consumer Payments - Traditional Banks

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Card-based transactions forecast

Consumer Payments - Digital Banks B2B Payments- Fintechs

20%

10%

70%

12%2%

86%

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B2B card-based payments are growing fast

Source: Global Data & EDC Analysis

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Direct Carrier Billing

(DCB) solutions allow

end users to access

online content & pay

for services & products

using their mobile

phone account (either

pre- or post-pay)

In emerging

economies, DCB has

greater consumer

reach than traditional

& mobile wallet

payment solutions and

is growing fast

Direct Carrier Billing

Global carrier billing revenue

Source: Ovum

MerchantConsumer Telco DCB Provider

Merchant Commission

Purchase amount

Purchase amount –Telco Commission

Purchase amount – Merchant Commission

Telco Commission

Net: DCB Commission

DCB Business Model

Probably The Wrong Way

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Ευχαριστώ πολύ

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DMCC Business CentreJewellery & Gemplex 2DubaiUnited Arab Emirateswww.edgardunn.com

Mob +971 56 413 56 04jean.sideris@edgardunn.com

Jean SiderisPrincipal

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