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MorningsessionBringing innovation
to payments
14.03.2017
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© Tieto Corporation
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Agenda
Sheri BrandonGlobal Head
Transaction Banking, Tieto
About Tieto
Culture of Innovation
Global payment trends
Stephen WarnerHead of Sales UK, Ireland & BeneluxRetail Payments and Cards, Tieto
UK market challenges
Turning challenges into opportunities
Valdis JanovsSales Director
Retail Payments and Cards, Tieto
How can Tieto help in solving the market challenges
Customer case studies
Mark BeresfordDirector
Edgar Dunn & Company
Areas of opportunity for banks and PSP’s
Round table debate
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Getting acquainted
3
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© Tieto Corporation
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Tieto at a glance
24%of sales
Multipleindustryproducts andservices
Financial Services
500+Supplier for
banksglobally
in IT services in Finland
and #2 in Sweden
#1
Billion EUR turnover
2015
1,46
Employeesin 20
countries
13 000
Projectsannually
3000• Retail payments and cards
• Global cash & liquidity management
• Instant Payments
• Loan Origination with Credit Scoring and LoanAdministration
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Building the Culture of innovation
5
Tieto values
We learn and grow
We work together
We are committed to quality
We care for our people and customers
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Globalpayment trendsand their impact
6
© Tieto Corporation
Socio-economicchange
Technology
Regulation
MEGA TRENDS 10 KEY TRENDS IN PAYMENTS
Open
Instant
Modular
Customercentric
THE NEW NORMAL IN PAYMENTS
#1CONNECTED
COMMERCE #2CLIENT-
CENTRICITYDRIVES
CONVERGENCE
#3INSTANT
PAYMENTS
#5NEW
ENTRANTS –MODULARISATION
OF BANKING
#4OPEN
BANKING
#7BLOCKCHAIN
#8PREDICTIVE ANALYTICS
AND MACHINE LEARNING
#9BANKING THE
UNBANKED
#10“CASH-LITE”
SOCIETY
AGENDA
#6FROM
PIPELINESTO
PLATFORMS
© Tieto Corporation
Confidential
Customer expectations fuel the disruptionCustomers demand new services faster and faster
Real-time
Self-service
Channel-independent
Personalised Experiences
Macro trends
Socio-economic
change
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9 Source: Ericsson Mobility Report 2016 / Image from: nrclive.nl
28bnconnected loT devices
by 2021
Connected everything
TREND #1 CONNECTED COMMERCE
2015 2021
Mobile phone subscriptions
Connected devices
30
20
10
0
billion
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For consumersDigital enabling customer-centric
solutions
TREND #2 CLIENT- CENTRICITY DRIVES CONVERGENCE
’’ I want one view to manage my daily spending
PayChose how and when to pay
Finance ManageTrack and plan my financial life
MY WALLET
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For merchantsDigital enabling customer-centric
solutions
TREND #2 CLIENT- CENTRICITY DRIVES CONVERGENCE
’’ I need a solution supporting my business
Payments Cash mgmt Inventory
MY COMPANY
• Ensuring great experience independent of user channel
• Optimise supply chain and cash management
Image from: entrepreneur.com
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TREND #2 CLIENT- CENTRICITY DRIVES CONVERGENCE
Examples from: Costa coffee, IKEA, SubWay
Payments integratedinto the shopping experience
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Implementations
globally
TREND #3 INSTANT PAYMENTS
Immediate Payment (ISO 20022)
Hybrid Immediate payment system
In Progress (discussion stage)
S. Africa Real time
clearing RTC
UK Faster
Payments
India immediate
Payments IMPS
Poland Express
ElixirSwiss Interbank
Clearing
Nigeria NIBBS
Instant Payment
Service
+30
*Hybrid Immediate payment system based on ISO 8385Source: Euro Bank Association and ISO20022.org
Instant
payments
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The idea behind PSD2Open Banking
TREND #4 OPEN BANKING
APP
APP
APP
APP
APP
APP
APP
De
fin
ed
ru
les …
…
Google services
Twitter services
Facebook services
Data mining service
Personal finance mgmt
Identity service
Net-worth service
In-Game services
…
…Standard interface (iOS, Android) Standard interface (Bank Account)
Source: Caps Initiative (Equens Worldline)
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Type of player Example Raison d’être Strategic objectives
Big banks greenfield digital only banks
Disrupt rather than be disrupted
Value proposition for new customer segments, Lower cost to serve through new channels
Digital native –challengers
User-centric and improved bank experience
Enhanced banking experience fortarget segments
New standards of cost-efficiency
RetailersExpand along the value-chain
Deeper share of wallet with current customers Expansion along the value chain, providing and end-to-end offering
Niche financial service providers, e.g. international money transfers, crowdfunding
Address underserved customers
Enhanced customer experienceLower cost-to-serve through increased efficiency
15
TREND #5 NEW ENTRANTS – MODULARISATION OF BANKING
15
The new payment and banking landscape -what implications on Tieto, e.g. who is our target customers, our offering?
© Tieto Corporation
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Telcos 100%
control - from
device to content
(Voice and SMS)
The journey that we have embarked uponfrom control of value chain to open platforms
Telecom
Industry
Bank
Industry
Degree of industry standardisation
Banks 100% control
from payment
instrument to
processing, e.g.
cards
Launch of
MVNOs, e.g.
Launch of new
payment providers
Access to
communication a
commodity
App store - primary
benefits to
Google/Apple and
developers (not
MNOs)
How can banks be
pro-active?
?Access to account
and payment a
commodity
16
VALUE CHAIN EVOLUTION
End-to-end control of
incumbents
Disintermediation at
customer touch-pointsCommoditisation of
back-end
Platforms the new
normal
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Platforms a new normalAffecting all industries
Park and return your car
TREND #6 FROM PIPELINES TO PLATFORMS
Groceries home delivery
Personal helper, handy man, IKEA assembler
Rent a car from a neighbour
Restaurant home delivery
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Changing logic and assets
TREND #6 FROM PIPELINES TO PLATFORMS
Product models
Physical resources
Hierarchical relations
Service models
Virtualised resources
Symbiotic relations
Users - participating and active
Things - connected and intelligent
Platforms - economics and scale
Data - own, shared and open
Source: Ericsson, Networked Society Lab
FROMconsumption logic
TOusage logic
TONEW ASSETS
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From product pushers to platforms
TREND #6 FROM PIPELINES TO PLATFORMS / TREND #4 OPEN BANKING
Crowdfunding platform
• Aiming at connecting 11 million customers with 100 partners by 2020
• Driven by new requirements for open, instant and personal services
Ecosystem for 3rd
parties
BNY Mellon published 55 APIs so far in API store
Open API framework
Developed by BBVA Bank for their Spain and US operations
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UK market insights
20
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Breaking down barriers in the UK
The Rise of Digital
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UK payment statistics2016
76%
Amount of Retail spending made with payment cards
£647BConsumer spend with cards
15B / 40 Milliondaily
Number of card transactions
Food and DrinkThe highest category£9.5Bper month
Source: UK Cards Association 2016 report
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UK spendingAverage spending by adults 2015
Source: UK Payment Markets – Summary , Payments UK,2016
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24 Source: UK Payment Markets – Summary , Payments UK,2016
UK spendingAverage spending by adults 2025
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Generation change fuels movement to digital
Pic
ture
: D
elo
itte
91% of 18-44 year olds in UK own a smartphone
compared to the population average of 75%
Young people 2x more likely to use mobile payments
in the future: 66% /18-34 y.o./ vs 33% /55+ y.o./
50% of 18-24 y.o. in UK check their phone in
the middle of the night
Source: yougov.com, US, 2016 & Deloitte Mobile Consumer Survey 2016
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Online Servicing
How banks have respondedEvolution of digital business
FUTUREPRESENTPAST
Digital
channels
Digital
propositions
Digital
ecosystems
Online Product Sales
mCommerce Evolved Stores
Click & Collect
New Business Models
Source: Digital Disruption: UK Banking Report
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27 Source: UK Payment Markets – Summary , Payments UK,2016
Priorities for digital transformation
Creating a customer-centric organisation
Enhance channels to give an omni-channel digital experience
Maximising usage of digital technologies (mobile, social)
Enhancing/ redesigning products & services for the digital age
Enhancing digital security
Pervasive automation to improve operational technologies
0 10 20 30 40 50 60 70 80 90 100
Renew back office to leverage new digital technologies
Building collaboration services ecosystem to improve differentiation
Empowering every stakeholder with actionable insights
78%
74%
68%
63%
53%
48%
44%
68%
31%
Confidential
© Tieto Corporation Source: Deutsche PostBank, Dennis Rabe, Mobey Day 201628
Customer
Bank
Customer
TPPs / partners(banks/financial)
XS2A Value added API
Business(fintechs/non financial)
Ecosyste
m
Free of use*
Example approach from a bankDeutsche PostBank
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52%
83%
39%
13%
0%
30%
75%
30%
15%
5%
In-house investorand developer
IndustryCollaboration
Platform provider Outsourcer Other
Preferred strategic response for banks in the face of increased non-bank competition.*
Source: Interviews with 24 European payment experts, March to May 2015, Deloitte analysis
* Respondents could choose more than one option
Preferred strategy
Non-card
Card
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Key challenges
Targetedcompetition: clear, simple, transparent
History and projection of new joiners to the interbank payment systems
Bacs
FPS
CHAPS
Source: PSR annual report 2016
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Extremely competitive environment in UK
Number of Challenger Banks by country,2016
Scale of the «Challenger»
Source: Burnmark
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Proportion of banks with innovation strategy
Regulatory
Source: Efma Infosys, November 2016
74%73%64%37%
2009 2014 2015 2016
Complexity in the
UK is «hard
wired»
«Regtech» – new
business for
FinTechs
38%
25%
25%
12%
Varying levels of Big data adoption and maturity among banks
Source: Capegemini, April 2014
Experimenting
Exploring
Deploying
Expanding
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Cost Reduction
The Digital opportunityChannel evolution – Online & Mobile
1
Source: BBA UK Banking Report 2015
RevenueCreation
CustomerExperience
Digital channels began life as technology-led cost reduction plays
432
1
As digital banking matured, the focus shifted toward digital as a tool for service and sales
2
Recently, banks are focusing on digital as a way of offering the customer a tailored, relevant experience
3
Moving forward, banks will need to find the right balancebetween these elements to fully capitalise on the promise of digital
4
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34 Source: Payment Disrupted, Deloitte 2016
Investing in forward looking activity
Create faster adoption cycles
Product innovation
Being clear about roles in the new
‘ecosystems’
Strategic partnerships are
critical to future growth…
The Digital opportunityCall to action
How can we help?
Tieto Retail Payments
and Cards
© Tieto Corporation
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Globalisation Population growth Ageing population Urbanisation Resource nexus
Dynamic digitalisation is at the core of what we do…Technologies, competences and industry specific services to make our clients’ services data
centric, realtime, predictive and networked.
Internet of
Everything
Customer expectations
Everything
as a service
Technology acceleration
World of
ecosystems
Innovations and disruptions
Public
Tieto’s solution for retail payments A set of off-the-shelf software packages for retail payments:
Electronic bill presentment
and payments
Mobile payments
Internet payments
Card payments
Instant Payments
© Tieto Corporation
Public
Interfaces to local payment networks and local switches
Interfacesto international
payment networks
Smooth integration with existing banking systems
On Premises or SaaS delivery mode
38
SaaS
PA DSS (v.3.1)compliant / ready for
new deployments
Solutionfor retailpayments
© Tieto Corporation
Public
Acquirer authorisation
Card life-cycle management
Fraud management
ATM management
Settlement
Dispute management
Clearing
Issuer authorisation
Transaction routing
Switching authorisation
POS management
Merchant account management
Fraud Prevention & Detection for Issuers
Financial productsCardholder account management
39
Tieto Mobile Payments ContactlessNFC / HCE solution:
Proprietarywallets
Fraud Prevention & Detection for Acquirers
Basic functionality
Public
Cloud based payments
© Tieto Corporation
Public
41
Card digitisation independent from schemes
Integrating with any mobile wallet app through API
Alternatively, unified token management platform that supports VTS / MDES and other issued tokens
In-house tokenisation – for mobile phones, wearables, etc.
OpportunitiesTieto Cloud based payments solution
© Tieto Corporation
Public
42
NFC OfferingTieto Cloud based payments solution
MDES support
Brand walletsupport
VTSsupport
Host Card Emulation
Bankmobile appProprietary
Wallet
What we can do?
© Tieto Corporation
Public
43
Consumer Merchant
Acquirers
IssuersSchemes
PSP’s
43
Target segments and customers
© Tieto Corporation
Public
Account
Enablement System
• Cardholder
Registration
• Token Issuing
• Cryptography keys
• Operational Web GUI
Credentials
Management System
• Communication with
MPA, and Google
push service
• Managing SUKs
(LUKs)
Transaction
Management System
• Verifying UMD and MD
cryptograms, SUKs
• De-tokenisation (real PAN
matching, expiry)
• Creating authorisation and
transaction with real PAN
Token Vault
Token storage for
token-to-PAN
mapping
Tieto Host Card EmulationHCE solution components
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Omni-channel payment solution
© Tieto Corporation
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46
New opportunities with PSD2
Providing additional services through APIs
Providing superior customer experience through unified channel and payments management
Connecting to Faster Payments scheme
OpportunitiesOmni-channel payments solution
Picture: Payments, Cards and Mobile
© Tieto Corporation
Public
47
Central Bank
Banks/PSP/MNO Banks/PSP/MNO
Processing with no downtime
Stand-In processing and authorisation
Quickly connect to Central Infrastructure
using pre-defined gateway packages & SDK
Active-Active deployment
Message transformation mechanism
Support ISO 20022, ISO8583 messages
Simple channels integration
Identity management
Central infrastructureSwitching&Clearing system
Tieto Omni-channel banking solutionFor Retail banks (PSD2 APIs compliant / Instant payments support)
© Tieto Corporation
Public
48
PLATFORM
SOAP / REST XML
protocolPLUG-INS AND CONNECTORS
Open API
Identity MANAGEMENT
MessagesHUB
ATM
Application
Social network
Branch
VocaLink
…
Telco
…
back middleware Front
Cards
User
Accounts
Core
Banking
CRM
Other
Banking
systems
Self-service Device
management
Remote Banking Platform
Converter
Stand-In
i-bank
Open API and Instant Payments connectivity
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Operational scheme example
49
Clearing and
Settlement
Central Register
Account in Originator’s
AS PSP
Real TimeRouting
Payment Processing
Account in Beneficiary’s
AS PSP
API
Originatorbank
Payer PayeeBeneficiary
bank
STEP 1
Payer initiates a person to person transfer
STEP 2
Check payment and verify Mobile Phone number and account number Payee
STEP 3
In real-time mode the beneficiary's account is crediting
Interbank Real-time Switchfor P2P money transfers STEP 4
Originator and Beneficiarybank’s send notification about payments
Public
Issuing solution
© Tieto Corporation
Public
51
Stand-alone issuing solution for fast product creation / market rollout
Supports digital-only as well as physical card products with lifecycle management, fully supporting Apple Pay and Samsung Pay requirements
Single or multi institutional issuing capability
Credit, debit, prepaid, loyalty, instalment etc. products
VISA, MC, AmEx, JCB, UPI brands supported
OpportunitiesTieto Issuing solution
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Client use cases
52
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e-Commerce,
PSP
Enabling Samsung Pay and Apple Pay
Digital banking, tokenisation
Real time mobile payments platform
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E-Commerce acquiring & PSP business solution
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Established a dedicated processing centre fore-commerce – DECTA, launched in 2015
One of the largest banks in the Baltic States, specialised in corporate banking and affluent individuals
One of the first private banks in Latvia, founded in 1992
First in the Baltic States to emit EC/MC and VISA Platinum cards
First bank in the Baltics to launch its own internet banking application for iPhone
Images and information form Rietumu Banka homepage: https://www.rietumu.com/Decta homepage: https://decta.com
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Connects payment institutions, PSPs and eMoney issuers to Visa and MasterCard
Acquiring, processing, clearing in 18 currencies, P2P card to card transfers
Flexible SOAP API for processing transactions for purchases, payments, e-wallets, prepaid cards, airline-tickets with long record
Principal member of Visa and MasterCard, SWIFT and SEPA
Images and information form Rietumu Banka homepage: https://www.rietumu.com/Decta homepage: https://decta.com
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Enable small and medium banks to open e-Commerce merchant accounts for their clients
Allow businesses to set-up their merchant account directly for accepting credit cards online. Funds received into Rietumu multi-currency IBAN or existing bank account in any other bank
Images and information form Rietumu Banka homepage: https://www.rietumu.com/Decta homepage: https://decta.com
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Launch of SamsungPay and ApplePay
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Widely viewed as the pioneer of Russian consumer credit, the bank also dominates the merchant acquiring sector.
28 million individual customers
46 million issued credit cards
A unique payments platform combining leading payment systems, innovative technology and superior acceptance
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Launch of SamsungPay
Russian Standard Bank was among the first 4 banks to launch SamsungPay in Russian market (Oct. 2016)
Supported Payment schemes: MasterCard
Service available to Samsung Galaxy users
Application allows to link MC credit cards to ones phone and pay by simply tapping the phone to the POS terminal
Fingerprint authorisation
Role of Tieto: ensuring integration with MDES (VTS – in process)
Information from RSB homepage (Press Release): https://www.rsb.ru/press-center/news/2016/151116/Apple Pay participating banks in Europe: https://support.apple.com/en-us/HT206637
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Launch ofApplePay
Smart & easy way to pay –contactless payments using iPhone, iPad or Apple Watch
10% cash back for purchases with MC credit cards(for the period of service launch: 15.11.16.-31.01.17.
Supported Payment schemes:MasterCard
Fingerprint authorisation (Touch ID)
Role of Tieto: ensuring integration with MDES
10%
Information from RSB homepage (Press Release): https://www.rsb.ru/press-center/news/2016/151116/Apple Pay participating banks in Europe: https://support.apple.com/en-us/HT206637
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Digital banking. Tokenisation
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A branchless bankingplatform launched in 2015 by the Russian unit ofHungarian Banking GroupOTP
Competitive advantage –free market niche(the competitor in Russia Tinkoff Bank)
Customer convenience asthe greatest priority –bank for everyday visit
Growth ambitions – 1M newcustomers in five years; extend to other countries
Business driving values –agility, flexibility, high-techsolutions
New innovative products –multi-application card
Images from Touch Bank official website: https://www.touchbank.com
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Positioned as «Cards in card»
Possible to link with up to 5 cards fromother banks
Use one Touch Bank card by keeping thebenefits from other banks’ cards
/ access to the salary account
/ accumulation of air miles
/ bonuses in super-markets
/ discounts
/ cash-back
/ other
Technical solution powered by Tieto
Multi-application card
Images from Touch Bank official website: https://www.touchbank.com64
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65 Images from Touch Bank official website: https://www.touchbank.com
Register and orderthe card online byfilling in electronicapplication form
Link up to 5 cardsfrom other banks viainternet bank, define the usagerules for each card
Free-of-chargedelivery
Pay with onemulti-applicationcard and enjoy allthe benefits
1 2 3 4
How does it work?
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‘‘Cards in card’’success
Images from Touch Bank official website: https://www.touchbank.com
50 000 customers in 8 months
15 000 new customers monthly
Service penetration 20% of all services, continuing to grow by3-4% per month
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Mobile payments platform Siirto
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SiirtoFinland’s first real-timemulti-banking platform for mobile payments
1st ever payment platform with open interfaces
- Send & request money
- Notifications
- Split shared costs
- Reminders
PSD2compliant
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Some of Tieto’s customersGlobal coverage
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Continue the dialogue with us!
Retail Payments and CardsTieto Financial Services
tieto.com/cards | [email protected]
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Payments Roundtable debate
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How can banks and payment service providers leverage the
PSD2 and go beyond compliance?
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Cloud
computing
20202010
Digital
73
Physical
19901980197019601950 2000
ISO 8583
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Retail payments innovation
73
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Immediate
74
Batch
19901980197019601950 2000
1973
Cloud
computing
2010 2020
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Institutional payments innovation
74
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ConsumersMerchants
MerchantAcquirer
Card Issuer
Payment Company
Consumer’sBank
ACH / Retail Banks
Merchant’s Bank
Alternative Players
Card Payment System
(payment charged to payment card)
ACH Payment System
(payment charged to bank account)
Merchant Guarantee
No Merchant Guarantee
Today, there are two retail payment systems
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ConsumersMerchants
MerchantAcquirer
Card Issuer
Payment Company
Consumer’sBank
Fast ACH
Merchant’s Bank
Alternative Players
Card Payment System
(payment charged to payment card)
ACH Payment System
(payment charged to bank account)
Merchant Guarantee
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Merchant Guarantee
Today, there are two retail payment systems
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But the payments landscape is changing
ConsumersMerchants
MerchantAcquirer
Card Issuer
Payment Company
Consumer’sBank
ACH / Retail Banks
Merchant’s Bank
Alternative Players
Card Payment System
(payment charged to payment card)
ACH Payment System
(payment charged to bank account)
MNO’sDigital Giants
Security & Identity
Social Commerce
Alternative Players
Gateways / PSPs
Device Providers
Cloud Services Disruptors
Direct Payments
Mobile Acceptance
Wallets
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Regulation and payment innovationPSD2 is intended to continue the standardisation of Payment Regulation across
the EU and EEA, by providing:
Reduce ambiquity
Level the playing field for payment providers
Increase consumer protection
Stimulate innovation
Increase competition
- Access criteria
- Regulated entities
New payment service provider types
- Account Information Service Providers (AISP)
- Payment Initiation Service Providers (PISP)
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Today Post-PSD2
Consumer Merchant
AcquirerIssuer
Consumer Merchant
Issuer
Third parties can act as a Payment Initiation Service Provider (PISP)
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PSD2 is expected to impact the flow of payment transactions
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PSD2 will change the competitive landscape
A huge number
of new providers
will flourish within
the emerging
API and data
economies
Consumer
Bank Data
Proprietary Apps
Private API
Ba
nk
Do
ma
in
Today Post-PSD2
Consumer
Bank Data
Proprietary Apps
Private API
Ba
nk
Do
ma
in
PublicAPI
Consumers
Third Party Apps and new entrants will provide more choice and services
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The API and
data economy is
creating new
opportunities to
build digitally
connected
experiences for
consumers
© Tieto Corporation
Inte
rnal
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Exte
rnal
With the increasing pace of
change in payments this is the
time to develop new payment
strategies…
It is not just a question of
compliance
It is time for financial institutions
to develop three workstrems
Create New Customer
Experiences
Create A Partnership
Strategy
Create New Products
and Services
What are the areas of opportunity for banks and payment service providers
Thank you...Edgar, Dunn & CompanyCandlewick House120 Cannon Street
LondonEC4N 6AS
Mobile: +44 7825 027525Tel +44 207 283 1114
Fax +44 207 283 1007
Mark BeresfordDirector
Thank you!