Payments Cards in Europe

January | February 2016 | paymentscardsandmobile.com

Payments Cardsin EuropeAn annual update and insights into the payments landscape in Europe

in this issueCard Notes

Visa Europe sells to Visa Inc.

Big Data

Behind the Big data hype

Issuing and acquiring

Russia launches domestic payment system

Mobile payments

The battle of the Pays continues

Entrust Datacard offers a complete portfolio of instant card issuance hardware and software solutions to help you create these remarkable customer experiences. See how

instant card issuance can enhance customer loyalty and drive new revenue.

Visit www.datacard.com/pcm to download the free white paper.

Entrust Datacard and the hexagon design are registered trademarks and/or service marks of Entrust Datacard Corporation in the United States and/or other countries. ©2015 Entrust Datacard Corporation. All rights reserved.

I LOST MY DEBIT CARD.

I was rushing to get to work, and I must have left it at the coffee shop. Thankfully no one used the card, but I was expecting the hassle of waiting two weeks for a new one. Instead, my local branch instantly issued me a new debit card right then and there.

What a remarkable experience.

Entrust Datacard offers a complete portfolio of instant card issuance hardware and software solutions to help you create these remarkable customer experiences. See how

instant card issuance can enhance customer loyalty and drive new revenue.

Visit www.datacard.com/pcm to download the free white paper.

Entrust Datacard and the hexagon design are registered trademarks and/or service marks of Entrust Datacard Corporation in the United States and/or other countries. ©2015 Entrust Datacard Corporation. All rights reserved.

I LOST MY DEBIT CARD.

I was rushing to get to work, and I must have left it at the coffee shop. Thankfully no one used the card, but I was expecting the hassle of waiting two weeks for a new one. Instead, my local branch instantly issued me a new debit card right then and there.

What a remarkable experience.

Happy New Year. Welcome back!

January | February 2016 Volume 8, Number 1

Editor-in-chief and publisher Alexander Rolfe Tel +44 1263 711 800 [email protected]

Editor Joyrene Thomas Tel +44 1263 711 800 [email protected]

Contributors Joyrene ThomasHorst Foerster

Head of Business Development Wendy Sanders Tel +44 1263 711 801 Fax +44 1263 456 100 [email protected]

General Manager Gemma Haywood Tel +44 1263 711 800 Fax +44 1263 456 100 [email protected]

Subscriptions and General Kaye Skinner Tel +44 1263 711 800 Fax +44 1263 456 100 [email protected]

Address Payments Cards and Mobile The Stable, Hall Yard Kelling, Holt NR25 7EW United Kingdom

Cover, Design and Origination Adam Unsworth

Printing Micropress Printers

All rights reserved. No part of the publication may be reproduced or transmitted in any form without the publisher’s prior consent. While every care is taken to provide accurate information, the publisher cannot accept liability for errors or omissions, no matter how caused.

Payment Cards and Mobile™ is owned and published by PaymentsCM LLPISSN 1759-829X

© PaymentsCM LLP 2016

www.paymentscm.com

2015 went out with a whimper as it seemed to PCM that the entire global payments industry took Christmas off – good news for us in the news business.2016 has kicked off at some pace and we can all look forward to another blistering

year of FinTech, disruption, acquisitions and probably the odd IPO along the way.

Blink and you will miss it.

Many have commented on the speed of change but are we getting close to

a “singularity” in payments? The technological singularity is a hypothetical

event related to the advent of genuine artificial intelligence. Such a computer,

computer network, or robot would theoretically be capable of recursive self-

improvement, or of designing and building computers or robots better than

itself on its own. Repetitions of this cycle would likely result in a runaway effect –

an intelligence explosion.

Others argue that it is the combination of the computing power and the human

itself that will evolve together to create super-humans using technology to its

extreme advantage.

Now, it may be a stretch, but think of the evolution of payments in recent history

from mobile banking to mobile payments, contactless NFC and Apple Pay and

the latest in wearables all being devised with payments onboard (including a

heart monitor for those big ticket purchases). There have even been incidents of

embedded chips being used in the body.

The jury’s still out on artificial intelligence, onboard and embedded payment. But

2016 is shaping up to be an interesting year for the future of payments.

Alexander Rolfe, Editor-in-chief and publisher, Payments Cards & Mobile

Editorial Advisory Board

John Berns Managing Partner, Accourt

Sylvie Boucheron-Saunier General Manager, Continental Europe, ACI

Robert Courtneidge Global Head of Cards and Payments, Locke Lord

June Felix President – Europe, Verifone

Denise Gee Director, Magna Carta

Simon Hardie Director, Magna Carta

4 payments cards and mobile | January | February 2016 www.paymentscm.com

contentsnews in brief6-7. The payments world in 60 days

card notes8. Visa Europe sells to Visa Inc for €21.2 billion Visa Europe ended months of speculation by confirming in early November 2015 that it would sell its European operation to Visa Inc in a deal worth €21.2 billion.

10. Microsoft aims to restrict US snoopingMicrosoft unveiled a plan in mid-November 2015 to keep customer data beyond the reach of US authorities.

10. Europeans turn to e-commerce as 50 percent shop online in 2015European consumers aged 16 to 74 ordering goods or services via the internet in 2015 was 53 percent, up from 30 percent in 2007, according to data from Eurostat.

11. EU aligns on interchange as regulation kicks in 09 December 2015 marked a significant date for interchange rates across Europe as all EU countries had to align their domestic rates, in accordance with the Interchange Fee Regulation (IFR).

12. Omni-channel providers: some are born, others are created The final quarter of 2015 saw various high-profile mergers and acquisitions within the European payments industry — all aimed at serving the omni-channel needs of customers.

13. One third of all card-present transactions uses EMV 1-in-3 card transactions undertaken in the face-to-face environment globally between July 2014 and June 2015 used EMV chip technology, according to official figures released by technical body EMVCo.

issuing & acquiring26. MasterCard gaining ground on Visa in the Americas MasterCard and Visa account for 69percent of the 2.9 billion payment cards issued in the Americas, and this share continues to rise at the expense of private label cards, according to RBR figures.

26. Nordics say ‘no’ to cash Sweden can currently claim to be a world leader in cashless trading, according to a recent study from KT-Royal Institute of Technology.

27. Russia launches domesticpayment systemRussia has launched its own domestic payment system, aiming to boost its financial independence and compete with international payment systems, such as Visa and MasterCard.

27. EPC publishes latest version of the SEPA Cards Standardisation VolumeThe European Payments Council (EPC) and Cards Stakeholders Group (CSG), a multistakeholder group comprising retailers, vendors, processors, cards schemes,published version 7.1 of its ‘Volume’ in December 2015.

mobile payments28. The battle for Pay supremacy continues Tim Cook, CEO of Apple, said that2015 would be the year of Apple Pay. As it turned out, 2015 was the year of mobile payments initiatives generally as technology companies, retailers and banks all jostled to bring in-store mobile payments to the masses.

29. Mobile delivering financialinclusion in India India was on track to surpass half a billion mobile subscribers by the end of 2015,

29. Deutsche trials hapticauthenticationDeutsche Bank is trialling a system that analyses how people touch and hold their mobile devices to authenticate users. The bank hopes that the technology will free customers from the pain of passwords.

29. BlackBerry to expand BBM mobile payments in AfricaBlackBerry Messenger users in Africa will be able to transfer money or airtime within BBM. BlackBerry has partnered with Interswitch Ltd, Nigeria’s largest payment processor, to expand its mobile paymentsinitiative in Nigeria.

29.Powa extends Asianpresence with JVPowa Technologies has enteredinto a local joint venture with ChinaUnionPay to roll out its mobiletechnology across mainland China.

30. Mobile apps and the privacy trade-offEven free apps can involve potential trade-offs when it comes to permitting access to personal devices and information, the Pew Research Center found.

features16. Payments in Europe Cards and card payment at the point of sale (POS) and online showed solid growth rates in most European countries in 2014, supported by the roll-out of contactless technology.

20. Behind the Big Data hype There is no shortage of data in payments. Yet for too long the payments industry may have suffered from being data-rich but insight-poor.

24. The Internet of Things for payment In theory, the Internet of Things (IoT) could be the future of technology and a game-changer for many industries. But what are the implications for the payments industry?

contents

www.paymentscm.com payments cards and mobile | January | February 2016 5

contactless31. Worldwide SE shipments toexceed 9 billion in 2015Shipments of secure elements rose bynearly 12 percent to more than 9 billion units in 2015, according to figures released by Eurosmart.

31. French JV developscontactless mobility solutionsThe heads of 4 leading public services and private companies in France have announced a joint venture to develop contactless mobility solutions.

31. 1-in-10 UK cardtransactionsContactless card transactions nowaccount for 1-in-10 card payments in the UK, up 3.7 percent year-on-year, latest figures from the UK Cards Association show.

31. FIME launches NFC testingTest tool provider FIME haslaunched TrustApp, a secureonline testing portal for near fieldcommunication (NFC) applicationsembedded in secure elements.

pos terminals

32. Beyond the age of the ‘dumb’ terminalPOS terminals are changing. The change has been coming on for so long, it is difficult to know when it first started, or to pinpoint a single catalyst for change.

32. Self-service bureau de change kiosk live in UKUK-based company Fourex is rolling out self-service currency exchange machines across London’s underground network.

e-commerce33. German banks back new onlinepayment methodIn a strategic attempt to claim their share of e-commerce sales worth more than €40 billion each year, the German private and cooperative banks have launched their own online payment method.

33. W3C starts standards work foronline checkoutThe World Wide Web Consortium (W3C) has launched a web payments working group to help streamline the online checkout process and make internet payments easier and more secure.

33. Groupon exits the NordicsThe daily deals site ceases activity in Denmark, Finland, Norway and Sweden.

33. Gemalto partners forsecurity solutionGemalto has partnered with computer storage and data management company NetApp to provide an integrated solution for Amazon Web Service (AWS) customers.

products35. Western Union powers moneytransfer via social mediaWestern Union is to enable crossborder money transfer via mobile and social media in 200 countries and territories worldwide.

35. Sage launches direct-from-account paymentBusiness software provider Sage isnow enabling small and medium-sized businesses to make payments directly from their accounts or payroll software.

35. Worldpay to move into smallbusiness loansWorldpay is breaking into the small business lending market in a move to provide thousands of customers with flexible loans.

contracts37. Global Payments to acquireHeartland Payment SystemsPayment technology services provider, Global Payments Inc, announced in mid- December 2015 that it had entered into a definitive agreement to acquire Heartland Payment Systems Inc, a US payment processor, for $4.3 billion.

37. The Clearing House toimplement real-time paymentUS banking association, The Clearing House, has signed a contract with UK-based payment systems provider VocaLink to build and deliver core elements of a real time payment system for the US.

37. GoSwiff announces mPOSpartnershipsGoSwiff, a global provider of mobilepayment and marketing solutions, has announced various tie-ups to expand it mobile point-of-sale (mPOS) and value added service solutions.

Conferences38. Conference season kicks off

As the conference diary revs up to full throttle, PCM will attend both MPE and MWC.

www.paymentscm.com

Points win prizes — and free air

travel. Chinese businessman Liu

Yiqian stands to win tens of millions of

membership reward points after paying

$170 million for an oil painting with his

American Express card. The billionaire

art lover paid the record-breaking sum at

auction for Reclining Nude by Modigliani

in November 2015. Liu has form in this area.

He had previously charged $36 million for

a Ming Dynasty tea cup bought in 2014 as

well as various other artefacts to his Amex

card, according to the Associated Press.

The European Court of Justice

(ECJ) has classified Bitcoin as

money. This challenges the stance taken

by some EU member states, such as

Finland, Germany and Sweden, and the

US to regulate and tax the digital currency

as a commodity. In its October 2015

judgment the ECJ ruled that the exchange

of traditional currencies for Bitcoin was

exempt from VAT under the provision

concerning transactions of “currency, bank

notes and coins used as legal tender”. The

Supreme Administrative Court in Sweden

had referred the case to the ECJ, following

a request from a Swedish man wishing to

set up a Bitcoin exchange.

Monitise, the British mobile group,

lost its third senior executive

in a year when chief financial officer

Brad Petzer resigned in December 2015.

This capped an annus horribilis for the

company as it lost 2 chief executives,

issued revenue warnings and posted a

pre-tax loss of £227 million for the year to

June 2015. Monitise is seeking to re-focus

its business towards a subscription fee

model based on a single mobile money

platform. Petzer resigned from the board

with immediate effect but will remain with

the business until a successor has been

appointed.

Raspberry Pi, the maker of ultra-

cheap microcomputers, launched

its new credit card-sized computer

priced at $5 in late 2015. The Pi Zero is

around half the size of the original $25

Raspberry Pi launched in 2012, but 1.5

times as powerful. The new Pi is aimed

at students, hobbyists and those keen

to expand into the connected Internet

of Things. The company is based on

technology spun out of the University of

Cambridge and is owned by a charitable

trust. It has sold around 7 million devices

worldwide since 2012.

Oberthur Technologies postponed

its initial public offering plans at

the beginning of November 2015,

citing concerns about market conditions.

The decision by the French smart card

manufacturer adds to the tally of recent

IPOs that have either been postponed

or repriced amid volatility in the equity

markets. Oberthur Technologies, which is

controlled by private equity group Advent

International, had hoped to raise €500-

600 million on the Euronext market in

Paris to pay debt and fund research into

digital security for connected objects,

according to the Financial Times. Chief

executive Didier Lamouche said that the

plans remained intact and would happen

“as soon as possible” in 2016.

The Dutch government sold a

fifth of its shares in ABN Amro

raising around €3.8 billion in an

initial public offering in late November

2015. This marked the largest IPO of a

European bank since before the financial

crisis. Shares opened at €17.75 and rose 3.5

percent on the first day of trading, valuing

news in brief

the bank at almost €17 billion. This was

still well below the €24 billion of taxpayer’s

money used to bail out ABN and Fortis in

the 2008 rescue deal.

The Royal Bank of Scotland has

become the first bank to connect

employees using Facebook at

Work, a business version of the social

networking tool. Employees of the

British state-controlled bank will be able

to download the application to their

desktop computers, phones and tablets

to encourage “collaboration and allow

employees to communicate faster and

more efficiently”, according to a media

statement. RBS began a pilot of the

technology in July 2015. By the end of

March, 30,000 employees will be using

Facebook at Work, which will be rolled out

to all employees by the end of 2016.

2 months after security blogger

Brian Krebs first reported a

potential security breach, the

Hilton hotel group confirmed it had indeed

been hacked. In a media statement dated

24 November 2015, Hilton Worldwide

said it had “identified and taken action

to eradicate unauthorised malware that

targeted payment card information in

some point-of-sale systems.” Sensitive

cardholder data, but not PINs or customer

addresses, was compromised on 2

occasions (late 2014 or during the summer

of 2015). Cyber criminals are re-focusing

their efforts in the hospitality sector.

Starwood Hotels & Resorts, Mandarin

Oriental and the Trump Collection all

admitted hacks last year.

Target has reached a $39.4

million settlement with banks

and MasterCard issuers over

the massive data security breach, which

occurred during the 2013 holiday shopping


who created Bitcoin. “Either Wright

invented Bitcoin, or he’s a brilliant hoaxer

who very badly wants us to believe he did,”

say the authors of the December article.

The US Senate has passed the

controversial Cybersecurity

Information Sharing Act (CISA)

74 votes to 21. It allows companies

to voluntarily share evidence of

cyberattacks with the government

without fear of lawsuits if that

information also violates privacy. Those

in favour say that CISA allows the

government to better coordinate threat

information and response. The American

Banking Association applauded the

news, claiming that the bill “facilitates

increased cyber intelligence information

sharing between the private and public

sectors.” Opponents, including numerous

technology companies, claim that it

gives government greater powers to spy

on citizens.

More than 10 million UK road

users have switched to paying

their vehicle tax by direct debit

since being given the option to do so

a year ago. According to government

figures, there are 35 million licensed

vehicles on UK roads. “Direct debit

makes it easier than ever before for

motorists to tax their vehicles and to

spread their payments if they wish,” said

Oliver Morley, chief executive, Driving

and Vehicle Licensing Agency (DVLA). 59

percent of motorists say that direct debit

offers peace of mind while 67 percent

say that it saves them from manual

renewals, according to research by Bacs,

the organisation behind direct debit in

the UK.

season. Card details of around 40 million

customers and personal data of around

70 million customers were stolen in

the attack, which is said to have cost

banks more than $200 million. The deal

announced at the beginning of December

2015 will see Target pay $20.25 million to

banks and credit unions, and $19.11 million

to MasterCard issuers. Details of a $67

million settlement between Target and

Visa Inc were announced in August 2015.

Barclays is to sell its Italian retail

banking business as it accelerates

its withdrawal from non-core

European business, according to the

Financial Times. The disposal is subject to

regulatory approval but will see CheBanca!,

the retail banking arm of Milan-based

investment bank Mediobanca, acquiring

89 retail branches. Barclays is expected to

lose £200 million on the sale. This follows

Barclays’ exit from Spain in 2014, where it

lost £500 million from the disposal of its

retail, wealth and commercial banking

business to Caixabank. More recently

Barclays sold its Portuguese business to

Bankinter for €175 million.

Every age is defined by its

mysteries. 1980s TV audiences

wanted to know ‘who shot JR?’

Nowadays the pressing question of the

moment is ‘who is Satoshi Nakamoto?’,

the pseudonymous creator of the Bitcoin.

Since the publication of the 9-page

paper giving rise to Bitcoin in 2008,

possible candidates have ranged from a

Japanese mathematician, a Japanese-

American living in California and various

cryptographers and digital currency

specialists. Wired magazine now claims

that 44-year-old former academic Craig

Wright is the “unknown Australian genius”

news in brief


Visa is working with several Indian banks in order to utilise

the country’s biometrics-based national identity system to bring financial services and electronic payments to millions of people. The ‘Saral Money’ account from Visa, Axis Bank, HDFC Bank, ICICI Bank, Indian Overseas Bank and the State Bank of India is designed to solve the long-standing problem of how to authenticate the many millions of Indians without existing bank accounts or adequate forms of ID. They plan to tap into the government’s Aadhaar national identity system which uses fingerprint and iris biometric information to verify users and authorise payments. There are currently 210 million Aadhaar card holders, with the government planning to expand this to 600 million by 2015.

Just 3% of UK organisations have made preparations for the intro-

duction of SEPA for direct debits, lagging behind rivals in France and Germany as the countdown to the 2014 migration begins. The survey of 300 businesses in France, Germany and the UK conducted by Edgar Dunn & Company on behalf of Steria, finds that almost 70% of European businesses are aware of SEPA in general, and more than 80% of businesses have heard about SEPA Direct Debit in France and Germany. However, only 26% of UK businesses are aware of the mandate.

Sweden’s Swedbank is piloting the use of mobile couponing with

merchants in Uppsala, the country’s fourth-largest city which is attempting to eradicate cash as part of a local crime-fi ghting initiative. Swedbank is trialling the use of MasterCard’s mobile application Koy with high street merchants who can use the app to post deals to subscribers that can be redeemed from the user’s smartphone.

VeriFone has had the wind taken out of Sail, its app and dongle-based

system for turning smartphones into card acceptance devices. Having failed to gain traction with merchants, VeriFone will instead off er the technology to banks. Sail was launched in May 2012, but according to the company, the standalone economics of micro-merchant acquiring ultimately proved to be unprofi table.

Vietnamese payment switch operator Smartlink is working with Singapore

tech vendor Tagit to build a mobile bank-ing service. Tagit’s Mobeix platform will be available to over 40 million cardholders belonging to Smartlink’s more than 50 mem-ber banks. Vietcombank will be the fi rst to roll out the service, enabling customers to download an iOS, Android, BlackBerry or Java app that can be used for account information queries, fund transfers, bill payments and mobile top-ups. Through the Tagit system, Smartlink customers will also be able to con-nect with third parties such as utility compa-nies and government agencies.

Royal Bank of Scotland, Lloyds TSB and NatWest in the UK are in

a generous mood, having set aside £10 million to refund customers who forgot to pick up cash dispensed at the ATM. The banks are set to compensate hundreds of thousands of customers who made a withdrawal at the ATM but walked away without the cash. Unlike other banks which automatically re-credit consumer accounts when the machine retracts the forgotten cash, the banks diverted the funds into their own reserves account and only paid up if the customer asked for a refund.

US start-up Movenbank, which has positioned itself as a mobile-only, card-

less, branchless bank, may be forced to off er companion plastic cards to customers in order to be compliant with MasterCard rules. Movenbank is working with MasterCard on a planned February 2013 launch which will see customers issued with contactless stickers that they can attach to their mobile phones, says founder and CEO Brett King. However, he maintains that the fi rm is still “anti-card”.

news in brief

paymentscardsandmobile.com payments cards and mobile | January | February 2013 7

VeriFone has had the wind taken out

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Visa Europe sells to Visa Inc for €21.2 billionVisa Europe ended months of speculation

by confirming in early November 2015 that

it would sell its European operation to

Visa Inc in a deal worth €21.2 billion. The

price for the long-anticipated buyout was

higher than some analyst expectations,

and means a windfall for European banks.

Barclays is expected to book around

£400 million from the sale, Lloyds Banking

Group and Royal Bank of Scotland £300

million and £200 million respectively.

HSBC’s share is estimated to be £150

million, whilst Visa Europe’s largest

acquirer, Worldpay, could benefit to the

tune of €1.25 billion.

Unifying into a single globalcompany

The agreement is structured such that

Visa Europe members could generate

further returns 4 years after the transaction

closes. The deal includes upfront cash

of €11.5 billion and Visa shares worth €5

billion. There is also potential for an earn-

out of up to €4.7 billion payable on the

fourth anniversary of the sale closing. This

will be based on Visa Europe members

achieving net revenue targets during the

16 quarters following the transaction.

Visa Europe and Visa Inc formally split in

2008 when 5 out of 6 Visa regions floated

on the New York stock exchange as Visa

Inc. Visa Europe elected to maintain its

independent status as a membership

association owned and governed by its

4,600 European members.

At the time of the split, a Visa Europe

spokesperson was on record as saying:

“Payments in Europe are at a critical point

in development with SEPA, the Payment

Services Directive and the deployment

of chip and PIN. To achieve the goal of

displacing inefficient payments, such as

card notes

cash, needed a unique response — Visa

Europe is that unique response.”

The payments landscape in Europe and

the strategic focus of both companies, now

makes a sale possible. Commenting on the

deal, Gary Hoffman, chairman, Visa Europe

board said: “The board believes that it is the

right time to reunite these 2 very healthy

businesses under common management.

The deal will unlock significant value for

members both through the consideration

paid and because the board believes a

combined Visa will be better positioned

to serve the needs of customers going

forward.”

Both companies’ boards were unanimous

in their support of the transaction. The

sale adds approximately 3,000 European

card issuers, more than 500 million card

accounts and €1.5 trillion in payment

volumes to the Visa Inc portfolio. European

card acquirer and merchant numbers were

not made public. “We are very excited about

unifying Visa into a single global company

with unmatched scale, technology and

services,” said Charles W Scharf, CEO, Visa

Inc.

Future focus

Visa Europe members will have

to adjust to becoming clients of a

global organisation with corporate

headquarters in the US. In the official

media announcement accompanying

news of the sale, Scharf sought to

reassure European members. He spoke

of having a local management team

with London remaining as headquarters

for the region, maintaining an European

data centre, and ensuring efforts in

Europe were tailored to meet local

market needs.

Visa management now has the

opportunity to re-focus the business

after the distraction of the sale, which is

expected to close in the second quarter

of 2016. Integration work dubbed ‘One

Visa’ is already underway. Work to separate

scheme and processing activities also

continues in response to European

regulatory pressure.

Visa Europe is expected to formally close

its digital wallet service V.me by Visa. It is

expected to announce the launch of a Visa

developer platform in February 2016. This

will give developers working for financial

institutions and partners access to APIs and

a sandbox to test software prior to launch.

Visa management must also focus on

attracting and retaining talent at the

required levels to drive productivity

and growth. Visa Europe employee

engagement, traditionally always within

the upper quartile, is currently around

70 percent. Since Nicolas Huss, CEO, Visa

Europe took the helm in October 2013, the

company has cut several hundred jobs,

scaled back the use of contract staff, closed

the final salary pension scheme and lost its

Investors in People accreditation. Whilst

employee bonuses of £10,000 to £20,000

are expected on completion of the sale,

further job losses are also expected as part

of the integration process.

EUROPE

Visa Inc Visa Inc & Visa Europe

% Change

Financial institution clients c 14,000 c 17,000 + 21%

Cards in force c 2.4 billion c 2.9 billion + 21%

Payments volume c $4.9 trillion c $6.5 trillion + 33%

Net revenue $13.9 billion $15.5 billion +12%

Operating income $9.1 billion $9.5 billion + 5%Source: Visa Inc, Visa Europe, SEC filing


THE SALE IN NUMBERS

www.equens.com

The European payments market is rapidly evolving. In order

to keep up, it might be helpful to team up with a trusted and

experienced partner. As one of the largest payment providers in

Europe, Equens ensures seamless, secure and efficient handling of

large numbers of transactions and peak volumes. With more than

50 years of experience in the industry, the cards and payments

business is truly in our DNA. We actively drive operational

excellence and offer modular, customisable and future-proof

solutions covering the entire payments value chain, including

e- and m-payments, e-mandates and e-identity transactions. Our

systems and services are fully compliant with all of the relevant

regulatory and security requirements. What’s more, our European

scale and scope give us a highly competitive cost structure and

enable us to provide seamless connectivity throughout Europe.

So if you’re looking for a partner who knows all the ins and

outs of the payments industry, you can definitely rely on us.

Your business is in our DNA

cards & payments

GLOBAL

Microsoft aims to restrict US snoopingMicrosoft unveiled a plan in mid-

November 2015 to keep customer data

beyond the reach of US authorities. The

US technology giant has developed a

‘trustee’ model with German telecoms

provider Deutsche Telekom as a legal

work-around to the problem of digital

sovereignty for cloud service providers.

Microsoft plans to build 2 data centres

in Germany, which will be put under

the control of T-Systems, a subsidiary of

Deutsche Telekom. Microsoft contends

that even if a US court ordered it to

hand over data stored in a German data

centre, it would be unable to comply as

it would not have access to the data, due

to the trustee arrangement. Lawyers

acting for Microsoft are said to have

worked on the arrangement for months,

although it has yet to be tested in court.

The move comes in the wake of

revelations by American whistleblower

Edward Snowden about the surveillance

activities of US authorities. And

Microsoft’s own long-running legal

battle with the US government about

access to data stored in Ireland.

A New York district court ruling in

2014 ordered Microsoft to hand over

data held on a US citizen stored in a

Dublin data centre. Microsoft refused,

arguing that the warrant was not ‘extra-

territorial’, that is to say should not apply

outside the US. The case is ongoing but

is being watched with interest from

various quarters.

The ruling would have wide-reaching

implications for US cloud service and

data storage providers seeking to

operate and compete in Europe, as well

as the users of such services.

The tie-up with Deutsche Telekom

seems to be tacit admission by

Microsoft that it cannot protect

customer data from US authorities.

It also acknowledges the expediency

of recognising national and regional

concerns about data sovereignty,

security, stewardship and privacy.

The announcement comes at

a time when EU and US authorities

are renegotiating the provisions of

transatlantic data transfer under Safe

Harbour, which was declared invalid

by the European Court of Justice in

October 2015. The EU General Data

Protection Regulation is also wending

its way through the legislative process

and is expected to be finalised in Spring

2016, and fully applicable 2 years later.

European consumers aged 16 to 74

ordering goods or services via the internet

in 2015 was 53 percent, up from 30 percent

in 2007, according to data from Eurostat.

The report by the statistical office of the

European Union showed that countries

with the highest proportion of so-called

‘e-buyers’ were: the UK (81 percent),

Denmark (79 percent), Luxembourg (78

percent), Germany (73 percent) and the

Netherlands, Finland and Sweden (all with

71 percent). By contrast, Romania (11

percent), Bulgaria (18 percent), Cyprus (23

percent) and Italy (26 percent) registered

the lowest proportion of internet shoppers.

Among internet users who did not make

any online purchases in 2015, 75 percent

reported that they preferred to shop in

person, and 27 percent were concerned

about payment security and privacy.

Concerns about the delivery of goods and

not having a payment card for the internet

ranked as lesser barriers

(6 percent and 13 percent

respectively).

70 percent of EU

consumers did not

encounter any problems

when shopping online.

However when issues

occurred, delivery

speed (16 percent) and

technical failure of the

website (12 percent) were

the 2 most commonly cited problems.

The most enthusiastic online shoppers

were those in the 25-34 age group

across most EU countries. Those in the

younger age group (16-24) were more

likely to shop online than those aged

65-74 in every country, although the

size of the difference between these

2 groups varied markedly between

countries. This highlights issues related

to digital literacy and internet usage,

internet connectivity, cultural norms

around shopping and the maturity of

the domestic e-commerce market.

As to what Europeans bought online

in 2015, clothing and sports goods were

the top items in 19 out of 28 EU member

states. Travel and holiday accommodation

was the next most popular category in the

remaining 9 member states, particularly

in the Nordic countries: Denmark (73

percent), Finland (70 percent) and Sweden

(69 percent).

Europeans turn to e-commerce as 50 percent shop online in 2015


Source: Eurostat, 2015

Perceived barriers to buying over the internet

(in % of non e-buyers)

GLOBAL

EU aligns on interchange as regulation kicks in

Cybersecurity for 2016: ransomware and POS attacks set to rise1-in-3 business computers were

exposed to an internet-based attack

at least once in 2015, according

to cybersecurity firm Kaspersky

Lab. Businesses were 3 times as

likely to have their standard

office applications attacked than

consumers. Business computers also

faced local threats from infected

USB sticks or other compromised

removable media. Exploits targeting

the Android platform also increased,

confirming the growing interest in

attacking mobile devices.

Banks, investment funds, stock

and currency exchanges were all

targeted by cybercriminals in 2015.

This included the Carbanak attack,

which infiltrated financial networks to

steal money by dispensing cash from

ATMs, arranging money transfers, or

creating fake accounts and using

money mules to cash out.

Cyber attack tools used against

businesses in 2015 were different

to those used against consumers,

according to Kaspersky Lab’s review

of corporate threats over the last year.

They included greater exploitation

of legitimate software programmes

and malware being signed with valid

digital signatures to keep malicious

files hidden for longer. The use of

corporate ransomware also increased

— a trend set to continue in 2016.

Cryptolocker attacks doubled in 2015,

according to Kaspersky Lab. This

reflects the higher potential ransoms

from corporates, and the increased

likelihood of pay-outs if critical servers

are impacted.

Retail point-of-sale terminals continued

to be a target in 2015. Kaspersky

Lab claims to be aware of 10 families

of programmes designed to steal

data from POS terminals, 7 of which

appeared for the first time in 2015.


and charges. “Unbundling may suit large

merchants with accounting and finance

specialists, but it is unlikely to improve the

ability of smaller businesses to understand

what they are paying to accept cards and

allow price comparison,” continued Purser.

Will interchange fee reductions lead

to lower prices to consumers at point-

of-sale? Purser does not think so. “The

drop in merchant acceptance

costs are likely to be below

0.5 percent, just about

offsetting the 0.3

percent inflation

rate in the Eurozone

last year. The cost to

merchants of repricing

goods to reflect a net

reduction of 0.2 percent

is likely to be greater than the

potential saving to consumers.”

“Furthermore in most markets, cards

still account for less than 50 percent of

payments, halving the saving on any basket

of goods to around 0.1 percent, thus making

repricing even less likely. International

experience in markets such as Australia

also indicates that merchants do not pass

on reductions in their card acceptance fees

to consumers,” concludes Purser.

Further IFR provisions around the

separation of scheme and processing,

co-badging of brands or applications,

unbending and the honour all cards rule

are set to come into force on 09 June 2016.

Meanwhile American Express suffered

a set-back in the UK around its exemption

from the IFR. The Payment Systems

Regulator, the competent authority in the

UK, has provisionally concluded that the

marketshare of American Express in the

year to 08 September 2015 was above the

3 percent threshold. This means it may

not be exempted from the interchange

fee caps on domestic transactions and

must comply with the fee caps. A final

decision is pending.

09 December 2015 marked a significant

date for interchange rates across Europe

as all EU countries had to align their

domestic rates, in accordance with the

Interchange Fee Regulation (IFR). National

regulators are now obliged to enforce

rates of no more than 0.2 percent and

0.3 percent of the transaction value for

consumer debit and consumer credit

cards payments respectively.

Regulators and card

schemes have been

debating interchange

fees for at least 20

years. In July 2013

when the European

Commission proposed

new regulation,

it claimed that

intervention would “create a

level playing field for new payment service

providers to enter the market and offer

innovative services.” Furthermore, retailers

would “make big savings by paying lower

fees to their banks,” and consumers would

“benefit through lower retail prices.” But

2 years on, have lower fees to retailers or

lower prices to consumers materialised?

“The regulation states that merchant

fees must be unbundled, breaking

out interchange and other fees, such

as scheme fees and acquirer margin.

Sounds like a great idea in theory, but

these changes increase the complexities

of pricing,” said Luke Purser, consultant,

PSE Consulting. “It makes merchant

reconciliation harder compared with a

relatively straightforward calculation of

multiplying card volumes by a percentage

or flat fee per transaction.”

Despite the regulation simplifying some

intra-regional rates, there are still a long list

of unregulated card products, including

non-European cards and commercial

cards. Things are set to become more

complicated in June 2016 when acquirers

are required to further break out fees

Omni-channel providers: some are born, others are created

but Equens is active in the non-card

business, whilst Worldline is active in the

cards business,” continued Desportes.

Andrew Quartermaine, vice president

merchant retail, ACI described the

acquisition of PAY.ON thus: “Both entities

saw the natural synergies that exist in

working together. The businesses are very

complementary. What PAY.ON brings to

the equation — being a technical provider

of integrations to multiple acquirers and

alternative payment types — complements

ACI’s expertise in the fraud space and

its card-present activities via its Postilion

product.”

Similarly June Felix, vice president,

Verifone Europe explained that the strategy

behind her company’s recent acquisition

of Intercard was “to offer seamless service

to our clients, from hardware to software,

from payment processing to value-added

services. We are always looking at ways to

complement our capabilities, including

the whole continuum beyond the box.”

Build it, buy it or partner to get it

Consolidation is being driven partly

by technology, changing customer

expectations and growing pragmatism

in the ‘build it, buy it, partner to get

it’ debate. “If we look at the evolving

trends in payment with the use of mobile

and alternative forms of payment, the

world is becoming ever-more blurred

in terms of what is a card-present and

a card-not-present payment,” explained

Quartermaine. “Retailers are enabling

card-not-present transactions in-store in

parallel with accepting traditional card-

present sales on terminals.”

Merchants want to join up their various

sales channels to serve customers better.

They want to make the experience of

selling on a website, mobile or app both

slicker and quicker. And they see digital

The final quarter of 2015 saw various high-

profile mergers and acquisitions within

the European payments industry — all

aimed at serving the omni-channel needs

of customers.

French processor Worldline announced

that it would join forces with Dutch

payment services provider Equens to

form an enlarged financial processing

business, Equens Worldline Company.

ACI acquired the German e-commerce

payment solutions provider PAY.ON. And

Verifone bought the German network

service provider Intercard AG.

Speaking to PCM about his company’s

deal with Equens, Marc-Henri Desportes,

general manager, Worldline siad: “We

believe that the market is moving towards

more consolidation for scale, the ability to

provide cost efficiencies to customers and

to leverage innovation to a wider base.”

Processing is a scale business. “We are

doubling our size in the cards business.

And we are adding a lot of non-card

capabilities, including an automated

clearing house (ACH), to our payment

position. On the merchant acquiring side,

we are gaining an additional 25 percent in

size of the activity,” continued Desportes.

Sweating the synergies

However whilst size matters, the

rationale behind much M&A activity is not

only a case of bigger is better. Speaking to

PCM, those close to their respective deals

mentioned “complementarities”, “natural

synergies” and the desire to offer “seamless

service to clients”.

In the case of the Worldline/Equens tie-

up, the businesses are complementary in

terms of geographic coverage and areas

of business. “Equens is especially strong in

Netherlands, Germany and Italy. Worldline

is especially strong in Benelux, France,

Germany, and to a lesser extent in the UK

and Spain. The only overlap is Germany,

channels as a way to grow outside their

home market. Providers recognise that

they must support customer needs, yet

sometimes this goes beyond what they are

able to supply acting alone.

Does a provider develop these

capabilities itself? Or is it more time-

efficient and cost-effective to buy a

company that is already doing this? A

more pragmatic approach to partnership

is starting to emerge and this trend is set

to continue.

“The market will continue to evolve

and so we are still looking at other

potential opportunities, acquisitions and

partnerships,” said Desportes of Worldline.

This is echoed by Verifone. “We are looking

at things all the time. It’s too early to

say what might come up [in 2016], but

like every good company we look at

opportunities that hit our strategy,” said

Felix.

2016 and beyond

“There are so many questions in the

payments industry at the moment: the

impact of regulation and how this will

change the market of financial institutions

versus pure players; the place of card versus

non-card payment; the rise of instant

payments, regulatory impact and how it

affects the distribution of value between

banks and non-banks,” said Desportes.

“I think it’s the beginning of a journey.

There is pressure on banks to work

more in partnership mode. This doesn’t

mean that they have lost their ability to

provide a strong relationship and portfolio

of services to their clients. They will be

more and more incentivised to work

with partners to offer this at the highest

level of innovation, speed and capability,”

concludes Desportes.

12 payments cards and mobile | January | February 2016 Omnichannel

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GLOBAL

One third of all card-present transactions uses EMV

Belarus, Croatia, Russia and the Ukraine,

saw a substantial rise of 30 percent in the

use of EMV, such that 65 percent of all

face-to-face payments are based on chip

technology.

The US is just beginning to establish its

EMV infrastructure with chip payments

accounting for less than 1 percent of all

transactions during the reporting period.

“The figures published represent a 10

percent year-on-year rise in the number

of card-present transactions using

EMV technology, from 30 percent of all

transactions a year ago to 33 percent in

the most recent reporting period,” said

Mike Matan, chairperson, EMVCo Executive

Committee.

“With EMVCo reporting that 3.4

1-in-3 card transactions undertaken in

the face-to-face environment globally

between July 2014 and June 2015 used

EMV chip technology, according to official

figures released by technical body EMVCo.

The 37 countries comprising western

Europe (Europe zone 1) are close to full

EMV chip deployment with 97 percent

of all card-based payments being chip-

to-chip. That is to say, both the card and

terminal used EMV chip technology. This

is followed by Latin America at 87 percent,

Africa and the Middle East at 84 percent of

EMV chip-enabled payments.

Asia showed significant growth with

the number of payments using EMV chip

technology increasing by 73 percent. The

17 countries Europe zone 2, including

Percentage of Card-Present Transactions that are EMV

Source: EMVCo

Africa &

The Midddle East

Asia

Canada, Latin

America & The

Carribbean

Europe Zone 1

Europe Zone 2

The United States

0% 25% 50% 75% 100%

75.90%

19.42%

83.33%

96.33%

July 2013 - June 2014

50.47%

.03%

83.77%

33.55%

86.95%

96.94%

July 2014 - June 2015

65.41%

.26%


billion EMV chip payment cards were in

circulation globally at the end of 2014, it is

great to see that not only are the cards in

the marketplace, the infrastructure is also

in place to accept and process secure chip

payments worldwide,” continued Matan.

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GLOBAL

Finnet – 34% annual growth in transaction flow on Way4

Being the Core of the National Payment EcosystemPT Finnet Indonesia was established

in 2005 as a subsidiary of PT. Telkom

Indonesia, Tbk (TELKOM), the country’s

largest telecommunications company.

Finnet runs three lines of business: a

bill payment aggregator, an electronic

payment platform and online payment

solutions. Today the company is central to

the national payment ecosystem, with all

the major banks, billers, e-money issuers

and non-bank payment providers in

Indonesia connected to Finnet.

OpenWay Group has been supporting the

Indonesian payment leader ever since Finnet

migrated to the WAY4 Switch platform

nearly a decade ago. “During these years

OpenWay has proved to be a reliable and

supportive partner,” says Erman Suherman,

Operation, IT & Innovation Director, Finnet.

Migration to WAY4Switch – Reasons and OutcomesSoon after Finnet was established,

the company realized that legacy

transaction switches could not fully

support its strategy of “becoming the

leading Indonesian and global-scale

service provider of electronic payment

systems”.

Most solutions on the market were

just back-end systems relying on XML

protocol. Finnet required an innovative

payment switch platform with powerful

messaging, high availability and a

modern mechanism for seamless

integration and building online

interfaces between information systems.

WAY4 Switch platform from OpenWay

Group met all those requirements

and more.

adds Erman Suherman, Operation, IT &

Innovation Director, Finnet.

The migration was accomplished

swiftly by the vendor’s team in 2006.

Since then Finnet has been profitably

developing the WAY4-based part of

its business. The low TCO of the new

switch has allowed the company to

compete on pricing with banks. Today

Finnet serves and connects over 60

financial institutions and 20 billing

companies on WAY4.

In 2015 Finnet achieved 34% annual

growth in transaction flow. The year was

also remarkable in terms of revenue,

achieving 150% growth compared to

the same period in 2014.

ADVERTORIAL

Syaiful Rahim, Finnet’s Director of

Business & Services speaking about

WAY4 Switch at the international

conference ‘New Trends in Payment

Innovations’, Vietnam, 2015


“We chose WAY4 for its

flexibility, modularity, and cost-

efficiency.“

Finnet recently decided to replace two

other legacy systems with WAY4 in order to

further reduce the costs of maintaining its

payment processing infrastructure.

A Promising Future

Indonesia’s GDP is on the rise, and so

is consumer spending. The unique

geographic spread of the population

explains the strong demand for

branchless financial services. The

popularity of online and mobile payments

is growing, additionally fueled by the

Government’s desire for a “cashless

Indonesia”.

The Indonesian payment ecosystem

is transforming. In addition to banks,

telcos, billing companies and payment

gateways, there is an increasing number

of e-money issuers and other non-bank

financial providers. The market requires

interoperability between all the payment

industry players, and here lie rich

opportunities for Finnet.

In 2015 Verifone, Finnet and Telkomsel

launched “TCash Tap” – NFC mobile

payments in retail stores. Finnet’s role is to

provide mobile user access to Indonesia’s

banks nationwide, facilitate interbank

connectivity, and support a wide range of

payment types and acceptance options.

Finnet believes in the future of such

projects, and in the benefits of introducing

payment innovations of its own.

To celebrate and support Finnet’s ten-

year run of success, OpenWay and

its partner Metro Asia Pacific ran a

workshop in Jakarta for the Finnet team.

The participants discussed payment

trends, both global and those specific to

Indonesia. OpenWay presented the WAY4

product roadmap, and its most recent

innovative solutions – WAY4 HCE, WAY4

Wallets, WAY4 Shop, and WAY4 High

Availability.

Rudy Gunawan, Managing Director,

APAC, OpenWay, says: “Our partnership

with Finnet helps both companies to

achieve outstanding goals in shaping the

payment landscape of the Indonesian

market, and we believe we will achieve

even more together.”

Are you transforming your payment processing infrastructure?OpenWay Group is ready to share more business cases of its

clients – banks, processors, payment switches, telcos and oil

companies. We advise on the best practices and migration

tips for:

National and cross-border payment switches

Omni-channel and digital banking platforms

Mobile wallet, e-money and other innovative

payment solutions

Would you prefer a personal meeting? Our team is waiting for you at the forthcoming payment events:

• February 16-18, Berlin: Merchant Payment Ecosystem – OpenWay’s booth #24

• March 22-23, Abu Dhabi: MEFTECH – OpenWay’s booth #F6

• April 4-7, Copenhagen: Money20/20 Europe – OpenWay’s booth #D20

• May 31-June 1, Dubai: Cards & Payments Middle East – OpenWay’s booth #H18

Email OpenWay today to request a conference call or a workshop:

[email protected]

3.80 in Luxembourg. In 2014, 69.3% of all

bank-issued cards were debit cards.

In 2014, there were 53.78 billion card

payments in the E33 countries, a

growth of 8.8%. There were 88.4

payments per capita on average,

ranging from 8.0 in Greece and 9.0 in

Bulgaria to an exceptionally high 375.5

in Iceland and 353.8 in Norway.

Additionally, remote payments on the

internet and payments initiated from

Cards and card use in Europe

In the European countries covered in the

Yearbook (E33), there were 966.8 million

cards in circulation at the end of 2014, up

1.7% from 951.0 million in 2013. The number

of cards per capita was 1.50 on average in

the EU28 countries and 1.59 in the E33

countries, but card holding varies

significantly between countries, ranging

from a low of 0.72 in Romania to a high of

Cards in issue and card payments by

volume and by value showed significant

rates of growth once again across the

33 countries covered in the Yearbook. In

particular, POS payments showed

further significant growth, while cash

withdrawals grew slightly. By the end of

2014, card payments by volume

accounted for 48.51% of the cashless

payments in the region, up from 45.83%

in the previous year.

Cards and card payment at the point of sale (POS) and online showed solid growth rates in most European countries in 2014, supported by the roll-out of contactless technology. The challenges for the industry as a whole are the downward pressure on interchange fees and growing fraud losses. by Horst Foerster – Head of Research, Payment Cards & Mobile

Table 1 - Selected Regional Card Market Summary 2010-20142010 2011 2012 2013 2014 GR 13/14 CAGR 5Y

Total cards in the European E33 countries (m) 885.7 902.7 926.0 951.0 966.8 1.66% 2.01%

- thereof debit cards (m) 595.6 615.9 635.4 664.3 669.8 0.83% 2.86%

Payment cards per capita (EU27/28) 1.45 1.45 1.47 1.49 1.50 0.67% 0.54%

debit cards in % of cards total 67.3% 68.2% 68.6% 69.8% 69.3% -0.81% 0.83%

Card Payments in the European E33 countries (m) 38,502.2 41,972.6 45,327.8 49,438.5 53,777.8 8.78% 8.74%

Value of card payments in the E33 countries (€bn) 2,005.9 2,159.9 2,331.3 2,458.3 2,654.7 7.99% 7.71%

ATV per card payment €52.10 €51.46 €51.43 €49.72 €49.36 -0.72% -0.95%

Average payments per card per year 43.5 46.5 49.0 52.0 55.6 7.00% 6.60%

Card payments per capita 69.8 75.1 81.8 81.6 88.4 8.34% 8.21%

- thereof debit card payments per capita 46.3 54.7 59.1 64.8 70.5 8.95% 8.79%Note: Only 30.7% of all cards in the region are of type credit card and/or delayed debit card. Source: Yearbook Research (European E33 countries).

cover story

Payments Cards in Europe


• Downward pressure on card issuers

following the Interchange Fee Regulation

(IFR) effective 9 December 2015

Debit cards

In 2014, the region’s total debit card base

grew by 5.5 million cards to 669.8 million,

with around 1.10 debit cards per capita. 10

countries recorded a decline in the total

number of debit cards, with the greatest

declines in Greece (-36.0%), Bulgaria

(-9.3%) and Spain (-7.8%). These declines

were partly due to consolidation of card

portfolios and changes in statistical

reporting. For example, in Germany, ELV

direct debits are now excluded from the

debit card total.

Payments on debit cards were 42.9 billion

in 2014 (+9.4% on 2013). All the major

developed markets continued to show

significant growth in payment volumes

compared with 2013. The only exception was

Germany, where direct debits (ELV) were no

mobile devices grew by more than 10%

and 20% respectively in 2014.

The value of card payments across the E33

countries grew by 8.0% to €2,654.7 billion at

the end of 2014, up by 45.0% on 2009. The

average transaction value (ATV) was €49.36,

down from €49.72 in 2013, probably as a

result of contactless cards being used more

frequently for lower value payments.

Across the E33 countries, notable market

trends include:

• Card payments by volume and value

between 2009 and 2014 continued to

grow higher than the compound annual

growth rate (CAGR)

• Contactless cards and payments are the

new normal in Europe and gained

significant traction in 2014

• Digital payments are continuing to grow,

spurred by the launch of digital wallets,

such as MasterPass by MasterCard, and

mobile HCE NFC payment pilots

combining card credentials stored in the

cloud with tokenisation

longer reported as debit card payments.

Leading markets such as the UK and

France accounted for 19.7 billion debit card

payments in 2014, an impressive 45.9% of

the regional total.

Notable trends include:

• Moneo prepaid cards have replaced the

electronic purse Moneo in France

• Capped bilateral interchange

arrangements instead of multi-lateral

domestic scheme interchange fees apply

from the end of 2015

Credit/delayed debit cards

The total credit/delayed debit card

base grew to 300.3 million in 2014, up

by 7.7 million (+2.6%) on 2013. There

were around 0.49 credit cards per

capita in the E33 countries. The

decline in credit/delayed debit cards

across 8 countries is likely to be due in

part to changes in statistical reporting,

which were aligned with the new

cover story

Table 2 - EFTPOS Terminals in Europe2010 2011 2012 2013 2014 GR 13/14 CAGR 5Y

EFTPOS Terminals (000s) 11,120.0 11,584.9 11,762.8 11,797.7 12,391.7 5.03% 2.91%

Ø Number of TXs per POS per month 279.8 294.0 314.0 335.8 337.9 0.61% 4.39%

POS Payments (m) 37,342.8 40,872.3 44,321.6 47,544.1 50,244.3 5.68% 7.42%

Value of POS Payments (€bn) 1,924.7 2,104.2 2,294.0 2,357.9 2,471.6 4.82% 7.11%

ATV per POS Payment 51.5 51.5 51.8 49.6 49.2 -0.81% -0.29%

POS Payments per capita per year 62.3 67.9 73.5 78.5 82.6 5.27% 7.02%

EFTPOS Terminals per 1 million capita 18,632.8 19,331.3 19,555.3 19,475.1 20,377.1 4.63% 2.52%

- thereof in EU27/28 per 1 million capita 17,370.9 17,970.8 18,401.6 17,826.7 19,693.8 10.47% 2.75%Note: figures are for payments on cards at POS terminals made with domestic cards and with cards issued abroad. Source: Yearbook Research (E33 countries).

Table 3 - ATMs in Europe2010 2011 2012 2013 2014 GR 13/14 CAGR 5Y

ATM Terminals 439,336.0 446,934.0 450,452.0 452,159.0 454,459.0 0.51% 0.81%

Ø Number of TXs per ATM per month 2,510.5 2,517.6 2,529.4 2,532.9 2,626.6 3.70% 0.84%

ATM cash withdrawals (m) 13,235.3 13,502.5 13,672.3 13,743.2 14,323.9 4.23% 1.66%

Value of ATM cash withdrawals (€bn) 1,495.6 1,537.3 1,597.3 1,612.9 1,665.0 3.23% 3.34%

ATV per ATM cash withdrawal 113.0 113.9 116.8 117.4 116.2 -0.96% 1.65%

ATM cash withdrawals per capita per year 22.1 22.4 22.7 22.7 23.6 3.81% 1.28%

ATM Terminals per 1 million capita 736.2 755.7 746.0 746.5 747.3 0.11% 0.44%

- thereof in EU27/28 per 1 million capita 866.2 871.2 865.7 855.1 959.6 12.22% 2.20%Note: figures are for ATM cash withdrawals at ATMs made with domestic cards and with cards issued abroad. Source: Yearbook Research (E33 countries).


POS payments per capita again ranged

widely from 7.1 POS payments (Bulgaria)

up to an extremely high 382.0 POS

payments (Iceland) in 2014.


• 95.7% of all domestic POS payments on

cards in Europe are now EMV transactions,

according to the ECB

• The roll-out of contactless POS terminals

continued as did tablet-based mPOS

solutions

• The POS continued to be a testbed for

new technologies, including QR-codes

and Bluetooth Smart (BL E).

ATMs and cash withdrawals

The number of ATMs continued to grow

slightly across the E33 countries covered in

the Yearbook advancing to 454,459 ATMs

(+0.5%), up 4.1% from 2009. The growth

rate in 2014 was lower than the fairly low

CAGR of 0.8% over the last 5 years. The

number of cash withdrawals per ATM per

month amounted to average 2,626.6

withdrawals (+3.7% on 2013).

As at the end of 2014, 20 countries

reported declining ATM numbers,

including Cyprus (-29.4%), Belgium

(-26.9%) and Estonia (-12.5%). Those

countries reporting a substantial growth

of their ATM population include Ireland

(+9.0%), Poland (+8.6%) and Turkey

(+8.5%). The mid-term trend of declining

ATM installations in Europe is likely due

to bank mergers and the higher use of

cards at POS and on the internet. In

2014, ATM density showed a wide range

from 333.2 in a mature market such as

Sweden to a high density of 1,410 in

Portugal.

The total number of cash withdrawals

across the E33 countries covered in the

Yearbook showed an overall growth

rate of 4.2% in 2014. This was higher

than the compound annual growth rate

of 1.7% over the last 5 years. The total of

cash withdrawals in the E33 accounted

for 14.32 billion withdrawals. In 2014,

there were 23.6 withdrawals on cards

per capita in the E33 region, ranging

European Central Bank (ECB)

statistical standard.

There were 10.9 billion credit/delayed

debit card payments in 2014 (+6.2%).

Although credit/delayed debit card

volumes have been growing healthily

(37.1% over the last 5 years), these rates of

growth are outpaced by those on debit

card volumes (56.4%). 6 countries –

Belgium, Croatia, Cyprus, Finland, Ireland

and Portugal – actually recorded a fall in

the number of payments on credit/delayed

debit cards in 2014.

The value of payments on credit/delayed

debit cards was €748.3 billion in 2014 (+9.0%

on 2013). The value of such payments fell in

Belgium, Cyprus, Finland, Ireland, Portugal,

Serbia, Slovenia and Turkey.

Notable domestic card trends include:

• Most cards of the remaining domestic

credit card schemes are co-badged with an

international card brand

• Domestic interchange fees for delayed

debit/credit consumer cards were capped

at 0.3% at the end of 2015

POS terminals and payments

In 2014, the POS terminal base grew across

the E33 countries by 5.0% to 12.39 million, an

advancement of 15.4% over the last 5 years

(CAGR: 2.9%). The roll-out of contactless POS

terminals and mPOS terminals has

contributed to the growth in 2014.

Belgium (29.5%), Poland (22.0%) and

Luxembourg (20.9%) reported POS

terminal growth exceeding 20% in 2014.

Conversely, Ireland (-61.9%), Greece

(-53.3%), Finland (-19.9%) and Slovenia

(-7.6%) had the largest declines year-on-

year. Denmark and Iceland also reported

declines.

Total POS payments by number

amounted to 50.24 billion payments in

2014, up from 47.54 billion in 2013. The

overall growth was 5.7% on 2013, which

was lower than the CAGR of 7.4% over the

last 5 years. There were 82.6 POS payments

per capita per year (+5.3% on 2013) on

average with a POS ATV of €49.19 across

the EU28 countries.

from 10.4 withdrawals in Serbia up to a

high of 43.8 withdrawals in the UK.

Total cash withdrawals by value across

the E33 countries showed an overall

growth rate of 3.8% in 2014, which was

higher than the compound annual growth

rate of 2.8% between 2009 and 2014. The

E33 total of cash withdrawals by value

amounted to €1,665 billion (3.2% on 2013).

The notable growth was influenced by the

statistical effect of adding withdrawals

from Austria and Germany that were not

previously reported.

The ATV per cash withdrawal amounted

to €114.04, slightly down from 2013. In 2014,

the UK, France, and Germany accounted

for 48.3% of total cash withdrawals by

value, down from 59.4% in 2005.


• ATM terminals installed and cash

withdrawals by volume and by value

continued to decline in many countries

• Pilots of card-less ATM withdrawals

initiated using mobile banking apps or

biometric authentication

The European Payment Cards Yearbook 2015-16

The latest edition of the European

Payment Cards Yearbook 2015-16 is based

on end-2014 payment industry figures. It

reports recent card market developments

and the latest card business trends. Rich

statistical data is provided by country,

including typical key performance

indicators, documenting the growth of

cards in issue and transactions by volume

and by value.

Further information on leading issuers,

acquirers and processors, on cards and

remote payments via the internet, digital

wallets and mobile payments initiatives by

country are also included, along with

notable trends.

Note: This article is compiled using

detailed information adapted from

individual country profiles and from the

European Overview section of the European

Payment Cards Yearbook 2015-16.

www.paymentcardyearbooks.com

cover story


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For additional information:

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Richard Hahn VP of [email protected] www.northernleasing.com

For additional information:

Northern Leasing Systems is seeking to purchase credit card terminal estates (portfolios) of any size in the UK, Europe or Scandinavia.

You retain your merchants as your clients and retain them as credit card processing customers.

We offer to purchase the monthly cash stream and ownership of the terminal. The transaction is transparent to the merchant.

Turn this asset into immediate cash!

TERMINAL ESTATES WANTED!

Does size matter?

When it comes to data, is it really a case

of bigger is better, though? How much

data is enough? For Cristina Soviany, CEO,

Features Analytics, a Belgian firm

specialising in machine learning

technologies, huge quantities of data

alone is not enough to build accurate

predictive models. Soviany notes that

sometimes one can get by quite well with

limited or small amounts of data.

“The answer lies in the quality of data

combined with the ability to enhance it

with the right features, or sets of variables,

able to detect hidden patterns but also

evolve with the data,” she says. When

Facebook, Google and Netflix, have made

monetising Big Data a cornerstone of

their business models. But how

widespread is the use of Big Data across

the financial services industry?

According to Hugo D’Ullise, head of

analytical platform, SAS, UK and Ireland,

adoption of Big Data techniques is

relatively widespread and on the rise,

although there is still a way to go.

“In retail banking, nearly 80 percent of

organisations report that they collect or

store Big Data. More than half of

insurance, retail banking and investment

banking firms were using some form of

data analytics solution in 2015, and that

figure is growing.”

The dataverse is growing exponentially.

From mobile phone signals to social

media sites, online banking and the

Internet of Things, we create around 2.5

quintillion bytes of data every day — so

much so that 90 percent of the data in

the world today has been created in the

last 2 years.

The term ‘Big Data’ has generally come

to mean data which is too large or

complex to be processed using

traditional database techniques. The

challenge and opportunity of Big Data is

coping with the sheer quantity of data

available, and analysing it to generate

useful insights.

Technology companies, such as Amazon,

There is no shortage of data in payments. Yet for too long the payments industry may have suffered from being data-rich but insight-poor. PCM attempts to go beyond the hype around Big Data to investigate how those in and around the industry are actually using Big Data effectively, and what the future may hold.

Behind the Big Data hype

big data

by Joyrene Thomas


Features Analytics builds models to detect

payment fraud, having the right type and

amount of historical data is important,

ideally 12-18 consecutive months of

transaction data. The data also needs

enough statistical coverage.

“In the case of payment fraud solutions,

we are used to building models where the

fraud class size is 0.005 percent to 1

percent of total transaction numbers,”

explains Soviany. “If the volumes of data are

large enough — more than hundreds of

millions of transactions or samples, for

example — and if the above percentages

hold, then we have enough statistical

data,”

Good data quality enables Features

Analytics to apply algorithms to select the

best variables, and to design new features

to ensure the models learn and evolve. So,

it is not always a case of bigger is better.

Both quantity and quality of data matter

— as well as the underlying modelling

technology, which drives insights.

Generating useful insights

One of the insights Big Data techniques

helps to deliver is inverting the traditional

needle-in-a-haystack approach to fraud

detection for more accurate decisioning. If

bad customers represent only a tiny

minority of a portfolio and are therefore

difficult to find [the needle in the haystack],

why not turn the problem on its head?

Identify your good customers and give

them a better experience. Any anomalous

behaviour will stand out against the mass

of good customer behaviour.

This approach has a number of benefits.

“As technology evolves so quickly, if you try

to identify fraud on what has happened in

the past you can often miss new types as

they emerge,” says Dave Excell, CTO and

co-founder, Featurespace, a start-up spun

out of Cambridge University’s engineering

department. “We learn about what good

or normal customer behaviour is and then

we identify what is different. As fraudsters

begin to exploit new techniques and fraud

patterns change, we are then able to

identify the new ways in which they

operate.”

Catching fraud faster helps clients

contain losses. A machine-learning

approach also helps minimise false

positives, where genuine transactions are

mistakenly flagged and declined. “A fraud

system should not only identify the fraud,

but also ensure that good customers can

continue to transact,” adds Excell. “Working

with UK high street banks, we have

managed to reduce false positives by more

than 70 percent.”

Letting more good transactions through

not only improves customer experience at

the time of the transaction. It prevents the

card being put at the back of the wallet

and not trusted for future transactions.

Furthermore, it helps minimise the

additional operational costs of in-bound

calls to the customer centre with queries,

card unblock requests and so on.

Featurespace is also using pattern

recognition techniques to help gambling

sector operators detect fraud as well as

problem gambling. “In 2014, we were

selected by the Responsible Gambling

Trust to do some work on behalf of the 5

biggest bookmakers in the UK. We took

more than 10 billion transactions from

in-store gambling machines to identify the

characteristics of those who could be at

risk from problem gambling,” explains

Excell. This allows operators to proactively

intervene to help prevent addiction and

gambling-related harm.

Messy data

As a specialist in secure multi-channel

customer on-boarding technologies,

AU10TIX is used to messy data. The

company works with mostly unstructured

picture data from identity documents,

which consumers scan themselves using

web or smartphone cameras in varying

lights, angles and so on.

“We realised that we had to use machine

learning to cope successfully with the

huge variations in the incoming images,

the volumes and the response times

required by our clients,” says Ofer

Friedman, vice president marketing,

AU10TIX. “We managed to solve the auto-

classification problem, which no-one had

managed to do before,” adds Friedman.

Machine-learning techniques have

allowed AU10TIX to identify whether the

document presented is a Scottish driving

licence version 2 or a Zimbabwean ID card

version 5 for example, and tell whether it is

genuine within seconds. “We created a

completely automated ID authentication

and on-boarding process. We also

introduced forensic techniques to go

beyond checking the printed data on the

document. We can see things humans

cannot,” says Friedman.

Average abandonment rates for remote

on-boarding are typically 50-70 percent

within the financial services sector.

Automation, greater accuracy, meaning

fewer false positives, and fast response

times have helped AU10TIX positively

influence conversion rates for clients.

The need for speed

Big Data techniques enable companies

to analyse huge quantities of data — and

do so quickly. This is the so-called Fast Data

challenge. “For payment systems, decisions

must be made in the sub-second range,”

explains Richard Harris, head of

international operations, at the

US-headquartered data science company

Feedzai. “Our clients typically require 20-50

millisecond response times. So we’ve

overcome this by using technology

founded in the Big Data era, such as

Hadoop and Cassandra.”

Near real-time decisioning is one aspect

of the Fast Data challenge. The other is

faster deployment times, compared to

rules-based systems or neural networks.

Payment processor, First Data, is one of

Feedzai’s clients. “We score $800 million in

daily volumes for the STAR network. First

Data is able to produce new machine

learning models that detect fraud better,

and deploy them in 2-3 weeks, compared

to 6-8 months with other systems. This

big data


Free Registration now open

www.rbtexpo.com

RBTE is where retailers come to find out the latest payments news from mobile payments to biometrics;

data security to alternative payments

RBTE IS YOUR EVENT!Bootcamps | Dedicated Retailer Payments Theatre

Innovation Trail | eCommerce Quarter & eCommerce TheatreExtensive Networking | Over 350 Exhibitors | FREE conference

programme featuring leading international retailers ALL UNDER ONE ROOF

SEE THE FUTURE OF PAYMENTS

www.rbtexpo.com | +44 (0) 208 874 2728

9 – 10th March 2016Olympia Grand, London

Speakers in the dedicated Payments Theatre at RBTE include:programme subject to change

Louise Cowan, Global Fraud and Payment Manager, River IslandKelly Smirk, Head of UK Multi Channel Retailing Operations, ClarksMike Hominick, Retail Marketing Leader, ShellJulian Bond, Head of ICT, HillarysMatthew Hudson, Head of Business Development, Transport for LondonNicolas Voglimacci, Payments Software Manager, DecathlonBen Fricke, Commercial Director, Subway

Branko Lolich, Business Solutions Architect, DebenhamsRob Harper, Director and Head of Mobile Commerce, PayPal UKJeremy King, International Director, PCI Security Standards CouncilDavid Baker, Head of Card Payment Innovations Unit, UK Cards AssociationRafaele Petruzzo, Digital Wallet Director, Tesco BankRoy Ford, IT Director, SparArnaud Crouzet, Head of Group Global Payments Development, Auchan

RBTE2016_Payments_January_210x280.indd 1 08/01/2016 16:20

speed and accuracy advantage means the

STAR network is less of an attractive target

for fraud,” concludes Harris.

The future of Big Data is human

Automation in the workplace is

growing, as machines take over an

increasing range of tasks, including

analysing data. If machines can think,

learn and communicate with other

machines, how soon before robots

replace humans altogether? This

dystopian view of the relationship

between man and machines is not new,

nor is the discussion about automation in

the workplace. However, the future of Big

Data is as much about humans as it is

about data or machines.

“Where we see machine learning and

its application today is for repetitive tasks

where the machine is following a process

or looking for certain activities or

characteristics,” explains Excell from

Featurespace. “Humans will take more of

a role on the creative side — how you add

more colour or excitement to processes

and the output. Machines will provide

more automation and predictions.”

For D’Ullise at SAS, the future of Big Data

is also human in that there is not enough

skilled humans. “A major challenge is the

lack of in-house skills. Research we carried

out with the The Tech Partnership revealed

that demand for Big Data professionals

will rise by 160 percent over the period

2013-20, yet UK employment overall is set

to rise by just 6 percent. This problem

won’t go away quickly.”

Big Data will have implications for how

humans organise themselves in

companies. Fraud prevention, KYC and

operations need not be silo-ed functions

within an organisation, if the use of Big

Data techniques allows them to be

covered off with one process in one

department. Big Data has implications for

how companies use business intelligence,

but also how they are organised internally.

Companies have already started to

appoint chief data officers or heads of

data & analytics in recognition of the need

to become data savvy across an

organisation.

Big Data will deliver change in the

back-office but also front-of-house to

customers. Insights can help move

customer engagement from a one-size-

fits-all approach towards a more human,

personalised one.

In summary

It is not just hype. Big Data and Big Data

techniques are being used within the

payments industry. When used well within

the fraud and authentication space, Big

Data helps improve the accuracy and

speed of decision-making. Ultimately this

builds business resilience and protects

brand, reputation and financial health. The

future of Big Data is more: more companies

using more data for more effective

insights. But above all, the future of Big

Data is about being more human.

Small glossary of Big Data terms

big data

Artificial intelligence (AI) — the

intelligence exhibited by machines or

software, as well as the academic field

which studies how to create

computers and computer software

capable of intelligent behaviour.

Bayesian analysis — a method of

statistical inference named after 18th

century mathematician Thomas

Bayes, combining prior information

about a population parameter with

evidence contained in a sample to

guide the statistical inference process.

Big Data — data which is too large or

complex to be processed using

traditional database techniques.

Mined correctly, Big Data can reveal

insights helpful to meeting various

business objectives, such as improving

supply chain performance, workforce

management, business planning and

modelling, fraud detection, forensics,

and tracking customer sentiment.

Hadoop — an open-source software

framework used for distributed

storage and processing of very large

data sets on clusters of hardware.

Machine learning — explores the

study and construction of algorithms

that can learn from and make

predictions on data. Such algorithms

operate by building models from

example inputs to make data-driven

predictions or decisions, rather than

following strictly static programme

instructions.

Pattern recognition — a branch of

machine learning focusing on the

recognition of patterns and regularities

in data. The terms machine learning,

pattern recognition, data mining and

knowledge discovery in databases

(KDD) are difficult to separate as they

largely overlap in their scope.

Semantic web — information

marked up with data describing its

context, making it a web of data,

rather than just of documents, thereby

increasing its value.

Structured data — any data that fits

into a fixed field within a record or file,

making it easier to enter, store, query

and analyse, e.g. information in

databases, spreadsheets, digitised

library catalogues or census records.

Unstructured data — any data that

cannot easily fit into a fixed field, e.g.

photographs, videos, web pages,

e-mails, information contained in pdf

or word processing files.


Free Registration now open

www.rbtexpo.com

RBTE is where retailers come to find out the latest payments news from mobile payments to biometrics;

data security to alternative payments

RBTE IS YOUR EVENT!Bootcamps | Dedicated Retailer Payments Theatre

Innovation Trail | eCommerce Quarter & eCommerce TheatreExtensive Networking | Over 350 Exhibitors | FREE conference

programme featuring leading international retailers ALL UNDER ONE ROOF

SEE THE FUTURE OF PAYMENTS

www.rbtexpo.com | +44 (0) 208 874 2728

9 – 10th March 2016Olympia Grand, London

Speakers in the dedicated Payments Theatre at RBTE include:programme subject to change

Louise Cowan, Global Fraud and Payment Manager, River IslandKelly Smirk, Head of UK Multi Channel Retailing Operations, ClarksMike Hominick, Retail Marketing Leader, ShellJulian Bond, Head of ICT, HillarysMatthew Hudson, Head of Business Development, Transport for LondonNicolas Voglimacci, Payments Software Manager, DecathlonBen Fricke, Commercial Director, Subway

Branko Lolich, Business Solutions Architect, DebenhamsRob Harper, Director and Head of Mobile Commerce, PayPal UKJeremy King, International Director, PCI Security Standards CouncilDavid Baker, Head of Card Payment Innovations Unit, UK Cards AssociationRafaele Petruzzo, Digital Wallet Director, Tesco BankRoy Ford, IT Director, SparArnaud Crouzet, Head of Group Global Payments Development, Auchan

RBTE2016_Payments_January_210x280.indd 1 08/01/2016 16:20

IoT

by Joyrene Thomas

Extending payment to new form factors

Several use cases combining IoT with

payments are beginning to emerge,

particularly around extending payment to

new form factors to enhance the

consumer experience. What about using

your car, television or wristwatch as a

payment device?

Various fast-food retailers are exploring

IoT scenarios combining in-car ordering,

beacon technology to detect the

approaching customer, existing drive-

through infrastructure and payment.

Document signing and management

company, DocuSign, and Visa Inc are

It encompasses cars, people, industry and

business, which in turn impacts our cities,

infrastructure, homes, health and so on.

IoT has the potential to add $6.2 trillion

to the global economy by 2025,

according to McKinsey. In terms of

hardware spending, consumer

applications will amount to $546 billion

in 2016, while the use of connected

things in the enterprise will drive $868

billion in 2016, according to Gartner. The

figures and projections for IoT may vary

but the potential is undisputed. When

the internet extends into the physical

world and machines communicate with

each other, what are the implications for

the payments industry?

From industrial machines to wearable

devices, around 6.4 billion physical objects

worldwide are expected to be connected

via the IoT this year, according to Gartner.

The term IoT was first coined in the late

1990s by British technology entrepreneur

Kevin Ashton to refer to machines talking

to each other. As a designer of remote

sensors, Ashton used IoT to distinguish

between data created by humans and

entered into computers, and computers

collecting and exchanging data without

human involvement.

A decade-and-a-half later, and thanks to

the falling cost of RFID tags, the scope of

IoT expands far beyond home appliances

and the oft-cited self-stocking refrigerator.

In theory, the Internet of Things (IoT) could be the future of technology and a game-changer for many industries. But what are the implications for the payments industry?

The Internet of Things for payment


IoTinvestigating the possibility of buying the

car itself by securely signing all

documents and paying electronically

from the driver’s seat.

The partners unveiled a connected car

proof-of-concept at Money 20/20 in Las

Vegas in October 2015. The prototype

automates the steps to buy or lease a car

by means of an app embedded into the

dashboard. The solution treats the car as a

smart asset within the IoT and also

leverages Blockchain protocols and

DocuSign’s secure signing capabilities.

“We see a future where car-commerce goes far beyond fuel pumps and drive-thrus, becoming a fully automated experience among the IoT,” said Jim McCarthy, executive vice president, innovation and strategic partnerships, Visa Inc.

“Anything you buy from your car, or for

your car, can be enabled by automatic

payments: whether it’s a lease payment,

insurance or anything governed by a

contract,” adds McCarthy.

Tolls, maintenance service, parking

could all be automated through a token

securely stored in the car. Insurance

companies already place black box-style

monitoring devices in vehicles in

exchange for lower premiums. The IoT

could expand this to create various usage-

based payment models. For example,

dynamic premiums which insure the

vehicle only when it is driven as well as

consider other factors, such as road and

weather conditions, time of day, speed

and driving style, when pricing the

premiums.

Back in the present, Samsung is already

allowing users to pay for content (movies,

books, games, music) using selected

models of smart TVs via Samsung Pay on

TV — a payment method backed by card,

PayPal or mobile billing. After entering

their name and billing details, users click

on the ‘Pay Now’ button on screen and

enter a 4-digit PIN to complete the

purchase. Payment via wearables, such as

the Apple Watch, is also in-market.

Implications of invisible payment

Turning objects into payment devices is

already happening via embedded

payment credentials or a payment on file

or recurring billing arrangements, running

off existing payment rails. The IoT will only

advance this, with the associated speed,

convenience and value benefits for

consumers, merchants and financial

institution stakeholders.

Naturally, the idea of automated or

invisible payment will not appeal to

everyone or be suitable for every payment

occasion. It may change the way we think

about payment, though. Not only in terms

of whether the payment is a push or pull

payment (and who or what is initiating

payment — the payer, payee or device) but

also how to translate existing provisions

around customer consent, repudiation

and dispute resolution into the IoT era.

If payers give permission for invisible,

frictionless payment, they will need

somewhere central to track and manage

their permissions, and some method of

accessing the ‘permission centre’. These

implications of the IoT for payments may

trigger a ripple of subsequent

breakthrough or incremental innovations.

Barriers to adoption

Lack of standardisation to ensure

interoperability and uncertainty about the

dominant wireless system may slow the

roll-out of IoT solutions generally. There are

also security issues, particularly around the

vulnerability to hacking if applications do

not incorporate security by design.

High-profile, non-payment breaches

have included smart dolls for children

that have been hacked to say things

unsuitable for children’s ears. Hospital

equipment has been accessed with ease,

and last year the on-board computer of

a Jeep Cherokee was compromised to

cut the car’s transmission at 70mph as

part of a security test.

These security issues present a

considerable barrier to adoption of IoT

solutions generally, even before payment

functionality is added. Equally, privacy,

data protection, data ownership and other

legal issues could prove as significant as

any technological issues. Legal

uncertainties, particularly given the mis-

match between the global nature of the

internet and domestic or regional nature

of legal frameworks, could inhibit the roll-

out of IoT with or without payment.

Finally, there are the questions of

consumer appetite and commercial

framework. Do consumers and merchants

actually want to pay and be paid using IoT

solutions? Are these ways of paying

significantly better than the options that

exist already? And, simply put, can people

make money from it?

In summary

The future of the IoT is already here — it’s

just not very evenly distributed. The IoT is

beginning to change how we think about

the objects in our lives. The so-called ‘killer

app’ of IoT for payments has yet to emerge,

with wearables and smart devices being

way-stages to the future.

Payment is an exchange of value and

data. If payment becomes invisible, or

just less visible, through the IoT, payment

institutions and brands may in turn

become less visible. Brands face

disintermediation threats and possible

relegation to the status of a hidden

enabler. This may have knock-on

consequences for brand recognition and

relevance, and also customer and

supplier relationships.

Incumbent brands will have to work to

maintain mindshare as well as wallet-share

with customers. Both new entrants and

incumbents will have to consider how they

partner for success in the emerging IoT

ecosystem.

The opportunities for IoT with or without

payment are considerable, yet so are the

barriers to mass adoption.


issuing and acquiring IN ASSOCIATION WITH

JPMorgan Chase hackers targeted risk management company

MasterCard and Visa account for 69

percent of the 2.9 billion payment cards

issued in the Americas, and this share

continues to rise at the expense of private

label cards, according to RBR figures.

Visa is the largest card scheme in the

Americas with 43 percent of cards in

circulation, compared to MasterCard’s 27

percent. Visa’s strong position in the US —

where it has almost 50 percent of the

market against MasterCard’s 24 percent —

gives it a considerable lead in the region. Visa

is also the largest scheme in Argentina, Chile,

Mexico and Peru, while MasterCard leads in

Brazil, Canada, Colombia and Venezuela.

However, MasterCard is gaining ground

as the number of MasterCards in

circulation rose quicker than Visa in all 9

countries surveyed in the region, except

Canada and Colombia.

A number of major deals is likely to

shape the competitive landscape over the

next few years. In Argentina, MasterCard’s

marketshare gain was due to increased

Maestro issuance by Banco de la Nación

Argentina, while in Chile several retailers

added the MasterCard logo to their private

label cards. In Brazil, Itaú Unibanco signed

a 20-year agreement in March 2015 to issue

mostly MasterCard cards, which may help

it increase its slender lead over Visa in the

second largest country in the region.

Portfolio switches in the US make it difficult

to call which scheme will fare best in the

coming years. Retailers Walmart and Sam’s

Club converted their portfolios to MasterCard

from Discover in 2014. Citigroup issued mainly

MasterCard consumer cards in 2015 in a deal

also affecting its subsidiary Banamex, Mexico.

However, Costco and USAA announced

moves to switch to Visa last year.

Private label cards are significant in the

Americas with 23 percent of all cards

compared to just 7 percent at a global level.

Brazil, Chile and the US have particularly

important private label sectors, as such

cards remain popular with customers who

may not meet the income requirements for

a bank credit card.

Conversely, domestic card schemes are

not particularly significant in the region,

making up only 3 percent of cards. While

some domestic schemes are increasing

their presence, the vast majority of cards

issued in the Americas will continue to carry

an international scheme brand.

Hackers behind the JPMorgan Chase attack also breached a risk management company retained by various parties in the card payments industry, according to federal authorities in New York.

The 68-page indictment from the US District Court of New York, unsealed in November 2015, details charges against 3 men ranging from conspiracy to commit computer hacking and securities fraud, to wire fraud and money laundering, operating illegal gambling and unlicensed money transmitting businesses.

12 victims are mentioned in the indictment, including financial institutions, f inancial news publishers, software development firms and Victim-12, “a merchant risk intelligence firm with headquarters in Bellevue, Washington.”

In a post dated 13 November 2015, security blogger Brian Krebs named Victim-12 as G2 Web Services, headquartered in Bellevue, Washington.

G2 is retained by acquirers, payment service providers and others within the payments industry to score transactions from e-commerce merchants. It also conducts undercover test purchases on cards to detect and prevent merchants from selling goods or services that are illegal, restricted, brand-damaging or prohibited by the card schemes.

The indictment alleges that in or about 2012 hackers breached G2’s computer network, including the e-mail system. They determined the account numbers of test cards used to conduct uncover purchases, blacklisted the numbers within their payments processing business and automatically declined transactions with these cards through their processing business.

G2 Web Services did not respond to a request from PCM for comment. The case against the 3 men is ongoing.

MasterCard gaining ground on Visa in the Americas

Nordics say ‘no’ to cash

Sweden can currently claim to be a world

leader in cashless trading, according to a

recent study from KT-Royal Institute of

Technology. There are less than 80 billion

Swedish crowns in circulation (€8 billion),

a sharp decline from the 106 billion crowns

6 years ago.

“In the retail sector, about 80 percent of

all transactions are made with cards, and

20 percent in cash, and the percentage

of cashless payments is increasing,” said

Bengt Nilervall, head of payments systems,

Swedish Trade Federation.

Popular alternatives to cash in Sweden

include card payments, as well as the

Swish mobile payment app launched by

6 Swedish banks in December 2012.

The study follows on from government

proposals in neighbouring Denmark to

remove the obligation for certain retailers,

such as clothing stores, petrol stations and

restaurants, to accept cash payment.


Source: Global Payment Cards Data and Forecasts to 2020, RBR

IN ASSOCIATION WITH

Russia has launched its own domestic

payment system, aiming to boost its

financial independence and compete with

international payment systems, such as

Visa and MasterCard.

The Bank of Russia and the National

Payment Card System presented the

Russian bank cards in mid-December

2015, saying that the move would bolster

Russia’s financial sovereignty, according to

Wall Street Journal reports.

Bank Rossiya, SMP Bank and RNKB

Bank, all of which are on the Western

sanctions list, will be among the first

Russian banks to issue the plastic cards.

Russia’s largest lenders, Sberbank and VTB,

also joined the national payment system.

The Russian government has allocated 4.5

billion rubles ($64.2 million) to issue the cards,

which look similar to international bank cards

and feature a Mir logo in the left corner (Mir

means ‘peace’ or ‘world’ in Russian).

The push for a new payments system

gained momentum after Russia’s

parliament passed a law in 2014 designed

to force Visa and MasterCard to keep

hundreds of millions of dollars at

the Bank of Russia as a collateral

against a possible freeze. This raised

concerns that the schemes would leave

Russia, causing massive disruptions

to the crisis-hit economy. Both Visa

and MasterCard said they wanted to

continue operations in Russia and, after

the law was amended, reached an

agreement with authorities to continue

to process payments in Russia.

The central bank plans to promote the

cards among state employees in 2016,

and turn them into a globally accepted

means of payment in the future.

Despite the growing popularity of non-

cash payments, Russians still prefer to

use cards to withdraw money from ATMs,

according to a central bank study. More

than 64 percent of Russians had at least

one bank card in 2014.

Russia launches domestic payment system

The European Payments Council (EPC)

and Cards Stakeholders Group (CSG), a

multi-stakeholder group comprising

retailers, vendors, processors, cards

schemes, published version 7.1 of its

‘Volume’ in December 2015.

First published in 2009 and regularly

updated, the Single Euro Payments Area

(SEPA) Cards Standardisation Volume

aims to achieve card interoperability and

security in Europe.

Version 7.1 includes new elements, such

as functional and security requirements

for card-not-present payments and a

card processing framework to facilitate

an open and transparent market. It

also contains additional requirements

and modifications, reflecting the

CSG’s analysis of card interchange fee

regulation.

Compliance with provisions in the

Volume is not mandatory as neither

the EPC nor the CSG has regulatory

or enforcement powers. However all

stakeholders active in the SEPA cards

domain are encouraged to roll out

products and services in line with the

Volume by December 2018.

EPC publishes latest version of the SEPA Cards Standardisation Volume

www.paymentscm.com

Card acquiring in Europe - Challenges of changing market environmentThe merchant payment landscape has

changed a lot over the last few years. New

Payment Service Providers (PSP) have

entered the market, new payment schemes

have been introduced, smart phones have

become not only “the” device but are also

used for electronic payments, are just some

of the examples we could mention. The

evolution in industry suggests that the new

era of acquiring driven by grip of powerful

forces for change is yet to come.

At the MPE 2016 (February 16-18, Berlin),

the Europe’s favorite merchant payments

acceptance conference, key market players

will identify and address current challenges

faces by merchant payment professionals:

Are merchant acquiring and processing

industry resigned to endure what is

happening?

What acquirers, processors and solution

providers must do to prepare for the future

of Open payments?

What are the growth strategies to reverse

market trends?

What is the impact of ongoing consolidation

in Europe, reduction of European card

interchange rates, disruptive payment

technologies delivered by FinTech

companies?

MPE 2016: 600+ of industry peers and

potential partners/customers, 200+ CXOs

and MDs, 20+ hours of networking in just in

3 days.

Speakers: 100+ hottest payments, HW, SW &

POS providers, industry experts & merchants

– Samsung, Shopkeep, Vend, Yandex.

Money, Fruugo, Green Man Gaming, Advent

International, PAY.ON, Nedbank, Rakuten,

Alipay, Hotel Booker, ECB and many more.

Topics: ACH payments vs. Apple Pay to digital

shopping and integrated experience, NFC,

ICHFEE regulation, biometrics, security & ID

innovations, Open APIs, Local, Cross border

Acquiring, SmartPOS.

Request the conference program and

registration form at [email protected]

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mobile payments

South Korea and the US during 2015. An

expansion of the service to more handset

types as well as to online shoppers in the

US is expected this year.

Both Apple and Samsung separately

announced work with China UnionPay

to launch in China this year. With an

addressable population for mobile services

of around 1.1 billion Chinese, the opportunity

is huge — as is the competition from

incumbents, such as Alipay and Tenpay.

Meanwhile Microsoft is gearing up to

launch its own mobile payment option for

Windows phones and tablets. And Korean

manufacturer LG announced via Facebook

in November 2015 that it was preparing for

the launch of LG Pay.

Retailers get in on the action

Retailers are also getting in on the

mobile payments action to protect

revenue, relevance and customer

relationships. Amazon is planning to allow

in-app payment at third party mobile

apps using credentials it holds on file.

Target, the fourth largest retailer in the

US, is rumoured to be working with card

schemes on a mobile payments service,

involving QR-code scanning.

Meanwhile Walmart stole a march on

its rivals with the launch of Walmart Pay in

December 2015. Currently being trialled, a

full roll-out to 22 million Walmart app users

is expected in the first half of this year.

Walmart is a member of the Merchant

Customer Exchange (MCX), a retailer-

backed mobile payments group behind

the much-delayed CurrentC app. However,

Chase Pay from JPMorgan Chase has

emerged as a payment partner for

MCX. Chase Pay will be available in mid-

2016 to 94 million Chase customers at

participating MCX retailers.

One of the most intriguing

announcements in the retail space has

been OmnyPay, a firm headquartered in

San Francisco and led by former VeriFone

Tim Cook, CEO of Apple, said that

2015 would be the year of Apple Pay.

As it turned out, 2015 was the year of

mobile payments initiatives generally

as technology companies, retailers and

banks all jostled to bring in-store mobile

payments to the masses.

Handset manufacturers have head-start

Apple Pay launched in the US in 2014

and in the UK in July 2015. Given the

downward pressure on interchange, Apple

found it hard to cut deals with banks

outside the US. Although the service was

rolled out in Canada and Australia, it was

only to American Express cardholders.

Further roll-outs to Amex cardholders are

expected in Spain, Singapore and Hong

Kong this year.

Apple Pay usage is still at the nascent

stage. Phoenix Marketing International,

a research firm, estimated that 14

percent of US households with credit

cards had signed up for Apple Pay.

And only a third of iPhone users had a

model new enough to use the system.

In the UK, only around 3 percent of

iPhone 6 users were regularly using

Apple Pay a month after launch,

according to national media reports. To

incentivise use, MasterCard undertook

a promotion with Transport for London

in November/December 2015, allowing

free travel on 4 Mondays for those using

Apple Pay with a MasterCard.

Samsung launched Samsung Pay in

The battle for Pay supremacy continues

executives. A media statement timed

to coincide with the Money 20/20 event

in Las Vegas last October did not pull its

punches.

OmnyPay is billed as an integrated

mobile, loyalty, rewards and payment

system designed specif ically for

retailers for the “last inch” of the mobile

payments process. OmnyPay recognises

that retailers have had a “challenging

relationship with credit and bank card

companies, whose control over the

mobile payment process has been

costly to retailers.” Referencing the

“handsome transactions fees” collected

by card companies, “intermediaries” and

the “third-party relationships retailers

[have] with their own customers”, the

statement sounds akin to a manifesto for

an anti-establishment cryptocurrency.

OmnyPay’s solution promises

coverage by supporting all iOS and

Android devices, including the iPhone

5. It allows the retailer to brand the

app themselves and offer all payment

types (ACH, private label, store, credit

and debit cards), whilst enabling them

to “incentivise shoppers to use the

payment type that works best and

has the lowest cost for the retailer.”

OmnyPay partners, launch dates and

targets were not provided.

Looking to the future…

Are payment cards dead as consumers

demand to pay with their phones?

Probably not, but calling to mind Henry

Ford’s famous quip about faster horses,

consumers may not be reliable sources

for future innovation. There will be more

mobile payments launches before there

is consolidation and the leaders emerge.

Even then, appeal is likely to be niche

with marketshare not on a par with

that of the major card brands. Further

announcements are expected around the

Mobile World Congress.


mobile payments

India was on track to surpass half a billion

mobile subscribers by the end of 2015,

according to The Mobile Economy: India

2015 published by the GSMA. 13 percent

of the world’s mobile subscribers live in

India and growth in mobile subscriptions is

likely to outperform both the regional and

global average in the coming years. This

will cement India’s position as the second-

largest mobile market behind China.

However, financial inclusion in India is

still a significant challenge. According to

World Bank Findex data, nearly half the

adult population does not have a bank

account. More than 90 percent of villages

do not have a commercial bank branch.

The absence of formal banking services

causes people to rely on informal cash-

based systems, which may be unsafe,

inconvenient or expensive.

Use of mobile money is not widespread

in India, compared to neighbouring

countries and the regional average for

South Asia. Only 2.4 percent of adults

currently have a mobile money account,

compared with 6 percent in Pakistan and

an average of 2.6 percent in South Asia.

To help address this, the government

launched its Digital India initiative in July

2015, which aims to provide internet access

and make broadband a utility for every

citizen. With its 2 million point-of-sale

outlets across the country and control

over the SIM card and data channels, the

mobile industry in India has the potential

to help power both Digital India and

greater financial inclusion.

“The Digital India programme is a unique

opportunity for India’s government and

mobile industry to work together on a

common agenda to transform the country

into a digitally powered society and

economy,” said Alex Sinclair, acting director

general and chief technology officer,

GSMA, which represents the interests of

mobile operators worldwide.

“Ensuring high, widely available and

affordable mobile broadband will

be critical to delivering this ambitious

vision, which will require a regulatory

framework and approach to spectrum that

encourages investment and innovation,”

added Sinclair.

Recent regulations issued by the

Reserve Bank of India (RBI) aim to

stimulate competition and new market

entrants. Differentiated banking licences

are available for those providing small

savings accounts, payments or remittance

services to various groups in a “secured,

technology-driven environment.” In August

2015, the RBI granted in-principle approval

to 11 applicants to set up payment banks, of

which 5 had mobile operators at their core.

Mobile delivering financial inclusion in India

BlackBerry to expand BBM mobile payments in AfricaBlackBerry Messenger users in Africa

will be able to transfer money or

airtime within BBM. BlackBerry

has partnered with Interswitch Ltd,

Nigeria’s largest payment processor,

to expand its mobile payments

initiative in Nigeria.

“The advertising markets in Nigeria

and South Africa represent 2 of our

biggest global opportunities. Both

markets generate substantial daily

ad requests, which is reflected in the

pricing and performance of the ad

units. Average click-through rates of 5

percent are among the highest we’ve

seen anywhere in the world,” said

Matthew Talbot, senior vice president,

emerging solutions at BlackBerry in a

corporate blog post.

BlackBerry has more than 22 million

registered customers in Africa, and

sees more than 17,000 installations

of BBM daily.

Powa extends Asian presence with JVPowa Technologies has entered

into a local joint venture with China

UnionPay to roll out its mobile

technology across mainland China.

Dubbed a ’10-year strategic alliance’,

the agreement will see a co-branded

version of the PowaTag designed

specifically for the Chinese market,

and fully integrated with the

UnionPay point-of-sale network and

settlement system.

PowaTag enables consumers to

scan tags they see in traditional print

adverts, e-mails, SMS or social media,

or hear as audio clips in commercials,

and purchase via their devices.

Deutsche trials haptic authentication

Deutsche Bank is trialling a system that

analyses how people touch and hold

their mobile devices to authenticate

users. The bank hopes that the

technology will free customers from the

pain of passwords.

The system available from UK start-

up Callsign analyses around 50 different

factors to build up a picture of the user.

These include haptic measures, such

as pressure applied to the PIN pad or

how the device is held, to location, facial

recognition and thumbprint.

The technology could be rolled out

to individuals or corporates transferring

funds between accounts, or allow the

bank to increase the limits for transactions,

including mobile payments.

Deutsche Bank plans to roll out the

technology to its 10,000 staff as part of a

larger pilot.


mobile payments

As smartphone adoption continues

to climb, mobile apps are becoming

increasingly important tools that offer access

to everything from banking and to news and

social networking sites. However, even free

apps can involve potential trade-offs when

it comes to permitting access to personal

devices and information, the Pew Research

Center found.

The study examined more than 1 million

apps available from the Google Play Store

and the range of permissions required as a

condition of use. The average apps asks for

5 permissions, although Android apps can

seek 235 different types of permission from

users.

These permissions range from allowing

the app to access the device’s internet

connectivity, hardware (e.g. prevent the

device from sleeping, control the vibrator or

camera flash) or personal information (e.g.

modify or delete USB storage, access GPS

location, read contacts or call logs).

The number of permissions an app

requests does not necessarily reflect

how much user information it is able to

access. An app with a single permission

could potentially access a wealth of user

information, while an app with multiple

permissions may only be able to interact

with device hardware components, not

personal data about the user.

Complicating matters even further for

users, app developers cannot edit the

description of each permission to include

information about why each permission is

needed. This information can be included in

the description of the app itself, but not with

each individual permission as the user sees

them. Users would have to first know what

the app is supposed to do, and then evaluate

the permissions that app is requesting to

decide whether they are appropriate or not.

In a February 2015 survey, the Pew

Research Center found that having clear

information about how apps will access or

use their personal data was important. 90

percent of app users surveyed in the US felt

that it was ‘very’ or ‘somewhat’ important

when deciding to download an app. 60

percent of app users chose not to download

an app after discovering how much personal

data was required. 43 percent uninstalled an

app for the same reason.

Mobile apps and the privacy trade-off

mobile payments

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contactless

Shipments of secure elements rose by

nearly 12 percent to more than 9 billion

units in 2015, according to figures released

by Eurosmart.

“The smart security industry continues

to grow. This is mainly due to EMV

migration, the rise of mobility trends and

the increasing number of eGovernment

services,” said Timothée Mangenot,

president, Eurosmart, a membership

association of global technology providers.

The US migration from magnetic stripe

technology to EMV and demand for smart

cards in China and India has boosted

secure element shipments. 2.6 billion EMV

cards were shipped in 2015, a year-on-year

increase of 32 percent.

The telecom market remains healthy.

The number of embedded secure

elements in mobile phones, tablets and

navigation devices and has been steadily

increasing. An estimated 5.45 billion SIM

cards were shipped in 2015.

Meanwhile the government and

healthcare sector saw an 8 percent

growth in shipments. This sector accounts

for cards issued by government bodies

for identification (e.g. travel, healthcare

and access to e-government services)

as well as cards issued by private health

insurance companies. Eurosmart expects

shipments to increase in these sectors

during 2016.

“Security and the protection of

personal data and privacy are especially

important when it comes to sensitive

data around identity and authentication.

eBorder and eVisa projects require the

highest level of security possible, and

the smart security industry has been

providing solutions that prevent security

breaches,” concluded Mangenot.

1-in-10 UK card transactions now contactless

Contactless card transactions now

account for 1-in-10 card payments in

the UK, up 3.7 percent year-on-year,

latest figures from the UK Cards

Association show.

A total of £929.8 million was spent

using contactless cards in October

2015. Since the contactless limit

increased from £20 to £30 in

September 2015, the average value

of a contactless payment rose

marginally from £7.35 to £7.72.

Transit has proved to be the ‘killer

app’ for contactless in the UK with

1-in-7 of all contactless payments

made on London transport. Since

launch in September 2014, more than

375,000 contactless journeys are

made on London underground and

rail services every day and 250,000

on buses.

“The first year of contactless payments

on TfL services has been a huge

success,” said Shashi Verma, director of

customer experience, TfL. “Over 20 per

cent of our pay-as-you-go customers

use contactless payment already

because it is so quick and easy.”

FIME launches NFC testing

Test tool provider FIME has

launched TrustApp, a secure

online testing portal for near field

communication (NFC) applications

embedded in secure elements.

“As TrustApp is online, it allows

stakeholders [such as mobile network

operators and NFC service providers]

to perform pre-certification testing

throughout the development

process, 24/7 and wherever they are,”

explained Christian Damour, head of

product and services marketing and

security, FIME.

Worldwide SE shipments to exceed 9 billion in 2015

French JV develops contactless mobility solutions

The heads of 4 leading public services and

private companies in France have announced

a joint venture to develop contactless mobility

solutions.

Wizway Solutions has the support of digital

security provider Gemalto, telecoms giant Orange,

SNFC and RATP, the state-owned operators of

the railway network and Paris transit system

respectively, plus the French ministry for transport.

The aim is to allow passengers to buy all

types of tickets anywhere, anytime with

apps from their carrier or transit operator,

using NFC-compatible devices. Passengers

will be able to store tickets securely on their

SIM card, and pass their devices over readers

or terminals when travelling, or present

them to agents checking tickets. A mobile

device will suffice for travel, even if it is out of

battery or switched off.

The 4 founding members each hold 25

percent of Wizway Solutions, which remains

open to other operators and carriers.


Source: Secure element market forecasts 2015-16, Eurosmart

pos terminals

POS terminals are changing. The change

has been coming on for so long, it is

difficult to know when it first started, or to

pinpoint a single catalyst for change.

The EMV migration in Europe and other

regions kicked off the trend for higher spec

terminals. Contactless, mobile point-of-

sale (mPOS) and tablet-based terminals

built on EMV specifications all followed.

Merchant and customer expectations have

also played their part in terminal evolution,

particularly in the move towards multi-

and omni-channel retailing.

Naturally, it was not just a case of

industry and demand-side pull.

Terminal manufacturers and vendors

have contributed a supply-side push

to evolving terminal design and

functionality. So much so that nowadays

the terminal is no longer a ‘dumb’ box

sitting on a counter and used simply

for processing payments. The ‘dumb’

terminal has given way to the smart POS

able to add value around payment.

Speaking to PCM, June Felix, president,

Verifone Europe feels that the in-store

experience is still where merchants can

differentiate themselves against the

clammer of the online space. “The online

experience may be more convenient but

the in-store experience is much more

immersive,” she said.

“It’s really important for the merchant

to engage with the consumer in much

more of a personalised way. It’s the

lasting touchpoint when you look at the

experience. Having this new, powerful

POS capability makes it more of a two-way

exchange between the consumer and

merchant.”

This may be in the form of loyalty,

enabling merchants to dispense

personalised coupons or offers directly at

the moment of payment, and enabling

consumers to redeem them. It may be in

the form of customer engagement, such

as survey questions, charity donations or

media running on terminal screens.

Alternatively, the ‘smarts’ may be turning

a smartphone into a terminal (mPOS). And

borrowing from the smartphone model,

using the terminal as a cash register

system and a repository for various apps,

ranging from stock management to staff

rotas and off-the-shelf customer loyalty

programmes.

“The fundamental POS architecture is

much more powerful in that it is open

and allows for more flexibility around

applications in an app marketplace,”

said Felix. “It’s really trying to go beyond

dumb terminals to smart terminals to

virtual terminals.”

Beyond the age of the ‘dumb’ terminal

UK-based company Fourex is rolling out self-service currency exchange machines across London’s underground network. The machines enable customers to

exchange notes and coins from more than

150 countries for cash paid out in choice of 3

currencies. Agreements with central banks

also mean that pre-euro currencies no

longer in circulation, such as German marks,

Irish punt or Spanish peseta, are accepted.

Speaking to PCM, co-founder of Fourex,

Jeff Paterson, explained that the idea for an

unattended, self-service bureau de change

came from solving his own problem.

Living abroad and travelling extensively

for his job, Paterson was about to move

house and pulled out a drawer with

around £500 of notes and coins from

overseas holidays and business trips. He

managed to realise about £30 from this.

The rest was in denominations that were

too small to exchange, in

coins or not a currency

accepted back.

Founded 4 years

ago, Fourex has spent

the last 2 years adapt-

ing image recognition

technology to coins

before integrating a

note validator.

“There are around

20-30,000 coin faces

in the world that are

worth anything. We

had to be able to

recognise these coins

at high speed and

exchange them, in-

cluding when someone


came with a jar of mixed coins.”

“People can now put unsorted coins

into the machine as well as feed in notes.

The machine recognises the cur-

rencies in about a tenth of

a second, tallies it all up

and pays out in either

pounds, euro or US dol-

lar.”

“With our technology

we don’t have the rental

or staff costs of a bureau

de change, and we can

pass on the benefit to

consumers in the form of

better rates.”

Fourex aim to deploy

machines in high, footfall

locations in central Lon-

don initially, and roll out

400-500 machines over

the next 2-3 years.

Self-service bureau de change kiosk live in UK

ecommerce

In a strategic attempt to claim their share

of e-commerce sales worth more than

€40 billion each year, the German private

and cooperative banks have launched

their own online payment method.

Paydirekt facilitates ACH-funded

payments between consumers and

merchants of the participating institutions,

and was launched in the final quarter of

2015.

The German e-commerce market is

particular as invoice is the most common

payment method. According to the results

of the annual EHI Online Payments study,

28 percent of e-commerce sales were paid

on invoice in 2014. Direct debit was the

second most popular payment method

accounting for 22 percent of sales, with

PayPal in third place with 20 percent.

Debit and credit cards are used less

often online than in other countries.

Domestic debit cards do not always bear

the account number of the holder, and

credit cards make up only 11 percent

of online sales. Consequently, there are

already various alternative online payment

types in Germany, such as Sofort, Giropay

and RatePAY.

Consumers register for paydirekt via

their online banking portal. They set

up a username, password and bank

account details, and thereafter access to

the paydirekt account is via these login

credentials. More than 50 million bank

accounts of the participating institutions

are online-capable. So far, around 150,000

consumers have registered for paydirekt,

according to a media statement in

December 2015.

The challenges to grow paydirekt are

familiar ones: solving the chicken-and-

egg problem of consumer registrations

and merchant acceptance, differentiating

the service in an already-crowded

marketplace and overcoming technical

integration hurdles.

German banks back new online payment method

W3C starts standards work for online checkout

The World Wide Web Consortium (W3C)

has launched a web payments working

group to help streamline the online

checkout process and make internet

payments easier and more secure.

W3C is an international consortium

where member organisations, a full-

time staff and the public work together

to develop web standards. More than

400 organisations are members,

including Bloomberg, BPCE, Deutsche

Telekom, Ingenico Labs, Rabobank and

Worldpay.

The proposed standards will support

an array of existing and future payment

methods, including debit, credit, mobile

payment systems, escrow, Bitcoin and

other distributed ledger technologies.

“The proposed standards from W3C

will help ensure interoperability of

different solutions by standardising the

programming interfaces,” explained

Dr Jeff Jaffe, CEO, W3C. “When you

buy something, you should have a

standard way to match the payment

instruments you have with ones

accepted by the merchant, in a way

that integrates smoothly with the

merchant’s checkout flow.”

Standardised APIs will establish a

foundation for simplified checkout and

payment experiences, greater security,

automation and choice. These APIs

will allow users to register payment

instruments and select a payment type

through the browser, making payments

faster, more secure and easier, particularly

on mobile devices. The standards also

make it easier for web developers to

integrate existing and new payment flows

into their applications.

Gemalto partners to deliver AWS cloud storage and security solution

Groupon exits the Nordics

“We scaled too far, too fast and

have had a rough ride,” said Rich

Williams, Groupon CEO, in a

blogpost on 19 November 2015.

This frank admission came amid

confirmation that the daily deals

and local commerce platform

was to cease activity in Denmark,

Finland, Norway and Sweden, as

reported in TechCrunch.

In an attempt to streamline its

international business, Groupon

exited Morocco, Panama, the

Philippines, Puerto Rico, Taiwan,

Thailand and Uruguay in September

2015 and cut 1,100 jobs. Over the

last year, the company has also shut

down operations in a number of

other countries, missed earnings and

changed CEO.

After a period of aggressive growth,

Groupon went public in 2011. Its

initial public offering on the NASDAQ

stock exchange was the biggest for

an internet company since Google

in 2004. The company is now

re-focusing its business away from

daily deals towards local commerce,

which includes restaurant ordering,

delivery and mobile payments for

consumers and merchants.

Gemalto partners for security solution

Gemalto has partnered with

computer storage and data

management company NetApp

to provide an integrated solution

for Amazon Web Service (AWS)

customers.

The deal will allow AWS customers

to store and encrypt their data

and applications in cloud-based

environments, whilst owning and

controlling the encryption keys that

give access to their data.


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Future of Checkout and Shopping Experience

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SmartPOS, Open Payments and Apps World

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9th annual

www.merchantpaymentsecosystem.com

+421 245 248 931

[email protected]

products

Western Union is to enable cross-

border money transfer via mobile

and social media in 200 countries

and territories worldwide. The newly-

developed WU Connect technology

platform for remittances integrates

with third party consumer messaging

and social media.

The first WU Connect partnership

announced is with WeChat, a social

media platform owned by Tencent

Holdings Limited. WeChat users in the

US will be able to send money cross-

border via the WU Connect platform.

Roll-outs are planned for WeChat users

in additional countries in the future.

WeChat, together with its sister product

Weixin in China, had more than 650

million monthly active user accounts at

end of September 2015. The platform

brings together messaging, social

communication and games within a single

app.

“Western Union’s omni-channel strategy

is combining our digital presence with

our distribution network,” said Hikmet

Ersek, CEO, Western Union. “Given the

proliferation of social media around the

world, we are expanding our activities in

this exciting area.”

Western Union powers money transfer via social media

Sage launches direct-from-account payment

Business software provider Sage is

now enabling small and medium-sized

businesses to make payments directly

from their accounts or payroll software.

“With firms spending over 8 staff hours

every month (14 working days per year)

making payments, this is a significant drain

on time for small and medium businesses,”

said Lee Perkins, executive vice president

and managing director, Sage UK. “We are

empowering businesses and enabling them

to take greater control of their cashflow.”

Sage integrates with

a customer’s software

allowing them to make

payments in 11 different

currencies to more than

20 countries. Payments

can be viewed and

approved from mobile

and tablet devices.

Worldpay to move into small business loans

Worldpay is breaking into the small

business lending market in a move to

provide thousands of customers with

flexible loans.

Working in partnership with Liberis, the

Worldpay Business Finance unit will offer

small businesses the ability to take an

unsecured cash advance based on their

future credit and debit card sales.

Repayments are made on the basis

of a pre-agreed percentage of card

transactions, so businesses only pay when

they are earning and do not have to meet a

regular monthly payment

if business is quiet.

“We’ve been concerned

that the lack of affordable

funding available to

Britain’s SMEs is stopping

great businesses from

growing. Unlike traditional

loans, the flexibility of

the product means

that payments can be

structured in a way that

better suits the models

of small businesses,”

said Dave Hobday, MD,

Worldpay.

Goldman Sachs backs Blockchain with SETLcoin

Goldman Sachs has filed a US patent

application for a cryptocurrency

settlement system in the hope that

distributed ledger architecture may

come to transform global payments.

The application for a new virtual

currency, dubbed ‘SETLcoin’ by the

bank, said it would offer “nearly

instantaneous execution and

settlement” of trades involving assets,

including stocks and bonds.

The technology presents an open

transaction on the funds in the

wallets of both the buyer and the

seller. The SETL coin ownership

transfers immediately to the

new owner upon verification and

authentication based on the network

ledgers within a peer-to-peer

network.

Independent.IndIspensable.

We have delivered unbiased reporting

on the payment industry for 45 years.

No ads. No sponsored content. Ever.

What you get is expertly curated,

original news stories, along with

proprietary industry data you can rely

on to make key business decisions.

Subscribe today. www.nilsonreport.com


To join this line-up of sponsors and showcase your brand callJoseph Ridley on +971 4440 2536 or email [email protected]

31 May - 1 JuneDubai International Convention and Exhibition Centre, Dubai, UAE

The region’s largest smart card, payments & identification event

Cards & Payments Middle East attracts over 10,000 attendees from across

the Middle East, India, Central Asia, North and East Africa.

17th Annual

Platinum Sponsors

Gold Sponsors

Silver Sponsors

Collocated with

Register now atwww.terrapinn.com/

cardsme

(2237) Cards & Payments Middle East 2016 Ad 210-280 1.1.indd 1 10/19/15 1:20 PM

contracts

Payment technology services provider,

Global Payments Inc, announced in mid-

December 2015 that it had entered into a

definitive agreement to acquire Heartland

Payment Systems Inc, a US payment

processor, for $4.3 billion.

The transaction significantly expands

Global Payments’ direct small and

medium-sized enterprise distribution,

merchant base and reach in the US. “This

partnership with Heartland marks a major

milestone for our company, significantly

enhancing our direct presence in our

largest market and transforming Global

Payments into the leading provider of

integrated payments technology solutions

in the world,” said Jeffrey S Sloan, CEO,

Global Payments.

Heartland was the third major

acquisition for Global Payments in 2015

in a quest to build its omni-channel

credentials. At the start of last year, it

acquired California-based Payment

Processing Inc (PayPros), an integrated

payment solution provider, for $420

million in cash. In May 2015, it bought the

Dublin-based payment gateway, Realex

Payments, for €115 million.

Global Payments to acquire Heartland Payment Systems

The Clearing House to implement real-time payment

US banking association, The Clearing

House, has signed a contract with UK-based

payment systems provider VocaLink to

build and deliver core elements of a real-

time payment system for the US.

The Clearing House is the only private-

sector ACH operator in the US and

processes around half of the country’s

commercial ACH volume. Its customers

include credit unions, commercial and

savings banks. It also owns and operates

the CHIPS system for US dollar funds

transfer and a cheque imaging network.

“Our real-time payment system will

enable customers across the country

to make secure, convenient payments

instantaneously,” said Jim Aramanda,

CEO, The Clearing House. “It will

enable businesses to process invoices,

governments to send disaster relief funds

and individuals to pay contractors — all

within an instant.”

VocaLink designed, built and manages

the real-time technology behind the UK

Faster Payments Service, launched in 2008,

and the FAST payments service in Singapore.

GoSwiff announces mPOS partnerships

GoSwiff, a global provider of mobile

payment and marketing solutions, has

announced various tie-ups to expand its

mobile point-of-sale (mPOS) and value-

added service solutions.

It has partnered with TBC Bank to launch

a new mobile payment service to merchants

in Georgia, which started at the end of

November 2015. It also announced a global

deal with VERA, a supplier of next generation

cash registers, to jointly market, distribute,

re-sell, service, support and import solutions

into Turkey and a number of other countries

in Eurasia, the Middle East and Africa.

Finally, the Ooredoo Group, a

communications company with interests

in the Middle East, North Africa and

Southeast Asia, selected GoSwiff for the

implementation of its international mPOS

system. The partnership covers 9 countries

and includes mobile

money, airtime top-

up and value-

added services,

in addition to

the mPOS

functionality.

Rivals Diebold and Wincor Nixdorf to merge

ATM rivals Diebold and Wincor

Nixdorf announced in late November

2015 that they had entered into a

‘business combination agreement’.

Diebold will launch a voluntary public

tender offer to all shareholders of

Wincor Nixdorf, consisting of €38.98

in cash plus 0.434 Diebold common

shares per Wincor Nixdorf share. This

transaction values Wincor Nixdorf

at approximately €1.7 billion ($1.8

billion), including net debt.

Following completion of the offer and

subject to approvals, the combined

company will be named Diebold

Nixdorf, with common shares publicly

listed on the New York and Frankfurt

stock exchanges. The combined

company will be operated from

headquarters in North Canton, US

and Paderborn, Germany.

“Our new company will be well

positioned for growth in high-value

services and software, particularly

in the areas of managed services,

branch automation, mobile and

omnichannel solutions, across a

broader customer base,” said Andy W

Mattes, president and CEO, Diebold.

Funding Circle launches across Europe after deal with Zencap

Funding Circle, which runs an online

marketplace for business loans, has

joined forces with Rocket Internet-

backed firm Zencap, which offers a

similar service in mainland Europe.

The deal sees Funding Circle expand

into Germany, the Netherlands

and Spain, alongside its existing

operations in the UK and US.

Funding Circle launched in the US

in October 2013 and in the UK in

October 2015.


To join this line-up of sponsors and showcase your brand callJoseph Ridley on +971 4440 2536 or email [email protected]

31 May - 1 JuneDubai International Convention and Exhibition Centre, Dubai, UAE

The region’s largest smart card, payments & identification event

Cards & Payments Middle East attracts over 10,000 attendees from across

the Middle East, India, Central Asia, North and East Africa.

17th Annual

Platinum Sponsors

Gold Sponsors

Silver Sponsors

Collocated with

Register now atwww.terrapinn.com/

cardsme

(2237) Cards & Payments Middle East 2016 Ad 210-280 1.1.indd 1 10/19/15 1:20 PM

Cover P3Accourt www.accourt.com

P36Cards & Payments Middle East www.terrapinn.com/cardsme Cover P2Entrust Datacard Group www.entrustdatacard.com/cartes

P9Equens www.equens.com

P27 and P34Merchant Payments Ecosystem www.merchantpaymentsecosystem.com P30Mobile Money Americas www.mobile-money-americas.com

P35Nilson Report www.nilsonreport.com

P19 Northern Leasing Systems www.northernleasing.com

P14-15OpenWay Group www.openwaygroup.com

P23 Retail Business Technology Expo www.rbtexpo.com P13 S-P-S www.s-p-s.com Cover P4Star Micronics www.star-emea.com

Ad Index Jan/Feb 2016

Merchant Payments Ecosystem16-18 February, Berlinmerchantspaymentsecosystem.com Mobile World Congress22-25 February, Barcelonamobileworldcongress.com

Cards & Payments Africa 20161-2 March, Johannesburgterrapinn.com/exhibition/cards-and-payments-africa/index.stm

BAI Payments Connect 20167-9 March, San Diegobai.org

The Future of Retail Banking7-8 March, Viennamarketforce.eu.com/events/banking/retail-banking-europe/

Retail Business Technology Expo 20169-10 March, Londonretailbusinesstechnologyexpo.com

Prepaid Americas9-10 March, Mexico Cityprepaid-conference-americas.com

Connect:ID14-16 March, Washington DCconnectidexpo.com

Retail Technology Show USACo-located with Ecommerce Show USA30-31 March, Atlantawww.terrapinn.com/conference/retail-technology-show-usa/index.stm

Money2020 Europe4-7 April, Copenhagenmoney2020europe.com

11th Middle East Retail Banking Forum & Expo6-7 April, Dubairetailbanking-expo.com

NACHA Payments 201617-20 April, Phoenixpayments.nacha.org

Conference diary

conferences


Conference season kicks offAs the conference diary revs up to full

throttle, PCM will attend both MPE and

MWC.

Merchant Payments Ecosystem (MPE)

is a top European event and hub for

community and business intelligence

around card acquiring, merchant

services, POS, mobile, online payment

acceptance and interaction beyond

payments. MPE connects all parts of

the merchant payments ecosystem:

merchants, acquirers, PSPs, payment

processors, ISOs, schemes, regulators,

gateways, POS hardware and software

solution providers, MNOs and innovative

start-ups.

For those of you who don’t know it,

Mobile World Congress is the world’s

largest gathering for the mobile

industry, organised by the GSMA and

held in Barcelona. The Mobile World

Congress surpassed all projections last

year with a record-breaking 94,000+

attendees from 200 countries.

www.accourt.com

Accourt is a leading provider of strategic and operational consultancy services to the payments industry worldwide with specialist expertise, knowledge and delivery of payment systems

Our clients include Banks, the Card Schemes and financial services institutions, payments and technology providers, telecom operators, corporates, merchants, and government organisations.

We aim to make a powerful, positive difference to our clients’ futures.

Our consultants are all seasoned practitioners with front line P&L experience, combining unrivalled strategic expertise with operational know-how.

We have a passion for delivering real and lasting value and we bring focused, world-class expertise to complement client teams.

To discuss your advanced payments project call us on +44 (0)20 7839 4930

Why choose Accourt?

STRATEGY | DELIVERY | OPERATIONAL EFFECTIVENESS

Advanced payments expertise, knowledge and delivery

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� Stylish, functional cash drawer� Reliable 100mm/second print speed� Classic Bluetooth Connectivity� Compact, mobile POS design� Effective cable management with one power

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mPOP_PCM 15/01/2016 12:55pm Page 1

Documents

Payments Cards in Europe