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Transformation in Payment&
Fraud Prevention
Payment transformation and its relevance in the distribution
Pascal Burg - Director, Edgar, Dunn & Company
Thierry Stucker - Director, Industry Financial Program, IATA
Payment regulations: What are the latest news?
IATA World Financial Symposium
September 2018
© Edgar, Dunn & Company, 2018
Drivers of change in the payments industry
4
Regulations is one of four key factors driving significant change and disruption in the payments industry
2. New technologies & services
3. Newentrants & products
4. New client behaviour
1. New Regulations
Confidential
5Confidential
Why focus on payment regulations ?
6
Looking back at first : which deadline took place before this summer ?
Confidential
Mr AlbrechtHow the GDPR Will Change the World
7
Update 1 : Interchange fee regulations
Confidential
8
Interchange fees will be reviewed and most likely further regulated in the EU, but timing is unclear
Confidential
9
In other markets, regulators are also reducing interchange fees …
ConfidentialNotes: Israel (Feb 2018) : http://www.boi.org.il/en/NewsAndPublications/PressReleases/Pages/25-2-18.aspxCanada (Aug 2018) https://www.bloomberg.com/news/articles/2018-08-09/visa-mastercard-amex-agree-to-trim-interchange-fees-in-canada
The Bank of Israel accelerates the path of reducing the interchange fee
Visa and Mastercard agreed to cut Canadian card transaction fees
10
… or even contemplating an interchange fee ban, as suggested in Australia
ConfidentialNotes: Australia (Aug 2018) http://paymentsjournal.com/credit-card-interchange-australian-regulators-gone-wild/https://www.pc.gov.au/inquiries/completed/financial-system/report/financial-system.pdf
The Australian Productivity Commission recommended a ban on interchange fees
11
Update 2 : Wide range of EU payment regulations
Confidential
Confidential 12
EU’s payments reform agenda has been a constant and ongoing process to ‘open up’ the payments market
* Dates indicate when legislation was formally adopted by EU Council
2000:Lisbon Agenda
2000:1st Electronic
Money Directive
2010 2020
2007:1st Payments
Directive
2012:Updated 1st
Payments Directive
2001:SEPA regulation on cross-border
2009:2nd Electronic
Money Directive
2016:2nd Payments
Directive
2015:Interchange
Fee Regulation (IFR)
2000
2009:Updated 1st
Payments Directive
2025
IFR 2.0
PSD 3.0
High Level Timeline Of Key EU Payments Legislation*
13
Key PSD2 Concepts & Principles
Access to accounts (X2A)
Access to customer accounts by Third Party Payment Providers (TPPs)
Open Data
Provided by new Account Information Service Provider (AIS)
Security
2-factor authentication, Strong Customer Authentication (SCA)
EBA & RTS
European Banking Authority (EBA) Mandates
EBA: independent authority accountable to EU Parliament and Council
PSD2 conferred 11 mandates on the EBA
Mandates ’tasked’ EBA to define RTS
Regulatory Technical Standards (RTS)
Regulations, including RTS, directly applicable law and no interpretation by EU member states is permitted
PSD2 provides the conceptual pillars and regulatory principles for EBA’s Regulatory Technical Standards (RTS)
Confidential
Confidential 14
Strong Customer Authentication
Acquiring Fee Transparency
Access To Accounts (XS2A) via APIsPSD2 adopted by EU in 2015 and Member States have to implement into national law in 2018
Instant payments and other innovation driving change in the financial service environment
2nd Payment Services Directive (PSD2)*
Third Party Payment Providers (TPPs) Account Information Services (AIS)
Payment Initiation Service (PIS)
Interchange Caps & Surcharging
* Post-regulatory environment PSD2 & other regulatory events as well as additional drivers of change such as service innovation (i.e. Impact of Instant Payments)
Instant Payments
Regulators in Europe are trying to promote innovation via PSD2
15
Access to accounts and Instant Payments are likely to be game changers
Confidential
Access to accounts Instant Payments (or real-time payments)
16
Strong Customer Authentication (SCA) is one of eleven EBA mandates
Confidential
SCA requirements will be implemented soon, but a lack of clarity and direction is making balancing security and the customer experience difficult for merchants
Confidential 17
SCA requires at least 2 of 3 factors of authentication*...
…there are some exemptions to help reduce checkout friction…
Remote transaction <€30
(SCA required after 5th
transaction or once value hits €150)
Issuers can apply exemption & their fraud rate is below
threshold rate
SCA not required when a payer adds merchant
to list of trusted beneficiaries
…as well as certain transaction types being completely out of scope of SCA
Specific use cases only -payee initiated payments
e.g. mobile telco payments
SCA not required for the likes of gift cards
SCA not required in specific use cases; e.g. US issued
card used online at EU merchant
*For card transactions and for credit transfers
Low Risk
Merchant Initiated Trn
MOTO & Anonymous
Paym. Instrum.
One Leg Out Transactions
18
SCA comes into force in September 2019 - after an 18 month transitionary period
13th Jan 2018 Deadline for member states to
transpose PSD2 into law
13th March 2018 RTS on SCA & SCS was published in the
official journal of EC
14th September 2019Implementation deadline for RTS on SCA. Member states
through their regulators responsible for ensuring compliance
2018 2019 2020
14th March 2019Deadline for bank interfaces (APIs)
and testing facilities
High Level Timeline Of SCA Implementation
Confidential
Confidential 19
Phase 1360° payments
diagnostic
E.g. what are the major regulations impacting
your business?
Phase 2Payments strategy /
roadmap
� E.g. how to avoid negative impact of
SCA on sales?
Phase 3� Paymentsoptimization
�
E.g. RFPs to select payment partners
EDC would suggest a three-phase approach for Airlines to identify, evaluate and address payment opportunities and threats such as regulatory changes
Confidential 20
If you want to discuss payment trends and opportunities
Edgar, Dunn & Company1bis rue du Havre75008 [email protected]
Tel +33 1 4007 9224Mobile +33 6 7937 5547
Pascal BurgDirector
Confidential 21
Edgar, Dunn & Company (EDC) – global strategy consulting firm focused on payments and with a Travel practice since 2002
Global Experts in Financial Services & Payments Consulting
Edgar, Dunn & Company (EDC) is an independent globalfinancial services and payments consultancy
Founded in 1978, the firm is widely regarded as a trusted advisor to its clients, providing a full range of visionary, fact based strategy consulting services, knowledge, subject matter expertise and market insights in payments
Travel practice since 2002 for clients including airlines, hotels, travel agencies, rail operators, GDSs, IATA, etc.
EDC has offices in London, Frankfurt, Paris, San Francisco, Istanbul and Sydney
Office locationsShaded blue countries represent markets where EDC conducted client engagements
Confidential 22
This document is protected under the copyright laws of the United States and other countries as unpublished work. This document contains information that is proprietary and confidential to
Edgar, Dunn & Company, which shall not be disclosed outside the recipient's company or duplicated, used, or disclosed in whole or in part by the recipient for any purpose other than to
evaluate this document. Any other use or disclosure in whole or in part of this information without the express written permission of Edgar, Dunn & Company is prohibited.
� 2018 Edgar, Dunn & Company (unpublished). All rights reserved.
Creating a digital payments platform for growth
Ray ChesworthPayment Solutions Business Development Manager, Accelya
Deliver a Payments Strategy for Growth
Ray Chesworth, Business Manager – Payments Solutions, Accelya
&
Nigel Allen, Director – Product Management, Mastercard
Without change there is no innovation, creativity, or incentive for improvement.
Those who initiate change will have a better opportunity to manage the change that is inevitable.
William Pollard
Global Payment Trends
key trends are shaping the global
payment landscape:
4Technological AdvancesDigital payments have changed more in the last 5 years than in the previous 20. Mobile devices are becoming central to both online and in-store shopping.
GlobalizationLeads to borderless industry and the increasing ability of global super brands to enter local markets.
CrimeFraud is constantly evolving, which can make it difficult to manage, and merchants need to protect data security and prevent consumer fraud.
Strategic PartnershipsWith an expanding number of players in the payments ecosystem, partnerships are essential to fulfil consumer needs.
* Mastercard-commissioned study by BCG and the “Market Forces” project.
$6T
$0.7T
Digital
Traditional
$14Tin 2013
$23Tby 2023
Device-based contactless15% of commerce
In app5% of commerce
Browser6% of commerce
Traditional
Digital26%
By 2023, 26% of retail purchases will be digital, and there is growing diversity in channels.*
The Emerging Digital Market
The Evolving Ownership of Payments provides opportunity for airlines that pursue a holistic payments strategy
Drive Growth, Reduce Cost, Maintain Compliance
Finance CommercialTreasury
Introducing the Accelya Payment Gateway
Providing airlines with the means to optimize their digital payments
programme
+
Centralize, Simplify, Automate and Control
Payment Gateway
Clearing
Reconciliation
Chargebacks
• Brand-agnostic• Global connectivity• Powered by Mastercard
• Centralise• Minimize acquiring fees• Boost sales
• Control compliance• Control fees• Control payments
• Recover lost income• Synergies with Payments &
Fraud
Designed exclusively for airlines
Independent, neutral & flexible
PCI-DSS compliant environment
Direct interface with acquirers, ERP, GDS, banks and others
Reporting Accounting
Benefits to Airlines
Reduce costs
Maintain ultimate control
Increase / protect
market share
Questions?
Blockchain for ICH: Beyond the hype on consumer facing initiatives, materializing how blockchain can truly transform
corporate payments
Juan Ivan MartinHead of Innovation, IATA
BLOCKCHAIN TECH ACROSS AVIATIONWFS – Madrid 20th Sept 2017
linkedin.com/in/jimartin
Juan Iván MartínHead of Innovation, FDS, [email protected]
AREAS OF APPLICATION IN AVIATION
ProvenanceCertificationCodifying AgreementsTokenizing
ValueIdentity
Management
IATA BLOCKCHAIN PROJECTS
IATADCA
IATA COIN
TRAVEL BLOCKCHAIN
FFP
Digital Finance
IATA Coin
DCA
ID Attributes
x y
z w
AIRLINES Travel Agents OTHERS
Blockchain
Enroll
x y
3rd Parties
z w
Travel Blockchain
IATA to facilitate airline acceptance of instant bank transfer
Benjamin Madjar - Director, Global Head of Cross Product Solutions, Deutsche BankJavier Orejas - Head of Banking, GDC and DB, IATA
World Financial Symposium 2018
Panelists:Javier Orejas, Head of Banking Management EMEA and Americas, IATABenjamin Madjar, Global Head of Cross Product Solutions, Deutsche Bank
PSD2, Open banking, Instant Payment: a game changer for the Airlines industry and the online payments in general
World Financial Symposium 2018
World Financial Symposium 2018
World Financial Symposium 2018
Instant payments with no cards or costly fees
Reduced working capital and operational costs
Better shopping experience
Open Technology Authentication
World Financial Symposium 2018
World Financial Symposium 2018
World Financial Symposium 2018
World Financial Symposium 2018