WHO'S CRACKING THE PAYMENTS MARKET? - LAUNCH OF THE PAYMENTS FINTRACKER AND NEW-LOOK MAGAZINE - Verdict
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www.e lectroni cpaymentsi nternati onal.com Issue 360 / JuNE 2017
WHO’S CRACKING THE
PAYMENTS MARKET?
LAUNCH OF THE PAYMENTS FINTRACKER
AND NEW-LOOK MAGAZINE
NEWS FEATURE INSIGHT
Analysis: UK PSPs can now Research: Why are banks PPRO Group’s Ralf
fast-track Faster Payments not making more use of Ohlhausen on screen-
via the cloud loyalty schemes? scraping regulation
EPI June 360.indd 1 13/07/2017 17:36
contents
this month
NEWS
COVER STORY
05 / EDITOR’S LETTER
THE PAYMENTS 06 / DIGEST
Deloitte and Waves partner to develop
FINTRACKER framework for blockchain projects. Nordea
launches pilot for open banking site. Non-
cash payments rapidly growing in popularity
in US; cheque losing appeal
07 / ANALYSIS
UK PSPs can now fast-track Faster Payments
via the cloud
08 / DIGEST
Card fraud losses in 19 European nations
reach record €1.8bn in 2016. MAS and FSA
agree fintech co-operation. UK banking app
transactions surge 57% in 2016
12
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2 | June 2017 | Electronic Payments International
EPI June 360.indd 2 13/07/2017 17:36
contents
JuNe 2017
18
s to talk about cracking China, disrupting
COUNTRY SNAPSHOTS
SWIFT, and leveraging WeCha
18 / GERMANY
9 Germany is one of Europe’s largest payment
cards markets, and is the third-largest in terms
of annual card transaction value. It is still far
from fully mature, however
FEATURES PAYMENTS FINTRACKER 19 / CANADA
Canada’s payment cards market is one of
the most highly competitive and attractive
09 / LOYALTY SCHEMES 12 / GOOGLE in North America. Pay later and debit
Customers are getting more and more used to Google’s new feature will expand access to card penetration rates reached 1.9 and 0.7
rewards programmes, and many are beginning merchant sites through Google Payment API. respectively per inhabitant in 2016
to question why banks are not using this It will improve customers’ experience when
information to serve them better. Anna Milne making payments through third-party mobile 20 / THE NETHERLANDS
speaks to CGI’s Kevin Poe about its latest apps, websites and Google Assistant The Dutch payment cards market has a high
research into the issue penetration rate of 1.9 cards per inhabitant.
13 / PAYTM Card use has benefitted from modern
15 / PAYTM In 2016 Shekhar Sharma revealed that Paytm infrastructure, and growth in the retail and
Indian m-payments giant Paytm has received will launch its own banking service – Paytm e-commerce sectors
investment from Japan’s Softbank and taken Payments Bank – by the end of March 2017.
its first step outside India by launching a There are significant opportunities to service
Canadian subsidiary. Paytm sees Canada the underbanked population in India s to talk about cracking China, disrupting
as the test laboratory for its international INDUSTRY INSIGHT
SWIFT, and leveraging WeCha
expansion, Robin Arnfield reports
12 14 / DBS BANK
Neal Cross is well known in his field – not
just for being CIO of DBS Bank, but for
being a maverick. His team’s only ‘tech
person’, he has redefined fintech strategy to
great effect. He outlines the five fintech types
21 / PPRO
In February the EBA announced plans
to outlaw ‘screen-scraping’ in one of
£$€¥
its Regulatory Technical Standards,
15 complementing the revised Payment Services
Directive. PPRO Group’s Ralf Ohlhausen is
concerned about the possible effects
www.electronicpaymentsinternational.com | 3
EPI June 360.indd 3 13/07/2017 17:36
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IE Adverts - 2017.indd 1 21/12/2016 11:53:12
editor’s letter
welcome to EPI’s
new-look magazine
Anna Milne, Editor
I
n this issue, we wlaunch the new fintracker, the opportunity brought about by the potential
compiled from our payments intelligence unit, relocation of UK-based financial services companies.
charting the latest innovation in the payments Despite not having vast experience in regulating
industry on a monthly basis. e-payments companies outside the banking sector,
On the subject of fintech – disregarding how Brexit the payments regulatory team has recently sped up its
will impact the UK’s thriving fintech scene, the figuring applications turnaround to six months.
out of which is frankly a thankless task and I doubt it The Emerging Payments Association recently put
will be much suppressed no matter what – Dublin’s out a paper detailing the most attractive countries
appeal was boosted by EBADay. for fintech relocation in the event of the loss of UK
Dublin’s potential as a major new fintech hub was passporting rights as a result of Brexit.
a hot topic of conversation at the annual payments Ireland was one of the six alongside (in alphabetical
bash, and on the back of this came news of investment order) Cyprus, Denmark, Luxembourg, Malta and
capital from Enterprise Ireland, called the Competitive Sweden. The main considerations were tax rates,
Start Fund. It is a government initiative in conjunction ease of contract transfer, talent pool, regulatory
with the Bank of Ireland and has been created a fund to environment, e-money precedence and multilingual
attract startups into the country. skills.
The fund is worth €500,000 and aims to help fund In a similar but separate study by Movinga, Dublin
up to 10 startups with up to €50,000 each, within ranked eighth out of fifteen European cities for fintech
the scope of payments, banking, regtech, security and relocation, and Berlin first.
insurtech as well as those which “leverage” blockchain, True, Movinga’s study took into account other factors
IoT, AI and data intelligence. such as affordability of flights for visiting home and the
Ireland holds appeal for good reason: It is a small, price of beer and lunch, which are not to be dismissed.
open domestic economy – an English-speaking market I can tell you first hand that booking a return flight to
with a young and highly educated workforce. It is, and Dublin from the UK at anywhere near peak times can
has been, an attractive destination for companies large be an eye-watering experience at best (think the price
and small because of favourable corporate tax, its of a transatlantic round trip) and as for eating out in the
location bridging Europe and the US, investment capital city, there is a fine line between entrepreneurialism and
availability, and its entrepreneurial spirit. bare-faced cheek. I can recommend Abrakebabra.
This entrepreneurial spirit extends to the Irish On the other hand, Dublin is just great and gets this
regulators as well, who are progressive and recognise humble writer’s vote any day. <
Get in touch with the editor at: anna.milne@verdict.co.uk
www.electronicpaymentsinternational.com | 5
EPI June 360.indd 5 13/07/2017 17:36
News | Digest
news and analysis
Deloitte, Waves partner to develop
framework for blockchain projects
NORDEA LAUNCHES
PILOT FOR OPEN
BANKING SITE
Nordic financial services group Nordea Bank
has launched the first pilot phase of its open
banking website.
The bank launched the first version of
its Open Banking website for external
developers earlier this year to prepare for the
Deloitte CIS has entered into a strategic ground, already allowing startups, investors second Payment Services Directive (PSD2)
partnership with Waves Platform, a and other stakeholders to quickly raise requirements, and invited developers to join
developer of blockchain solutions, to significant funds in cryptocurrencies. its pilot programme.
facilitate mass application of blockchain “However, the cryptocurrency market is The bank has currently received 700 sign-
technology by developing a legal relatively young, and not all the regulatory ups, of which it has chosen 22 customers,
framework for regulating blockchain mechanisms are in place. fintech firms and third parties for the first
projects in Russia and the CIS. “This is why we are glad to cooperate phase of the pilot.
The agreements aims to offer customers with Waves Platform and are confident The latest pilot will offer a sandbox
comprehensive initial coin offering (ICO) that our joint effort will help create the environment, allowing developers to test
services, as well as customised blockchain necessary conditions for putting together the Account Information Service (AIS)
solutions tailored for specific commercial the legal framework for blockchain projects application programming interface (API),
tasks. The partners will also aim to develop both in Russia and the CIS.” and retrieving account information details,
legal mechanisms for regulating ICO Waves founder and CEO Sasha Ivanov account balances, and transaction histories.
projects. said: “Our partnership is a significant step Nordea said the first pilots will help it
Deloitte’s legal and tax experts will offer towards the mass application of blockchain to identify and partner with third parties
necessary consulting and methodology technology. offering value-adding services.
assistance to both businesses and “Presently, blockchain companies are not In the later phases of the pilot, developers
government bodies. Waves Platform will regulated, as there is no existing legislation will be allowed to test initiating payments by
be responsible for providing technology as such. Our strategic partnership with using the Payment Initiation Service (PIS)
solutions for the introduction of digital Deloitte will allow us to take active part in API. The second phase of the pilot is expected
economy tools. the formation of this regulatory landscape. to commence in the end of 2017, offering
Deloitte CIS’s director of legal services “It is important to join this process both selected firms access to Nordea’s production-
for technology projects, Artem Tolkachev, for us and the entire blockchain industry in environment APIs.
said: “Blockchain technologies are gaining Russia and the CIS.” < Nordea’s business partner for the Open
Banking project, Sanela Dulic, said: “Open
Banking will provide our customers with
various new products and services, while
keeping the customers firmly in control of
what information they wish to expose and
which products they wish to use.” <
6 | June 2017 | Electronic Payments International
EPI June 360.indd 6 13/07/2017 17:36
News | analysis
Non-cash payments
rapidly growing in
Analysis: UK PSPs can fast-track Faster
popularity in US; Payments via the cloud
cheque losing appeal Payment service providers (PSPs) in the UK
have had their horizons broadened further
as “selling old software to sit atop legacy
systems, masquerading it as cutting-edge
Total non-cash payments per household, by a new partnership offering access technology and failing to tackle back-office
including cheques, card payments and to Faster Payments and settlement via problems”.
electronic transfers via the Automated challenger bank Starling and cloud-based Further to this, Mueller saw that smaller
Clearing House (ACH) system, increased by payments-as-a-service startup Form3. payment companies were priced out of the
nearly 95% from 40.3 per month in 2000 The deal will provide clients with an end- system and saw an opportunity in cloud-
to 78.6 per month in 2015, according to a to-end managed service using Starling’s based infrastructure to ameliorate the
study by the Federal Reserve. access to Faster Payments and Form3’s offering for payments outfits, large
Among the various types of non-cash cloud-based secure processing standard. and small.
consumer payments, non-prepaid debit Small payments players and e-money One of the sticking points of the typical
cards were found to be the most popular, issuers in the UK have had to pay hefty vendor model is having to sign up to
followed by general-purpose credit cards, rates to access payment rails through a 10-year service licence for software,
cheques, and ACH debit transfers. the tier 1 banks that collectively own the during which time the technology becomes
For businesses, ACH credit transfers payment systems in the UK, and there has outdated. This is known in banks as
topped the popularity chart, followed by been a growing lobby against this in recent “sweating the assets”.
cheques, general-purpose credit cards, and years, spearheaded in no small part by one
non-prepaid debit cards. Rich Wagner, CEO of APS.
The study also revealed strong growth Starling Bank became the 13th member
in selected alternative payment initiation of Faster Payments at the beginning of
methods and services from 2012 to 2017, and the first mobile-only bank. Now
2015. These include mobile payments, it has partnered with a new fintech on the
specialised services for person-to-person scene, Form3, to provide real-time access
payments, and payments using online to Faster Payments for smaller players,
authentication methods. which traditionally route through the Tier 1
However, the total number and value of banks and are subject to clunky, sometimes Mueller says it is “rare in bank back-
payments using these methods was found unreliable back-end legacy systems as office land, and unique in payments” to
to be low against total number and value of a result. have a (cloud) component-based platform
non-cash payments. The Payment Systems Regulator was put as opposed to a “monolithic piece of code”.
The study also highlighted a decline in into effect to remedy this as part of its And they will do SEPA as well. It would
cheque use, with around two-thirds fewer objective to increase competition and be misguided to ignore SEPA Instant Credit
cheques per household in 2015 compared foster innovation in the UK payments field. (SCT Inst) going live in November 2017.
to 2000. For businesses, monthly use of Mike Walters, chief product officer at With Form3, Mueller says the business
cheques in 2015 stood at 4.1, down from Form3, said: “At Form3 our clients face case for switching to a pay-as-you-go
66 in 2000. some complex decisions about how they service is clear, even if it involves writing
However, monthly ACH transfers by gain access to real-time Faster Payments off the asset, because the cheaper
businesses surged from 13.4 to 29.8. Also, in the UK, and which banking partners can infrastructure “makes a massive saving, not
the value of business ACH transfers and help them to achieve that. just 10-20% – it is in a different space”.
business cheques totalled $148.5trn in “Our partnership with Starling Bank Mueller insists the user experience can
2015, more than double the total value of shows Form3’s commitment to making only be improved upon if the back end is
business and consumer ACH transfers and sure that managed services for our tidied up.
cheques five years earlier. < clients extend all the way from payment Key to Form3’s platform is its so-called
to settlement under a single commercial multi-tenancy aspect, meaning there is one
contract,” Walters continued. “This platform that any kind of organisation can
provides a great option to leverage cloud- plug into on a pay-as-you-go basis without
based technology with simple integrations, having to pay for an individually configured
a wider range of processing options and platform. And of course, at the end of
reduced time to market.” this tenement are payment gateways
Form3 was set up in 2015 by a veteran connecting to the clearing and settlement
payments banker from Barclays, Michael platforms at the Bank of England.
Mueller, flanked by a team of payments Bang in time for SCT Inst in November
experts and ex-bankers. Mueller was 2017 and PSD2 and Open Banking in
frustrated with the standard being 2018, Form3 could do very well out of
offered by fintech vendors, describing it putting itself on the radar now. <
www.electronicpaymentsinternational.com | 7
EPI June 360.indd 7 13/07/2017 17:36
News | Digest
MAS AND FSA
Card fraud losses in 19 European AGREE FINTECH
nations reach record €1.8bn in 2016 CO-OPERATION
The UK recorded card fraud losses at The Monetary Authority of Singapore
£618m in 2016, a 9% increase over 2015. (MAS) and the Danish Financial Supervisory
The report has also revealed that the Authority (Danish FSA) have signed an
proportion of card-not-present (CNP) fraud agreement to co-operate on fintech.
rose from 50% of gross fraud losses in The two parties will refer fintech firms
2008 to 70% in 2016. looking to expand into each other’s markets,
Overall, 10 countries recorded increases and exchange information on emerging
in fraud losses, while eight reported market trends and their regulatory impact. At
decreases. However, the situation in the same time, the watchdogs will also explore
Romania was broadly unchanged from the joint innovation projects.
previous year. MAS chief fintech officer Sopnendu
FICO senior consultant for fraud Mohanty said: “Singapore and Denmark
Martin Warwick said: “The growth in are important gateways to their surrounding
online spending and CNP fraud brings regions. This co-operation agreement signifies
new challenges for banks and retailers, as the commitment of MAS and Danish FSA
criminals thwarted by chip and PIN have to promoting innovation in financial services
moved to a less-risky channel. and growing the fintech landscape.”
“Spotting the ‘needle in a haystack’ Danish FSA deputy director general
requires new behavioural analytics and Thomas Brenoe added: “We are currently
artificial intelligence, combined with establishing a fintech lab to support the
Total card fraud losses for 19 European enhanced information from outside development of fintechs and provide
countries reached approximately €1.8bn the traditional data contained within a assistance for these to set up business in
($2bn) in 2016, according to a report by purchase.” Denmark.
analytics software business FICO. Warwick added that FICO is working “Financial innovation is not confined
In 2015 the UK’s card fraud growth was with banks to advance the use of machine to national borders, and we are therefore
the highest in Europe, but in 2016 Poland learning and artificial intelligence to delighted to enter into this agreement
(10%) and Sweden (18%) saw higher rises. identify fraud faster. < with MAS.” <
UK banking app transactions surge 57% in 2016
Customer appetite for banking apps in the UK shows no to manage their money on the move is showing no signs
signs of abating as the number of transactions through of abating, with banking apps now the principle means by
apps surged by 57% in 2016, a report by the British which we access our current accounts.
Banking Association (BBA) and EY has found. “This doesn’t appear to be a fad, with more and more
According to the report, a total of 932m transactions people moving beyond payments and increasingly using
were made using banking apps, equating to 30 apps to access a broader range of banking services, such as
transactions per second. Customers’ activity on banking savings, credit cards, mortgage and investment accounts.
apps surged by 354% between 2012 and 2017. “Latest developments in the consumer-led digital
More than 19.6m people in the UK used banking apps revolution are empowering customers to manage their
last year, a rise of 11% compared to 2015. finances more conveniently. Whether we want to visit our
The study found that customers are using banking apps local bank branch, use a mobile or internet bank, there
to do more than just check their account balances, with are more ways we can choose to access and manage our
more people now using apps to manage savings, credit money than ever before.”
cards and mortgage or investment accounts. EY UK’s banking and capital markets lead partner,
Over 434m text alerts were sent by banks to customers Dan Cooper, added: “This latest report highlights how
in 2016, a jump of 18% on the previous year. Nearly customers are increasingly using digital banking, which in
4.4m customer-to-bank webchats took place in 2016, an turn is driving innovation.
increase of 24% on 2015. Contactless card spending rose “This growing customer comfort with digital financial
225% during 2016, as one in every four card payments services sets the scene for the launch of Open Banking in
used this technology, the report said. 2018, when both banks and other providers will have the
BBA’s MD for retail and commercial banking, Eric opportunity to present customers with greater choice and
Leenders, said: “Customers’ appetite for using technology control over their financial lives.”<
8 | June 2017 | Electronic Payments International
EPI June 360.indd 8 13/07/2017 17:36
Feature | loyalty schemes
The loyalty reward bind:
are banks and mobile
service providers
equipped to deliver?
Customers are getting more and more used to rewards programmes, and many
are beginning to question why banks – who know more about them than any
other commercial entity – are not using this information to serve them better.
Anna Milne speaks to CGI’s Kevin Poe about its latest research into the issue
www.electronicpaymentsinternational.com | 9
EPI June 360.indd 9 13/07/2017 17:36
Feature | loyalty schemes
B
anks are failing to realise the they need to do is get out there and try it and consumer is comfortable about using that
opportunity they could be see what happens. There are enough apps info, and there are security issues about banks
exploiting in the realm of customer and widgets in the new cross-channel portal looking after that info,” notes Poe.
loyalty programmes and credit cards are capability, so they can deploy quite quickly. According to Poe, the most important
missing the market completely. Such are It’s the internal processes that are slowing customer-facing concept “across every
the findings made by CGI, a Canada-based things down together with whether they’ve got demographic in every country” among 1,670
global IT services provider, into what sufficient insight on their customer base.” consumers surveyed globally was protection
customers have come to expect, and what from ID theft, data theft and fraud, and that
they want, from their bank. RETAIL PARTNERS 90% of those consumers said they expected
Kevin Poe, retail banking global lead at banks to address it within the next two years.
CGI, says the key stand out from the survey Banks are already partnering with retailers, “It’s a real opportunity for the banks to either
goes against much of the fintech rhetoric says Poe; however there is more opportunity win or disappoint,” Poe adds.
in that customers ultimately have sufficient to be exploited – reward wallets with So, are new banks at an advantage? In terms
faith in their banks to be able to meet their participating retailers can interchange and of speed, Poe says they are at a significant
expectations. potentially add to that. advantage. Something like 26 new licences
On a consistent level across the six “Monitise is very quickly getting into the have been applied for in the UK since 2013.
geographies surveyed, there was dissatisfaction e-commerce space and trying to facilitate “Some are using other banks as a back office
with banks providing value. It seems there is those networks,” notes Poe. so they can focus on service innovation. What
a finite window of opportunity for banks to “What I don’t see is Monitise and the banks they don’t have is call centres and branches,
respond and deliver. Mobile financial services teaming up on that e-commerce platform – which from the survey we can see very clearly
providers are not delivering on this front they’re using it just as a technology platform. are very important. Banks are trying to meet
either, according to the study, and are also Also, I don’t see credit cards teaming up with this challenge by setting up new brands under
losing out on revenue growth. the banks to do it. The credit cards seem to a similar or separate brand.”
have missed this market completely.” A ‘new bank alongside old bank’ model
REWARDS What rewards are customers expecting, and makes things quicker and easier, and the new
do they have any concerns? From the survey, bank ‘arm’ can be used as a test case without
Customers are used to getting rewards – from it is clear that consumers recognise that the jeopardising the historical business, so they
supermarkets to airlines and coffee shops, banks know more about them than any other can switch it. The upshot is that customers
there are loyalty points systems galore. It is not retailer, and are confused as to why banks are may switch to a brand which is, in fact, the
uncommon to have 10 different plastic card not customising and offering bespoke services same bank.
accounts, all amassing loyalty points. and products in way that a retailer would, Face-to-face service is desirable, but
Poe says: “What we have learned is that privy to that amount of information. complementary. People want to start
customers are wondering why they can only “There is definitely a limit to which a transactions with their bank at any time of
get these loyalty reward systems across certain the day or night, and that tends to be using a
parts of their spending. digital device, the survey showed.
“Could a bank not help them get more “At some point they’ll want to continue a
across all of their spending, irrespective of transaction on another channel,” says Poe.
“Respondents expressed dissatisfaction that
where it is spent? As a consumer, spend is
spend; however, the banks categorise spending customers are when they walked into a branch they weren’t
as well known as when they phoned up or
rigidly.”
There is widespread agreement that banks wondering why they went online. Nobody comes up and says hello
in the branch.”
are not yet ready to move quickly into this
space. Some forerunners have web-enabled can only get these
existing services rather than deploying omni-
loyalty reward GENERATIONAL DIVIDE?
channel services.
“Some Swedish banks put out new services
based on consumer feedback every three systems across Originally, certainly, the technology was all
built towards the younger generation, but Poe
months. That requires a different development
cycle to a normal bank’s IT department. It also certain parts of believes things have changed. “What’s come
out of this research is that all generations are
requires a different type of architecture, as well
as additional underlying security, and testing their spending. buying stuff online,” he explains.
“In the retail sector, this is consistent across
across multiple channels.”
Digital consumerism in banking is only Can’t a bank help all age groups – except for very aged people
who still like social interaction,” adds Poe.
just starting. Some banks think they have to
go through multiple strategy testing before them get more “The way people want to access a digital brand
is quite consistent today.”
deployment.
“Banks should be extremely cautious across all of their So, what of the future for rewards? “On
banks’ own products, raising loyalty for
about going through that strategy-planning-
deployment process, because actually what spending? additional products and high credit will
significantly increase,” predicts Poe. <
10 | June 2017 | Electronic Payments International
EPI June 360.indd 10 13/07/2017 17:36Feature | loyalty schemes
Rewards and mobile wallets Rewards and payment cards
Would you use your mobile wallet payment service more, Do you have a payment card, and
if there were rewards, (discounts, offers) for doing so? is your loyalty programme linked to it?
Probably
not: 2% Definitely
Not sure: not: 1% Payment card
6% is not linked,
but plan to
do so: 17% Have payment
card, and it is
Yes, probably: Don’t have linked: 37%
23% a payment
card: 23%
Yes, definitely:
69% Have payment
card, but it is
not linked: 23%
Source: Amdocs, Ovum Source: Amdocs, Ovum
SO, who else is missing an opportunity?
Banks are not the only organisations that are missing a
trick. Mobile financial service (MFS) providers are also
failing to realise the potential of loyalty programmes in
driving growth.
Research conducted early 2017 by customer experience
solutions company Amdocs, and analyst and consultancy
firm Ovum showed a “significant gap between what
customers want and what they are offered”.
This was found to be especially true for unbanked
respondents, 80% of whom were not enrolled in any
loyalty programme. Usually, the first thing on an MFS
provider’s agenda is to mop up the overspill of banks, or
indeed provide financial services in underbanked regions.
The study surveyed 1,800 consumers and 42 service
providers across nine countries in emerging and mature More banks than mobile operators – 38% and 28%
markets including the US, Singapore, Russia, Brazil, respectively – have already linked payment cards to loyalty
Indonesia, Mexico, the Philippines, Bangladesh and programmes, according to the survey; similarly, with
Vietnam. regard to future plans to link the two, banks were more
The consumers and the MFS providers were surveyed committed than operators.
independently of each other, and this revealed a Most respondents were keen on being able to manage
disconnect between the loyalty features consumers different loyalty cards from within a single wallet,
desire most, and support for these features in MFS loyalty with 61% stating this as ‘very important’, and 31% as
platforms. This was most pronounced with the ability to ‘important’. This was higher among banked users, with
integrate multiple loyalty programmes within a single ‘very important’ at 61%, compared to unbanked users
mobile wallet, social features and gamification. at 51%.
Moreover, many MFS providers underestimate the positive The ability to use reward points across programmes from
impact they can have on MFS usage, with the majority different service providers also scored highly in terms of
believing customer retention is the major benefit – it is, desirable factors, with 49% stating this as ‘very important’
but it is only one of many. and 43% as ‘important’. <
www.electronicpaymentsinternational.com | 11
EPI June 360.indd 11 13/07/2017 17:36payments fintrackER | google
payments Using five common criteria, the
GlobalData FinTrack reports give
critical at-a-glance information on
fintrackER the latest developments in the fast-
moving world of financial technology
Google launches merchant API
Google’s new payments feature will expand access to merchant sites through Google Payment API. The
new feature will improve customers’ experience when making payments through third-party mobile apps,
websites, and Google Assistant. Consumers can use the details of any credit or debit card stored in their
Google account, speeding up the payment process.
Payment providers integrating with merchants using APIs has
Is it original? been common for quite some time, although this is the first
payments API developed by Google. ✗
The feature has been created to improve payment take-up by
offering a better-quality service, enabling customers to make
faster and easier purchases at a wider variety of merchants.
Is it long-lasting? This is the first of a set of improvements to Google’s payments
facility. As the number of merchants that enable the Google
payment option rises, Android Pay will eventually strengthen its
✓
market position.
Is it operationally Google’s new payment API stores card details used in previous
game-changing for
the provider?
transactions and gives users the opportunity to choose which
of their stored cards to pay with. This will improve the user
experience in terms of convenience and ease of access.
✓
Will it significantly The API is a significant innovation that will enable faster
improve the user
experience?
checkout, drive more conversions, increase sales, and reduce
abandoned carts. ✓
This is more of an upgrade to the existing payment platform,
Is it market-changing?
and is intended to increase Google’s partner network. In this
case, the payment method is being upgraded in order to build
Android Pay’s market position, and eventually increase sales.
✗
Total Score: 3/5
12 | June 2017 | Electronic Payments International
EPI June 360.indd 12 13/07/2017 17:36payments fintracker | paytm
Paytm to launch Paytm Payments Bank
In 2016 Paytm founder Shekhar Sharma revealed that Paytm will launch its own banking service – to
be known as Paytm Payments Bank – by the end of March 2017. There are significant opportunities to
service the underbanked population in India using mobile technology. Although it has received approval
from the Reserve Bank, Paytm is still awaiting regulatory approval for its board of directors.
A mobile-based bank as an offshoot from a payment provider
is not new. China’s Alipay was later rebranded as Ant Financial,
Is it original? offering banking services. Although not an original idea, it does
however make sense for Paytm to form a bank to fit its local
market environment.
✗
With hundreds of millions of underserved consumers in the
market, as well as a banking infrastructure that is not able to
Is it long-lasting?
solve the issue in a short timeframe, a mobile-based bank is
strongly positioned to fill the gap. At the same time, this will
develop a consumer preference for banking activities over the
✓
mobile channel.
Due to Paytm’s involvement in the mobile payment business to
begin with, it will require almost no start-up cost to launch the
Is it operationally mobile-based banking business. Paytm should, therefore, hit the
game-changing for
the provider?
ground running as soon as it meets all regulatory requirements.
This move will open up a new vertical for Paytm, potentially
securing it a major stake in the Indian banking market due to
✓
the number of unbanked consumers in the country.
This will greatly improve consumer access to banking in India,
Will it significantly especially given the size of the underbanked market. With a
improve the user
experience?
large proportion of the underserved already using Paytm’s
payment service, it should be very fast and easy for consumers
to access the banking service.
✓
Paytm Bank will definitely change both the banking and the
payments environment in India, as around half of the market is
financially underserved. With such a big proportion, the group
Is it market-changing? of consumers that Paytm is targeting will have the pressure to
steer the future direction of the market to move towards being
a cashless society, and move a larger proportion of the banking
✓
service onto a mobile platform.
Total Score: 4/5
£$€¥
www.electronicpaymentsinternational.com | 13
EPI June 360.indd 13 13/07/2017 17:36industry insight | dbs
fosterIng fintech culture
inside track from dbs: Banks need to rewire their
operations so they partner more,
the five types
carry out fintech assessments, and
bulk product in. DBS accelerated
over 30 fintechs in 2015. We had
of fintech
three accelerators in Hong Kong
and Singapore; in 2016 we had six,
and deployed six fintech products
inside the bank. We’ll do over 10
in 2017.
Neal Cross is well known in his field – not just for being I got the bank to run 1,000
CIO of DBS Bank, but for being a maverick. His team’s experiments last year, and this
year the top 250 again have to run
only ‘tech person’, he has redefined fintech strategy to
their own customer journey – it’s
great effect. In this piece, he outlines the five fintech types written into their bonus to do a
customer journey or an employee
journey. Then we spend time
1: BANKS bases at scale because they have never done
it, they are not structured , they do not have
reinventing training, finance, legal,
compliance, so we work at not
They’ve been doing it for decades; the enough money and their brand is not really
just building a new product, but
worldwide financial services industry is worth there. A lot of those – such as Moven bank,
how to change the organisation so
about $5trn in revenue. They are obviously which I invested in, in the US – initially
pivoting quickly. At the G20 they asked me went out to be a bank, have pivoted and now everyone is more effective.
what the effect of fintech is. I said fear. It has supply the tech to the banks, like Westpac NZ So many banks are focused on
brought fear into the industry – there is more and TD Bank in Canada. ‘needing’ a new product or ‘talking
partnering, more accelerators and VC funds. to fintech’. We’ll talk to a senior
Most of them are taking their mobile assets 4: NEO-FINTECH II executive at the bank, ask them
and giving them a digital wash, and saying
what the biggest problem is. I then
they have a great digital strategy, but it is not, Those fintechs who want to kill banks and
and certainly not ambitious enough. their model means they cannot partner with take some of their staff for a week,
a traditional bank. Transferwise, for example- put them through a process and
2: VENDORS offering forex at 10% the cost of the bank, they’ll come up with 10 different
their adverts are very anti-bank but there is solutions to that problem. These
For example Misys (now Finastra with not enough money in there to partner so a
will be a business model or paper
D&H), Sungard, Fiserv, FIS or Temenos – bank is not going to go for half of 10% of the
prototype – no tech. We put them
their industry must be worth $200bn a year. revenue they would have got for that anyway.
They are pivoting and changing as well, for However, Transferwise has partnered with back in the business to go through
example staging hackathons, etcetera. They are number26, which does not have forex. the solutions, and execute them.
probably under the biggest squeeze because Things non-tech are a lot more
banks now look to fintech startups as well as 5: THE INTERNET GIANTS powerful.
these vendors and instead of a slightly adapted
HR for example, came to me saying
business model, they can get the tech, and Fintech will not change finance; what will is
they need an app. What for?, I
even the customers – that value prop is quite Google, Amazon, Facebook, Apple, Alibaba,
different than buying a mobile wallet from a WeChat – they have been very successful in asked. To get people to collaborate
traditional supplier. financial services. WeChat got 30m customers more, came the answer. You don’t
in just over a year – currently this tally hovers need an app for that. If you roll
3: NEO-FINTECH I around the 1bn mark. out an app, 20% of the bank will
To put this into perspective, that is more
download it, 10% will log into it
Most fintechs fall into this category, which customers than every single Western startup
and 5% will sometimes use it, so
want to partner and collaborate – many of bank added together. So what is coming out
these did start out saying they are going to kill of the East is a lot more exciting. Traditional you’ll end up addressing 5% of the
banks, which is just illusionary rhetoric. Now banks in China are building inside WeChat, bank. Change everyone’s KPIs and
they are doing a lot of partnerships with banks so the customer goes to WeChat to open their you’ll affect 100% of the bank. <
and realising they cannot grow mass customer account and get their card. <
14 | June 2017 | Electronic Payments International
EPI June 360.indd 14 13/07/2017 17:36Feature | paytm
softbank expands:
india’s paytm
entErS The
canadian market
Indian m-payments giant Paytm has received a massive investment from
Japan’s Softbank and taken its first step outside India by launching its
Canadian subsidiary. Paytm sees Canada as the test laboratory for its
international expansion plans, Robin Arnfield reports
I
n May 2017, Japan’s Softbank purchases in bricks-and-mortar stores as “In November 2016, a new growth
announced a $1.4bn investment in an alternative to cards and cash. Users can opportunity emerged for Paytm with India’s
Paytm’s parent company, Indian mobile transfer funds to Paytm Wallets from bank move to demonetization,” the Harvard
Internet firm One97 Communications, accounts, and from credit and debit cards. Business School case study says. “India
giving it a 20% stake. Paytm’s offline mobile payment service announced that INR500 ($7.81) and
Paytm said in a statement that the has proved popular with Indian merchants, INR1,000 ($15.62) notes would cease to be
investment will complement Paytm’s plans to many of which do not accept credit or debit legal tender with immediate effect.
invest around $1.6bn over the next three to cards. All they need to do to accept Paytm is “The elimination of about 90% of the
five years to expand its services in India. to display a QR code sticker which customers currency in circulation would create a short-
In March 2017, Paytm launched a bill scan into their phone – they do not need a term cash shortage and provide an impetus to
payment app in Canada, its first outside POS device or internet connection. digital payments.”
India. The app, which was developed by the Reuters said that by May 2017 the number
Paytm Labs R&D facility in Toronto, enables INVESTORS of Paytm users had risen to 220m.
Canadian users to pay around 5,000 billers, “Paytm is the largest mobile wallet company
including their cellphones, internet, cable TV, The biggest investor in Paytm is Chinese in India currently,” says Forrester Research
utilities, insurance and property taxes. e-commerce giant Alibaba and its payments senior forecast analyst Satish Meena. “It’s
arm, Ant Financial Services, which runs looking to build the Indian version of Alipay
HISTORY Alipay. Softbank is the biggest investor in India.
in Alibaba. “After the Indian Government’s
Paytm (Pay through mobile), One97’s mobile In March 2017, Alibaba and venture capital demonetization in November 2016, Paytm
payments and m-commerce arm, was founded firm SAIF Partners respectively invested benefited the most in terms of additional user
in 2010 by One97 founder Vijay Shekhar $177m and $23m in Paytm’s e-commerce numbers and transactions. With a very limited
Sharma. marketplace, Paytm E-commerce, which access to credit cards and other payment
Initially, Paytm just offered mobile airtime competes with Amazon India. methods, customers use mobile wallets like
recharge, but it subsequently launched the According to Paytm: Building a Payment Paytm to make payments in both online and
Paytm Wallet app which can be used to Network, a January 2017 Harvard Business offline channels.”
make P2P transfers, bill payments, Uber School case study by Sunil Gupta, Das Meena says Paytm’s focus remains India,
ride bookings, and purchases at Paytm’s Narayandas and Rachna Tahilyani, by October as the country’s payments and e-commerce
e-commerce marketplace. 2016 Paytm was India’s largest mobile markets are growing at a rapid pace. “Canada
Since November 2015, Paytm has offered payments and commerce platform with 142m is used as a test bed for international
the ability to use Paytm Wallets for “offline” users and a valuation of $5bn. expansion,” he says.
www.electronicpaymentsinternational.com | 15
EPI June 360.indd 15 13/07/2017 17:36Feature | paytm
“But Paytm’s main focus area remains “We go into new countries to get some book and debit card, and will also be paid
finding profitable business models in the learnings about what services can be replicated interest on deposits in their account.
Indian payments and e-commerce segments, internationally and what have to be heavily “Paytm Payments Bank allows us to expand
which have high losses due to the discount localised with country-specific settings,” Deora the number of deposit-type relationships we
wars for customer acquisition and the continues. have with our customers including digital
investment required in technology, logistics “We think we will learn things in Canada current and savings accounts,” says Deora.
and warehouses,” Meena continues. that we can apply elsewhere, as it is a test “We can become the primary bank for our
“With backing from Alibaba and Softbank, lab for other markets. Also, we can receive customers. Currently, most of them have
Paytm has some time to build the business learnings from our partnership with Ant banking relationships with another financial
case for both these segments, but Amazon’s Financial if we enter countries that are similar institution.”
presence in India is one of the biggest to those where Ant operates.” Speaking about Paytm’s retail payments
challenges it faces, especially in online retail.” Deora notes that Paytm’s partnership with business, Deora says Paytm plans to offer
Ant does not prevent it from entering markets its offline merchant customers value-added
MADHUR DEORA where Ant has subsidiaries. benefits for accepting Paytm Wallet payments,
including the ability to track any payments
In October 2016, Paytm appointed former PAYMENTS BANK they receive.
Citigroup senior executive Madhur Deora “The launch of the Payments Bank will see
as CFO and senior vice-president of Paytm, In August 2015, the central Reserve Bank of the split of the current Paytm proposition,
which is responsible for Paytm’s financial India (RBI) gave Payments Bank licences to with the Paytm Wallet going to the Payments
services business. 11 companies, including Paytm, Indian telcos Bank and the Paytm e-commerce operation
Commenting on Paytm’s Canadian launch, Airtel, Vodafone and Idea, and to India Post. continuing as is” says Shiv Putcha, associate
Deora told Electronic Payments International: The first Payments Bank has already been director, telecoms at IDC Asia-Pacific.
“We’ve always wanted to be international and launched by Airtel. “While Payments Banks aren’t meant
move into developed markets outside India. Targeted at unbanked consumers, Payments to lend, they can take deposits and act as
So we looked to see which technologies and Banks are allowed to offer current and savings instruments of financial inclusion. In a
services we have developed in India, would be accounts with restrictions on the size of country like India with a significant unbanked
relevant to a country like Canada which has deposits, along with mutual funds, insurance population, access to these financial services
very high banking penetration and different and pensions, but not loans or credit cards. will be potentially lucrative.
payment and banking systems to India’s. Customers can use correspondent agents “I believe Paytm will continue with its
“One reason we chose Canada is that we such as merchants to make deposits to their strategy of enabling P2P payments and
have a set of people in our company who Payments Bank accounts. focusing on all the transaction scenarios being
understand the Canadian market very well.” In May 2017, Paytm announced that it had enabled by the growth of the online to offline
Deora says that, even in developed countries been granted the final stage of its Payments segment in India. Paytm will continue to see
such as Canada where people have been using Bank licence from the RBI, and would strong growth and could cross 400m accounts
digital payments for some time, much of the officially launch its banking business on 23 by the close of 2018,” Putcha notes.
underlying payment infrastructure was built May 2017.
many years ago. Paytm said its customers’ Paytm Wallet NEW MARKETS
“Most developed countries have antiquated accounts would be transferred from One97 to
or legacy card payment systems which the newly created Paytm Payments Bank. Deora explains that when Paytm enters a new
underpin their digital payments services,” he “The core mission of Paytm Payments country, it may not necessarily seek a banking
explains. “In fact, some of the digital payment Bank will be to cater to the requirements of licence. “We’re very happy to work with
services we have in India are more advanced in the unserved and under-served communities banking partners,” he says.
some ways than those in developed countries. of India, and bring them to the mainstream “Like other fintechs, we ask the question:
“We won’t do a ‘copy and paste’ from economy,” it said. What isn’t working as well as it should, and
our Indian services to Canada, or to other Paytm Wallet customers who apply for a what would be our solution and what would
countries, and hope they work. Paytm bank account will be given a cheque- be the infrastructure we need to offer to
solve that problem in that market? In many
markets, we might not become a bank as
that wouldn’t be necessary, and we could
partner with local banks, providing them with
some of the digital payment lending, payments or e-commerce products.”
Deora says that in any country in which
services we have in India are Paytm operates in, payments will be the core
service it provides, and that it could then add
more advanced in some ways than on additional services.
“We believe 100% in real-time payment
those in developed countries services, and we don’t want to hold on to
customers’ money just because we can,”
he says.
16 | June 2017 | Electronic Payments International
EPI June 360.indd 16 13/07/2017 17:36Feature | paytm
“If it takes more than a few minutes or even For example, I read that around $20bn is paid plans to offer a Paytm wallet in Canada.
one day to transfer money from your primary in overdue charges for bills in North America. Paytm also plans to offer P2P transfers within
bank to your digital-only bank, then this So there’s a big opportunity for us to help Canada in the near future.
introduces friction to the customer experience. users with bill payments.” “P2P services are still a challenge in
We think it’s very important for customers to One feature offered by Paytm Canada’s app Canada,” says Christelis.
enjoy real-time transfers between their banks. is reminders that a bill is becoming due.
“In Canada and other markets, Paytm will “We want to provide insights to users INTERNATIONAL BILLS
look to offer cross-border remittances and based on their bill payments,” Mhatre says.
cross-border direct bill pay,” Deora continues. “Managing your bills is a headache via online Paytm Canada will provide a service enabling
“For example, we could partner with a bank banking, as it may not be possible to get a Indians living in Canada to pay bills on behalf
which has a lot of digital banking users and consolidated view of all your payments to of their family back in India.
maybe has a focus on the Indian diaspora your billers. We want to solve that headache “Most remittances to India are sent to pay
for bills such as mobile phones, insurance and
school fees,” says Mhatre.
“Our app already offers payment of post-
Although Canadian banks offer bill paid mobile account bills in India, and we
will be expanding that to any type of mobile
payment services, we believe bill payment account and to electricity bills.”
Originally, Paytm thought the users
is a neglected area in banking services of its Canadian app would just be Indo-
Canadians. “In fact, our user base reflects the
ethnographics of Canadian diversity,” says
Mhatre. “We haven’t done any marketing, and
population in its country. We could add a tab for users, and we will soon offer automated the app has been promoted by our users via
to the bank’s digital banking app that would recurring bill payments. social media.
allow customers to pay bills in India.” “We will also offer alerts that, for example, “We’re happy with the frequency of the
could tell a customer that they have C$900 transactions and the transaction volumes that
PAYTM CANADA ($662) worth of bills to pay but have people are doing.
insufficient funds in their account to pay these “We’re targeting tech-savvy people like
Paytm opened Paytm Labs, which provides bills, so please address this.” young professionals who want the ability to
R&D for its Indian operation from Toronto, Currently, Canadian users pay for bills from get things done quickly whenever they want
in 2014. The R&D facility’s team of 55 data their Paytm app via credit cards, but Paytm and wherever they are.” <
scientists and engineers apply big data, AI
and machine learning to Paytm’s data assets to
build products for the group.
Aditya Mhatre, product manager at Paytm
Canada, says Paytm’s Toronto Lab does a lot
of work for Paytm’s Indian business.
“The entire Paytm India app is
personalized, and that personalisation
intelligence was built by our engineers in
Toronto,” he says.
“Paytm’s fraud detection system was
developed by our staff in Toronto. We chose
Toronto for the Lab because of all the fintech
ability here. As we already had an office in
Canada, it made sense for us to launch our
first foreign service in Canada. This enabled
us to get going quickly.”
“It makes sense for Paytm to locate its
R&D activity in Toronto due to the fintech
activity here,” says Christie Christelis,
president of Canadian consultancy
Technology Strategies International.
“Although Canadian banks offer bill
payment services, we believe bill payment
is a neglected area in banking services,” says
Mhatre. “There are certain aspects of bill
payments that haven’t been fully developed.
www.electronicpaymentsinternational.com | 17
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