Category Archives: Digital Payments

Apple Pay Cash and the matter of trust

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Over more than a decade now we have seen the launch of mobile wallets and prepaid cards, the high hopes for them and an often lukewarm response from the customer, followed by a phased withdrawal. I have myself been involved in a number of launches, in roles at many different parts of the payments, banking and money transfer ecosystem. There have been clear benefits we could demonstrate for our customers, but inescapably, with each extra “pot of money” a customer creates, there is more to manage. So the benefit must be compelling.

The big question in my mind when Apple announced the launch of Apple Pay Cash in the US on December 5 was naturally, how will this product fare? Will the path we see look much like that of the Google payment card, which launched with great fanfare and soaring expectations, but just fizzled out? Apple has proven they can launch products that are accepted and can change customer behaviour, getting them to do things they never used a phone for before. So will the Apple track record be enough to carry through this new product to success and help Apple Pay Cash to succeed where others failed?

The new Apple Pay Cash card image, copyright Apple Inc.

With the growing threats from cyber security, from a myriad of digital players on a range from pesky to all out criminal, customers are increasingly on the look out for ways to transact securely while on the go. Could a prepaid card from Apple that can hold some money that you use to pay be of interest, by addressing the customers critical and growing need of trust? Apple Pay has been relatively successful in mobile payment, but research from PYMNTS.com “Apple Pay Stats” seems to indicate a plateau in uptake over the last few years.

The offer seems not too new, and by now customers should be familiar with what to do and how to do it, having used their mobile phones with PayPal, Square, Venmo and other payments and money transfer applications. The Apple Pay Cash debit card works “like a bank account”, allowing you to send and receive money on the go.

Apple has attempted to make it easy for customers to get started, but as they cross certain thresholds they are asked for more identity verification. For instance if you want to receive $500 or more your identity would be checked, but it may be checked even otherwise, based on the way Apple sets up its rules. You may choose to verify your identity upfront, for instance if you want to use it at your favourite retail store. The identity check is managed through Green Dot Bank, the Apple Pay Cash card service provider. You must provide name, address, last four digits of your Social Security number and date of birth, as of now.

If trust is to be the draw, launch timing seems really unfortunate.  We just found out that since 2016 Apple has been slowing down processes on older iPhones.  Whether this was meant to nudge customers towards buying a new phone before they planned to or was an error of judgement that lead the team to choose this as a “fix” for older batteries, trust in Apple has taken a beating. Apple has apologised,  but a clear statement on what customers may expect going forward may still be critical, to re-establish the kind of trust customers need to deepen a financial services relationship.

So the new Apple Pay Cash launches in a climate where trust in the Apple brand is not at an all-time high, while trust towards America and American brands has also taken a beating. The repeated high level data breaches in 2017 and use of our personal data as the price we pay for “free” services has left customers somewhat jaded.

Customers need brands they can trust and brands need customers, for which they must meet customer needs. As we enter 2018, for me success of every product and service will hinge on deepening trust. Trust is something customers often took for granted in the past. Now each breach is likely to cause a reaction that could take brands by surprise.

Q&A from our “Disruptions in Digital Payments in China” webinar

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Thanks very much to all of you who helped us to make this live webinar (our first!) a great success. With representation from over 20 countries, we received a number of questions and were not able to answer all of them in the time available. The post below addresses these and we hope you will find this useful. There is never just one point of view, and we would love to hear your comments and your unique ways of approaching the questions. If you missed it, catch the free replay here.

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Q1: Is it advisable to partner with a Chinese company when seeking to enter this market?

A1: In general you may not have a choice in this. The question is with whom to partner and how to set it up so as to remain in control. An example is Yahoo China and Alipay. In Jack Ma’s speech at Stanford on May 14, 2013 he mentioned that Alipay digested Yahoo – they simply ate Yahoo and would not have been able to do their P-2-P advertisement platform without that.

This is a great question and to do full justice would probably need a session in itself. As a guideline, it depends on your industry, your ambitions and the roadmap you plan. Suffice it to say that I have seen careers made and broken largely due to the manner of handling this issue.

Q2: In your experience what is the biggest threat to successfully entering the Chinese market?

Timing and partnerships. Possibly in no other market could I say more strongly that a 360 degree understanding and a watching brief is critical. You cannot afford to walk into this blindfolded without opening yourself and your company to high risks, neither can you afford to do nothing. Understanding, anticipating and planning is highly important. It is equally important to understand Chinese culture and history as much as you deeply absorbing knowledge on the payments ecosystem and timeline.

Products and services must be made fit for the unique expectation of the market. For instance the clean streamlined experience of Amazon is not what is preferred – online shoppers want a busy, “happening” website. Similarly, there is a very different online-offline-CSR engagement in the consumer journey that one needs to learn.

There is a window of opportunity that must be well understood. We have found that players who act too soon have faced problems. On the other hand due to the need for domestic partners, it is advisable to act before all the “good partners” are taken.

Q3: How stable is the regulatory landscape in China? Is it prone to sudden changes?

In general it has taken many years so far for changes expected and talked about to actually happen. For instance I recall I first studied proposed regulations for licensing third party payment providers way back in 2006. They actually came out in 2010.

Similarly it is not uncommon to have a mass rollout, big commitments and plans in a specific direction only to see it overturned (example RF-SIM). For players who have built these products specifically for the Chinese market this can represent a serious setback.

Q4: Who are the companies to watch in this space?

I touched on the main players in the China payments ecosystem during the webinar, so for those who have not heard it, it could be useful at this point to listen to the free replay here. Of course our 295 page “Digital Money in China 2013” viewport offers you the whole list of players, partnerships and initiatives with our best understanding of their importance and traction. There is so much happening in parallel and there is a high degree of cross-over. What we tend to do is to note how the payments gatekeepers are proceeding – CUP, CM, The big 4, the big 3 large PSPs and more.

Q5: What are the best partners to work with?

This depends on who you are and what is required by the regulatory environment. If you are to apply for a license there is a lead time involved.

A good example is Western Union’s recent thrust into China in partnership with ICBC and CUP.

Q6: How should we interpret Digital Payments in Hong Kong? How does the Chinese government and market incorporate the progress and regulation of that market?

The webinar only dealt with Mainland China. We plan a separate webinar that will address Hong Kong, China as also other countries in the region. In general the approach is One Country- Two Systems. This is why Hong Kong, China has a critical role to play in digital payments relating to Mainland China. More when we tackle this topic. Please register to our website (registration is free, takes seconds, only requires email address and provides you a much greater access to the overall content on our portal) so we can send on an invite to you once plans are in place.

Q7: Would you clarify your definitions for "digital wallet" and "digital money", thanks!

The Digital Money domain has been described by Shift Thought™ as a way to understand the ecosystem, products, services and infrastructure involved in the digitisation and transfer of value. We use this term to refer to a host of financial services that use innovative alternative channels, technologies, providers and payment instruments.

For a full definition and understanding of our approach please see Blog #3: What is digital money?

The Digital Wallet domain has been described by Shift Thought™ as a means of understanding the whole range of stored value products aimed at digitising value and enabling the owner to utilise it in a way that offers a superior experience as compared to traditional payment methods. Services utilise an account and stored value or e-money that may be utilised across various channels and services. This includes prepaid cards, vouchers, mobile wallets, e-wallets and more.

Q8: Is there any real digital money in China (I mean digital money that is not dependent on bank account or credit card)? All mobile payments solution are NOT based on digital money.

This is a good point. Please look at my response to Q7 on what is Digital Money earlier. We track an extended set of initiatives to do justice to our definition. However, specifically to answer yours, there is E-money that has been around for a while now. Prepaid cards, both open and close loop exist as discussed in our Webinar and covered in detail in our Viewport. More importantly, digital wallets and mobile wallets are very much in use.

You are right that all mobile payments are NOT based on e-money and a number of them require a connection to a bank account or card account. In the way we cover each of the 50 key initiatives on our portal, you’ll see our icon and descriptions that exactly show what payment instruments are supported for Senders and Receivers of each kind of service.

I hope this answers your question. Please feel free to reach out for a quick chat to discuss further. Also, this is not set in stone. We found an absence of accurate definitions in the marketplace and in those cases provided our own. Where possible we comply with the way in which CGAP, GSMA, Mobey Forum, NFC Forum and other key bodies and thought leaders already use these terms.

Q9: After utilising your China 2013 viewport, I also obtained your comprehensive Indonesia 2013 report. I noticed how in each country, both APAC members have approached and regulated differently - How would Shift Thought help a potential customer navigate these different markets?

That is a great question and thank you for the compliments on our viewports. Shift Thought is fortunate to have compared 19 different APAC countries in terms of regulatory approach as well as the predictor framework we use to project the growth of each of the 32 services we class as Digital Money.

We maintain a highly comprehensive knowledge base of regulations that impact on all these services, and understand how they may apply from each perspective. This, along with our deep understanding of player competencies puts us in a great place when we consult with large mobile operator, banking and money transfer groups in search of the right partners.

We’ll talk more on this in the Indonesia webinar. If you pop me an email on which countries you want to know about first I’ll consider this as we prioritise the webinars scheduled.

Q10: Charmaine - do you see an opportunity for mobile point-of-sale devices targeting Merchants in China much the same way that Square has addressed small Merchant needs in the United States?

Absolutely, and as is always the case in China, one of these providers currently cutting their teeth in the highest populated country in the world could well become a challenger to the Square, iZettle and huge number of mPOS providers currently starting of from the East. But it’s not just China. We’ve seen very interesting and innovative approaches elsewhere in APAC. This blog is getting too large, maybe a separate post later?

Q11: Sub Saharan Africa population is forecasted to reach China's in 20 years. What similarities if any do you see between these 2 markets and what learnings can Africa derive from China now to foster further successes in the contribution of digital money to more financial inclusion of unbanked populations.

Wow, this is a biggie. Thanks for this great question and sincere apologies that I can’t do justice to all of this today. However, I put it the other way, what can China learn from Africa including sub-Saharan Africa? – That is the real question. As the access that people have differs, I’d like to do fuller justice to this in a later post.

Q12: Hi - how pervasive are contactless payments in PRC? Thank you

For all the years I’ve worked with China there has always been something planned – most were trials, pilots. The real progress is in terms of installation of POS that supports contactless payments and cards. Once that is in place and China has elected to support the NFC standard, the people who currently use smart cards for travel all across China could very quickly change their behaviour to use of a mobile device instead. So to answer your question, contactless payments by card are already surprisingly pervasive!

I hope you have found this post useful. Again, this is just my perspective and I would love to hear from you as that is when the learning process really gets enriched. Thanks for the wonderful outpouring of support to me and thanks for being a valued member of our little fledgling Shift Thought community. Together we can make things better.

Disruptions in Digital Payments in China 2013 – what does this mean for you?

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China, the world’s fastest growing major economy, is seeing high adoption rates of new technologies amongst the rising middle class and other key segments. Local and foreign companies across a wide spectrum of industries stand to be affected as this rapidly shapes digital payments locally, regionally and globally. If you missed this, you can catch the free webinar replay here. Also check out the Q&A from the event.

 

imageJack Ma of Alipay threw down a challenge in his recent visit to the USA – Alipay plans to enter USA. Boosted by the largest markets in the world, Chinese providers are starting to set their sights on even larger and more distant prizes. At Shift Thought we have obtained many actionable insights from our recent in-depth studies across 19 key Asia Pacific emerging economies and truly believe that what we have found out could have far reaching impacts on businesses around the world. As part of our business of tracking the evolution of mobile payments and digital commerce around the world, we have spotted genuine opportunities beginning to present themselves in China for those who have ambitions of entering this lucrative market.

Shift Thought brings you a strategically important Webinar to share highlights of our latest report “Digital Money in China 2013”.

China, one of the largest and fastest-growing payments markets in the world, is undergoing rapid transformation. Renowned as a particularly difficult market to enter, recent developments make it a hard to ignore opportunity....

  • 250 new third party non bank providers in place are offering mobile payment services
  • Mobile payment standards are being finalised
  • High speed mobile networks are more widely available than before
  • Low cost smartphones are common and ready for mobile payments
  • Regulators are now issuing payment licences which even include foreign companies

So how do you take advantage of this opportune time?

Having attempted to enter this market on behalf of large mobile operator groups, global banks and money transfer operators, we at Shift Thought recognised the need for a navigational tool to steer entrants in their ambitions relating to entry into the China payments market.

In this free webinar we will explore the Chinese payments ecosystem and digital money initiatives. We will offer some of the analysis and learning from our recently completed  report “Digital Money in China 2013”. Additionally this webinar provides a valuable insight and robust intelligence into a complex and previously perilous market to enter, in order to help you identify, develop or refine your strategy.

  When?   Instant replay now available of our live webinar
  Tuesday 24th  September at 2.00pm GMT (1.00pm CET, 9.00am EST).
  20 minutes live presentation with 10 minutes Q&A to follow
  Where?   To view the replay click here.
  Presenter   Charmaine Oak, Payments and Remittances Expert,
  Digital Money Practice Lead, Shift Thought

We look forward to speaking to you then!

Paying the price: A new regulatory framework for Cards, Internet and Mobile Payments in Europe

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An extensive legislative and regulatory package has been recently announced by the European Union. In this guest blog, Jean-Stéphane Gourévitch shares his thoughts on the  potential impact to the payments industry in the EU/ EEA and, possible new threats and risks for incumbents and opportunities for innovation and new entrants.

 

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Jean-Stéphane Gourévitch has over 20 years of International and European experience at senior management levels. For more details see the full article on his website.

 

 

In July this year Commissioners Barnier (Internal Market and Services) and Almunia (Competition) joined forces to present an extensive Legislative and Regulatory package that will impact the payments industry in the European Economic Area, creating new threats and risks for incumbents and hopefully open competitive opportunities for new entrants and innovators.

The package is organised around two key policy initiatives:

  • Firstly, a draft new Payments Services Directive (or PSD 2) reviewing the original PSD from 2007, to be adopted by the Council and the European Parliament.
  • Secondly, a draft regulation to be adopted by the Council and the European Parliament on interchange fees for card-based payments transactions that also contains a number of important provisions and changes relating to separation of activities of card schemes, consumer rights, and rules relating to card payments.

1. The New Payments Services Directive (PSD 2)

The revised Payment Services Directive brings a number of new substantial and important elements to the 2007 Directive but also retains key measures such as “passporting”.

It aligns the provisions, including those relating to security, fraud prevention and consumer rights applicable to all types of Payments Services Providers (PSPs), whether digital or non-digital.

It also reviews the definition of payments services to adapt these to new digital and mobile payments, opening new areas for competition. The Commission hopes the new Directive will promote the emergence of new players and the development of innovative mobile and internet payment services and solutions in Europe. They further hope this will improve the overall EU global competitiveness in these sectors. Member States will have two years after adoption of the Directive to comply with it.

2. The proposed regulation from the European Parliament and the Council on interchange fees and other fundamental changes

The Regulation creates a regulated area and a non-regulated area for debit and credit cards. The Regulation caps Multilateral Interchange Fees in the regulated area, as regards both Credit and Debit cards. It seeks to hold these to a very low level, first for cross border transactions and after 2 years for all transactions, including domestic ones.

Furthermore, the proposed Regulation introduces some major changes in the rules governing card schemes. It mandates structural separation between the different functions traditionally integrated. For instance scheme management, payments authentication and processing would be separated. This aims at injecting more competition by increasing transparency, protecting consumer rights and supporting innovative payments.

The European Commission hopes this package will be adopted by the European Parliament and the Council of Ministers and implemented before end of March 2014. It is an ambitious programme with potentially far-reaching consequences as part of an ambitious political agenda.

Re-imagining India – the global payments factory of tomorrow

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My title is based on my favourite book “Imagining India” by Nandan Nilekani. Though I now live in the UK, I am fortunate to be a global worker and when I analyse news on India it is always with fond affection for the country of my birth. As India celebrated its 66th Independence Day a few days ago, this blog series is dedicated to focussing on its achievements over the last decade and imagining where next for this amazing country.

Transformation at home

clip_image001In the 1990s the Telecoms revolution opened the doors to a new level of progress for India. Entrepreneurs freed from shoddy fixed-line services today manage little empires from mobile offices based on a trusty cell phone, a less reliable pair of chappals and an occasional rickshaw ride. The figure shows the steep growth of mobile connections in this, the second most populous country in the world.

Now India has an opportunity to usher in the next revolution: based on Aadhaar identity, real-time money transfer across the length and breadth of the country, card payments through the RuPay domestic card scheme and mobile wallets that can be used to cut through layers of middle-men and go direct to the consumer. The mobile phone is truly evolving into an “office in a box”, as it becomes a means of identification, information dissemination and payment. Digital payments are set to revitalise the domestic economy and create a strong impetus for the next stage of growth. At 60 million, the MSME sector of India is just getting started and reduction of friction in payments will grease the wheels.

It is not gold but cashless payments that holds the key to India’s future. Money going digital is the solution that is needed to control black money and stop the flight of capital. As the need for cash payments reduces it will be so much easier to eradicate behaviour that destroys the very fabric on which poverty reduction measures rest.

Transformation abroad

As I write this Wipro has just been named amongst the top 3 in the 2013 Global Outsourcing 100 list. The list ranks companies on parameters including customer experience, global presence and competencies. In the 1980s I am proud to have been a part of the revolution as Wipro led by Azim Premji (my first employer) along with Infosys (Narayan Murthy, Nandan Nilekani), Tatas and countless others set out to prove that a power cut or two could not stand in the way of a good nation turning itself into the IT Centre of the world.

I believe prerequisite conditions now exist for Indian entrepreneurs to craft a new success story. This story will build on past successes, using technology to create innovative digital money solutions for the world, just as India did in the space of Information Technology.

Can India make payments cheaper, faster and more secure by injecting low cost value added services and payment platforms into payment chains for the new online “global customers”? There are many factors to support this. In my next blog I expect to touch on the many recent changes that perfectly poise the country to capitalise on new payments, at home and abroad.

As Europeans change the way they pay, card fraud reaches lowest level since 2007

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As card payments grow in importance as the preferred way in which people pay, the good news is that the level of fraud using cards decreased by 5.8% since 2010. This post offers insights from the latest ECB fraud report alongside our analysis of the way people pay in the EU area, to help payment providers prioritise their support to payment instruments and consider the impact of fraud related issues in accepting payments.

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