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

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.


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.

A new resource for safety in online payment, as scams straddle online-offline domains


As money goes digital, new threats and challenges arise as scam-artists seek new ways to profit at the cost of innocent victims. Charmaine Oak (CO) was curious to understand about the so-called “Ukash Virus” and interviewed David Cox (DC) of Ukash to find out about the origin of this term, the newly launched “AvoidOnlineScams” site and the investment that Ukash is making towards the safety of their customers.


CO: David, could you please tell us a bit about Ukash, and the origin of the term “Ukash Virus” ?

DC: Ukash was created to provide a safe and secure payment method for consumers to spend their cash online and we want to maintain this. However, to rip-off innocent consumers, criminals have begun to request payment by Ukash and other online payment methods, in their scams.

David Cox Ukash

David Cox is Head of Customer Experience, Ukash.  Helping customers to use their cash online, safely and securely, has been David’s primary objective since joining Ukash in 2006. This extends to providing practical advice and assistance to avoid online scams. David works closely with the Ukash security team, and liaises with law enforcement and consumer protection agencies, to promote online payments best practice.

One of the most common and quickly spreading scams we are seeing, using Ukash as a payment method, is malware demanding payment of a fine, seemingly sent from the local police authority. Ukash is widely available and is the brand leader in e-money, so unfortunately some have referred to this ‘Reveton’ ransomware strain as the ‘Ukash Virus’.

Malware scams generally take the form of a Trojan, typically picked up from malicious online adverts or from file-sharing sites, which locks the infected computer and then demands a fine or ‘ransom’ for unlocking - this is known as ‘ransomware’. This malware often displays a message that claims to be from the police, saying the computer has been targeted for legal reasons.

Payment by online cash is then requested, and even if payment is made the computer remains infected. Ransomware will use alarming messages and scare tactics to frighten internet users into paying the fine, something that we see as a growing problem. Of course no genuine law enforcement agency operates online fines without evidence or a right to appeal, and the on-screen messages are very badly written, so unlikely to be genuine.

CO: I recall similar “offline scam” cases (not virus associated) under which victims receive requests to pay, using Western Union for example ..

DC: Yes, criminals target consumers via ‘offline’ methods and often use traditional methods of communication to do so. For instance the prominence of the miss-sold payment protection insurance scandal in the UK has led some criminals to create a new telephone scam, targeting vulnerable groups such as the elderly. These victims are asked to pay an advance fee, via Ukash or another payment method perceived as being untraceable, in return for a much bigger pay-out, even if they have never had a product with PPI.

Other scams have involved individuals handing over Ukash codes as advance fees for loans and job applications. Every Ukash receipt has clear warnings printed against never giving codes to anyone and only using Ukash online and at genuine merchants, but unfortunately not everyone heeds the advice.

CO: Has this changed in recent times causing scams to be online as well as offline?

DC: With the advances in technology and the increased use of the internet, these traditional ‘confidence tricks’ have gone from offline to online. The ease of the technology also means that more people, of all ages and abilities are using the internet and can ultimately put their details online and become a target for fraudsters.

But the criminals are exploiting their victims in imaginative ways, such as encouraging non-internet users to use an online-only payment scheme such as Ukash, as in the PPI scam. Despite the warnings to only use Ukash online, the majority of victims do not perform any research or ask advice before handing over the Ukash code, as the criminal has created a level of trust where their instructions are followed without question.

The developers of the Reveton Trojan use the internet to distribute the malware as if it was a legitimate software product and even provide technical support! It is attractive to low-level criminals as they can buy at low cost the code to infect the sites where large numbers of internet users will visit, and then receive payment from those that fall for the scam, making it scalable and profitable.

CO: How have producers of viruses sought to monetise through the development of new payment services? How are they seeking to “Get credibility” by using trusted brands (Metro police & yourselves)?

DC: The original malware developers are running a business distributing the trojan code. They’ve designed the malware to use popular payment brands, such as Ukash and Moneypak, to make getting payments as easy as possible. The wide availability and consistent branding of the payment options is intended to make the ‘lock screen’ appear genuine.

CO: Could you tell us a bit more about Ukash, what it is used for, and in which countries and partnerships?

DC: Ukash is the global online cash payments provider and internationally recognised e-commerce cash payment method that enables consumers around the world to use cash to shop, pay and play online safely, securely and conveniently. This secure payment method was developed to protect personal identity and financial information when making online transactions, reducing the threat of credit and debit card fraud for consumers and repudiations and charge-backs for retailers.

At the heart of the Ukash vision is creating a truly global solution that holds no barriers or boundaries for consumers to access the burgeoning ecommerce marketplace. Since launch in 2005 Ukash has expanded into countries on every continent. Significant investment in back-end technology and front-end customer service has enabled Ukash to achieve a 65% growth year on year, with 91% of global customers saying they would recommend Ukash to friends or family.

Ukash codes are purchased with cash in retail outlets such as shops, petrol stations and kiosks. The unique 19 digit code can then be used to pay directly on any of the thousands of websites that accept Ukash transactions worldwide, or loaded onto prepaid cards and e-wallets.

Ukash is regulated by the UK Financial Conduct Authority (FCA). The maximum single value allowed is £200/€250 or equivalent in other currencies, and the maximum amount that can be held by an individual customer is £1,000/€1,250 or equivalent in other currencies.

CO: I was interested to see your recently launched website. Why did Ukash take this initiative and how do you hope to help?

DC: Ukash joined forces with leading police authorities and anti-malware partners to create Avoidonlinescams.net, an online resource to offer internet users up-to-date news, tips and advice on the latest online scams. This includes links to instructions and free software to remove ransomware.

imageWe want to remind consumers that Ukash must only be used to pay online and at genuine websites, never to pay fines or advance fees. One of the reasons we launched Avoidonlinescams.net was to protect consumers from these fraudsters and stop criminals in their tracks. Individuals can protect themselves online if they have access to knowledge and advice.

Most of the individuals falling victim to these scams are in vulnerable groups and not previously familiar with Ukash. We are therefore working to educate these groups in order to help them protect themselves and beat the fraudsters, including clear warnings on the Ukash receipts and initiatives with the retailers that issue Ukash.

CO: David, so what is your main advice to your customers?

DC: We advise consumers to visit Avoidonlinescams.net to learn how to remove the malware and keep themselves safe online.

Anyone who has used Ukash to pay a fine, or for any other suspicious payment, should contact Ukash immediately on 00800 247 85274, and we will attempt to block the Ukash code before it is used. It’s also vital that they report the crime to Action Fraud UK on 0300 123 2040.

We have a dedicated team working to provide intelligence, to the law enforcement agencies, on any reported crimes that use Ukash as a method of payment. This has resulted in several high-profile arrests of international criminal gangs suspected of involvement in ransomware and advance fee fraud.

Ukash is the safe way to pay, when used online at genuine merchants. But we advise that anyone unfamiliar with a payment scheme finds out how it works before they use their own money.

CO: Thanks very much David, I learnt a lot and am glad to hear about this initiative. Sounds like very useful advice.

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


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.



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.

Mobile Money in China – a classic example of Digital Money

Many a brave pioneer has attempted to break into the highly desirable China payments market without success. Yet as the first foreign licenses are granted and PayPal awaits theirs, other global providers question whether it is once again time to venture east. The Shift ThoughtDigital Money in China 2013” provides a guidebook to would-be marketers, with unique insights on the current state of play and potential navigation strategies for each category of player. It will not be possible to succeed in Mobile Payment and Mobile Money without understanding the larger context of Digital Money .


The size of the prize

It does not take long to convince any senior management team that the potential of the China payments market is massive. Homogenous, large segments do exist within the population of 1.35 billion. This major and rapidly growing economy is rapidly opening up to new technology and electronic commerce. Alipay, part of the mammoth Alibaba group has long ago claimed to have users in excess of the number of customers PayPal has world-wide, with a reported 550-700 million registered digital wallet holders.

Now they, along within an army of 250 other would-be payments providers equipped with third-party payments provider licenses are rapidly seizing key segments. Over 2013 the trend is for them to offer mobile wallets to their existing digital wallet customers. Historically Shift Thought believes this is the first time that new mobile services can start up with an existing captive base of hundreds of millions who can use the services on cheap smartphones through high speed mobile internet connections.

“Big hitter” providers hail from across multiple industries

The way this market has evolved is unique, as is the sheer variety of heavy-weight players bearing down on the alternative payments scene. The Chinese banks, now some of the largest companies in the world, are finding themselves at the starting line, as are the very large mobile operators. The relatively young and highly nimble payment operators grew beyond recognition, on the back of an SME market eager to do business on the Internet. Now they are using widely available, cheap smartphones and mobile internet technology to offer their digital wallets as mobile wallets to a captive consumer base of merchants and consumers shopping on the go.

Of the 32 services that we at Shift Thought monitor, there are many that present opportunities in China. Starting with Online Payment, we note large numbers of online banking, mobile banking and mobile payment users. Money transfer has been a highly desirable market, both within the country and internationally. The largest number of people in the world travel over the Chinese New Year, an indication of how many people live and work away from home and have a need to send money home.

The perils of the Chinese market

Since before 2005 many have attempted to break into the Chinese market. Large foreign banks and mobile operators made do with small shares in large companies, as the only foothold that could blossom into something larger. However let alone mobile wallets, even mobile payments and mobile banking progressed at a snail’s pace as the authorities experimented with multiple standards before determining which to back. Local companies enjoy multiple advantages. Regulations come from many directions, and not unlike the US, this is a country where you simply cannot count on a single standardised market.

So why is 2013 different?

Payment providers grew rapidly in the absence of regulation, reaching a point where they presented a threat to a number of incumbent players. New regulations have forced them now to obtain licenses. Already many tranches of licenses have been granted; the latest ones even include foreign companies.

Meanwhile mobile payment standards are being finalised, and this should address the current problems of highly fragmented markets. There has also been a rapid spread of high speed mobile networks, and cheap smartphone handset to utilise the services.

The role of Digital Money

China presents a classic example in support of the Shift Thought Digital Money approach. Services started strongly on the Internet and have now gone mobile, in contrast to a number of African countries that grew on the M-Pesa Kenya model.

Regarding the relative importance of digital money services, China currently has the largest number of online shoppers in the world estimated at $1.29 trillion for 2012, with 220.65 million users in June 2013. Unless would-be new entrants understand the various existing dynamics and key players, they stand to risk losing out as the mobile money market explodes over 2013 and beyond. With the need for local partners, it is possible that large global players find themselves having to sit out the dance while their competitors take to the floor.

A navigational tool for the complex China payments market

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. Our latest report “Digital Money in China 2013” was written at the request of some of the most renowned world payment experts who had no means of obtaining the knowledge elsewhere. It offers an introduction to the complexities of the China payment market, regulations and timeline. It provides a complete guide on the ecosystem, with details on each initiative, player and partnership.

Our goal has been not just to deliver actionable insights to mobile operators, financial institutions, payment providers and vendors world-wide, but to also offer practical, concrete ways to progress on the insights. There are links to the websites of all the important regulators, providers and players, as well as details required for building your business case. Market segment and services are explored in detail to track the progress of e-money in the Chinese market.

Get inside your competitor’s head with the Shift Thought Digital Money SAGE


Although mobiles and smartphones present an exciting new dimension for consumer payments, the Shift Thought Digital Money SAGE offers payments providers a panoramic view, so as to prepare for the eventual growth that is essential for building alternative payments services.

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European privacy action–what effect on the Google wallet business model?

Pressure mounts on Google, with the ICO (in concert with 27 data protection authorities across Europe) yesterday issuing their notice. How does this impact Google’s fundamental business model in payments, and what possible knock-on effects may we expect on new entrants with digital wallets based on similar models?

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Netherlands retail payments cost EUR 1 billion less per year than European average

The Netherlands has long been one of our “model countries” for Digital Money. Retail Payments results recently released show why. While cash withdrawals are falling, card payments have increased and there is clearly a higher value of card payments than cash. De Nederlansche Bank (DNB) worries about how  to “keep the cash chain alive” unlike India, Nigeria, Indonesia, China and other emerging countries whose top priority is to  go cash-less / cash-lite.


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New mobile payments standards in China – how will they shape markets worldwide?


In China online payments took off since 2009 and reached mass markets, triggering the release of third party non-bank payments provider regulations in 2010. With digital wallets from providers such as Alipay enjoying 500 to 700 million registered users, we’re talking very large mass markets here. Now the same looks set to happen in mobile payments. This blog shares Shift Thought analysis from our recently published “Digital Money in China” viewport.

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Steep rise in online commerce and non-card payments causes rethink in UK, France

BRC’s Retail Cost of Payment Collection Survey for 2012 released in May 2013 indicates that PayPal and coupons have increased to a level that now requires separate reporting. This accounts to over 5% of transactions in 2012, as compared to 1.66% the previous year. There has been a steady change in the proportion of sales transactions by each payment method as shown in our graph based on BRC data.


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Transitioning from social to e-commerce: not everyone makes it across

In a world where scale matters and players must continually reinvent themselves, it saddens us to see that not all make it through the metamorphosis.

Multiply Marketplace was a social networking service that first started in 2004 and built  a 11-million strong community around blogging, photo sharing, videos and more.

In 2012 they moved their base from Florida, USA to Indonesia. The task at hand was to offer e-commerce services to the 350 million strong market in Philippines and Indonesia, while also discontinuing their blog services.

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