Trends in Payments in India – from the eyes of the leading merchant acquirer

Posted on July 20, 2015 by Charmaine Oak

Today we are with Nitish Asthana of First Data, who provides insights on the fast moving payments scene in India, at this historic stage in the move towards non-cash payments. In this exclusive interview, we touch on key changes that could transform the card industry, and discuss a broad range of topics including E-tailing, Modern Retail, POS and the advent of mobile payments. Nitish shares four major trends that are transforming the way 1.2b consumers pay, as well as creating new opportunities in merchant-to-merchant payments potentially worth over $20b.

Thanks for taking time out from your busy schedule Nitish! As context please could you share a bit about yourself and your role at First Data?

I am the VP & Head of First Data India Ventures and have also led First Data’s merchant acquiring business in India. At First Data India ventures, we focus on venture investments in POS, e-commerce, mobile commerce and digital payments.

First Data is the global leader in payment technology and services solutions, operating in over 70 countries with relationships with over 3,500 Financial Institutions and offers a range of services including POS, E-Commerce and mobile (on internet and POS).

In India we are one of the leading merchant acquirers, providing services to over 250,000 merchants. First Data operates through an alliance with ICICI Bank (India’s largest private sector bank), ICICI Merchant Services. Our two lines of business are Merchant Services and Issuing. We offer POS, online, mobile and merchant processing and settlement for a broad range of consumer and business payments. Our issuing platform business runs on VisionPLUS, a First Data product and powers our service to leading banks in India.

Nitish, from your key perspective, which market segments seem to hold the most promise?

Activity in the payments space crosses a wide range of transactions across a set of vertical and horizontal segments.

In terms of vertical segments, E-commerce and especially E-tailing (Retail Sales on the Internet) is really important for us. Travel booking on the internet is already heavily penetrated, covering almost 100% of bookings and accounting for 75%-80% of online payments but this is fast reducing to 55% as online payments for retail, telecoms, utilities, insurance and tax take off. We also talk about point-of-sale (POS) as a vertical, within which Modern Retail is progressing very well, growing from just 5% of retail to 20% by 2020.

In terms of horizontal segmentation, large merchants of the country have already progressed in electronic payment, but today we see a lot more opportunity with small stores that accept only cash.

Overall in the market today card payments is a very small market as compared to US, UK, Australia and others but we expect 25-35% growth over the next few years.

The overall economic trends are also looking up?

Certainly, if you look at GDP growth, positivity is back! We are looking at a 7.5% growth in GDP expected to be the highest in the world.

A bigger driver for electronic payments is that currently over 90% of retail payments are in cash. The Government vision for less-cash is expected to bring out specific exemptions. Some are likely to relate to tax incentives for merchants and consumers to pay electronically.

If that happens, what is expected to be a $150b card industry over next 4 years could be pushed 50% higher going up to $250b-$275b by 2020. This would be much higher than current estimates, and we would reach an inflection point sooner with this planned government intervention.

What about the progress of Aadhaar-linked bank accounts and other key enablers?

Aadhaar has been an incredible journey with millions of customers enrolled. This received a massive boost from the launch of the Pradhan Mantri Jan Dhan Yojana (Prime Minister’s Benefit Fund) launched a year ago. It has created the rails to transfer benefits from the government, for instance LPG and fertilizer subsidy. NPCI recently confirmed that over 150m bank accounts have already been linked to Aadhaar numbers. All 170m beneficiaries were to be brought under the program by June 30, 2015. Banking inclusion has been greatly enhanced.

Regarding debit card infrastructure, India now has over 560m debit cards. Credit cards have been leading in the last 25 years, but debit cards are a more recent development. 60% of payment volumes are on credit cards despite them being fewer in number. The story so far was around credit but will be around debit cards going forward. I expect the ratio to reach 75% debit to 25% credit in terms of payment volumes.

In short we have a number of key enablers working together: the Aadhaar system enrolling people into electronic id, the push to mobile banking for the unbanked, the push to bank accounts, the roll out of debit cards and new POS infrastructure.

Could you please explain India’s position on merchant infrastructure?

In terms of a high level snapshot on merchant acceptance infrastructure, India has about 15 million merchants of which only 1 million accept cards. This is why card payments traction is so low. The barrier to acceptance is that terminal infrastructure is expensive, at a cost of around $150 - $200 per terminal. At this level return on investment on new terminals is difficult to justify. We have focused on bringing down the cost of a terminal to $25-$30, through the use of mobile POS. When you look at the last 8-9m merchants, mobile to mobile payments without infrastructure is the way to go.

First Data has launched our Pogo solution in July 2014, deployed at smaller merchants. At current take up levels the price point is higher but merchants do not pay upfront, we recoup the cost from on-going payments.

Could you tell us about the new services you launched recently?

We are one of the leaders in E-Commerce payments and operate across a number of categories. To simplify customer experience we are looking to launch our revamped internet payment gateway which would also work from mobile phones. Universal payment options also cover internet banking, integration to wallets, EMI products, payment in home currency and seamless plug in to all shopping carts and a mobile optimized interface as well. We are looking to launch this in next 2-3 months.

We are also adding a number of features to our MPOS launched last year. At that level of transactions we can simplify documentation for a merchant to quickly come on board. We’re launching a product for payments and other applications such as ERP, accounting, loyalty and a hardware/software.

Essentially small sized retailers have not invested in counter top infrastructure. Some may have PCs, some may not even have that. What we want to provide is a package deal for a small player by “miniaturising” the functionality used by large merchants: ERP, bar code reader, printer and other features. We believe that addressing the needs of small merchants is of great importance.

How about merchant to merchant applications and do you have estimates on how much the India B2B market is worth?

If you look at B2B, that too is very interesting for us as we address cash and carry. In India the market includes stores such as Walmart and Metro Cash and Carry. We’ve done a prepaid program, also a credit card with limit, accepted by closed group of retailers. Other interesting opportunities are around travel, for low cost airlines to sell their inventory and enjoy more card acceptance. The third interesting area is procurement that can help both parties optimise working capital.

Our own best estimates for the size of the B2B market is $15b to $20b of available market across the country.

How has the Indian payments market changed over the last year?

The first major trend has been the move from credit to debit. In the past cards were used more for discretionary expense, now the trend is towards non-discretionary, as consumers use cards instead of cash in their wallet. Supermarkets are adopting cards and issuers have provided a lot more debit cards.

Secondly, it is contactless. We were the first to introduce contactless terminals. For small value transactions, you can now tap and go. I believe Contactless could be very important going forward.

The third trend is mobile especially through mobile internet. India has 900m mobile phones and 300m smartphones, growing to 500m. People prefer to shop on their mobile rather than using their laptops or PCs. This is higher even than the US, and considering how important the Indian market is apps are being rolled out and payment systems are evolving fast. Mobile optimised pages and plug-ins are being rolled out. We expect this market to reach $35 million.

The fourth major trend has been the growth of our local network, RuPay, similar to China UnionPay. In the past Visa and MasterCard held dominant positions in India, but issuance in the last 18 months has changed things. NPCI RuPay has issued a huge number of cards and will play a very important role as all the new bank accounts use RuPay.

How important will the physical card be in India?

I think plastic cards will continue to be very relevant in the near future. Mobile wallets have not been adopted as fast as hoped and have been around prepaid rather than card in store.

I believe however that the form of plastic will change though, with more Chip & PIN EMV cards being rolled out as we speak.

Do you have any idea of the number of contactless cards and terminals?

I’d say terminals accepting contactless cards are in the region of 20,000-25,000. Also, if you talk to top acquirers, they’re all talking of deploying a large number.

We expect pretty much all of our new deployments to be contactless this year. Over 80% of the transactions on POS are less than $30 and could qualify as contactless. Some categories would go better, for instance super-markets and transit.

Transport has not come up as much as it could, do you see this changing?

A number of metros are leading in the investment in tap and go. Toll is not yet integrated and as it is not interoperable it means that people cannot yet buy prepaid. With regard to Prepaid, services Mobikwik offers card payment service for Android and iOS users and now supports paying for Uber.

The form factor of cards will change, as this increasingly moves to Chip & PIN and contactless rather than magnetic stripe as the price of contactless terminals is not that much more.

What significant changes are likely in the way people pay in India over the near future?

We are keen to look at in particular in terms of how government participates. Deploying acceptance infrastructure and now systemic incentives will help non-cash payments to reach tipping point.

Everyone understands the cost of cash. The goal is to get people to prefer electronic payments over cash. However affinity to cash is too high and must be broken. Government incentives made available to all, including merchants, consumers, acquiring banks and others, will help to lower costs and promote adoption.

Nitish, thanks for sharing your insights with us. I wish you the very best for your initiatives as India continues to adopt non-cash payments at this unprecedented pace.

Nitish Asthana is the VP and Head of First Data India Ventures, focused on venture investments in POS, e-commerce, mobile commerce and digital payments. He has led the merchant acquiring business for First Data- ICICI Merchant Services (ICICI MS) and had overall responsibility over ICICI MS revenue lines across the company’s POS and Ecommerce businesses, acceptance and acquiring product solutions, sales, business development and marketing.

For more information on “Digital Money in India”, Shift Thought’s unique 360-degree coverage of the Indian payments scene, or to gain access our self-service portal with the latest knowledge on the ecosystem, initiatives, regulations and more, just email us at contact@shifttthought.com.

Apple Pay comes to the most contactless ready country – UK!

Posted on July 14, 2015 by Charmaine Oak

Today Apple Pay launched in the UK - signalling the start of a new era.

Since Apple Pay launched in USA last October, a UK launch has been expected, to mark the start of a new level of use of mobile phones for contactless payment. UK is the country that is arguably the most contactless-ready in the world, with the largest number of contactless cards according to recent Visa reports. As people in the UK start to pay for goods and services around London using their iPhones and Apple Watches this could forever change the way we pay, first in the UK and shortly across other parts of Europe.

From today over 250,000 shops will accept Apple Pay across UK.

These include:

High Street Favourites: The Post Office, Starbucks, Costa, Subway, KFC, McDonalds, Pret
Retail Stores: Waitrose, Lidl, Spar, JD Sports, Dune
Department Stores: Marks & Spencer
Restaurants: Wagamama, Nando's
and most important of all, Transport for London (TfL)

As you will recall, London buses went cashless last year this time, but people were still largely using Oyster cards, with contactless payment cards still a novelty. I touched on this in my blog of December last year, “How payments changed in UK in 2014, and the perfect storm brewing for 2015”. Although mobile payments was supported by Vodafone, EE and others, consumers failed to adopt in large numbers. Now though, there is for the first time a real challenger to contactless cards.

People can now authorise payment simply by using their fingerprints, with the NFC chip on their phone communicating with TfL readers on the London underground, buses and rail networks.

The first three banks to launch today are Santander, NatWest and Royal Bank of Scotland. Barclays, having held out the longest, is also likely to shortly support Apple Pay, but HSBC and First Direct will be first with their launch later this month.

As the limit for contactless transactions increases from £20 to £30 in a few months, people can start to buy groceries through this fast new checkout method. Unfortunately I buy all my groceries online, so will have to make a special trip to the stores to check this out. Watch this space!

There are many ways to measure contactless readiness – number of terminals, number of cards, usage of contactless payments and more. Different countries top on different criteria. This month Visa Europe reported that UK leads Europe in contactless cards issued at 49.6 m cards, and 410,000 terminals, and considering that these are just figures from Visa, these figures appear to make UK the leading country, at least on some measures of contactless readiness (Your views are most welcome!). This launch is therefore a critical one for Apple, and will be instrumental in driving strategies of key providers world-wide.

With Apple Pay here now, can Android Pay be far behind?

Payments systems in the US – A sleeping giant awakes

Posted on July 4, 2015 by Charmaine Oak

This weekend as we joined in wishing our American friends and family around the world a wonderful Independence Day, my thoughts turned to how Payment Systems are changing in historic ways in America, in many ways setting off a chain reaction that will transform the way we transfer value, not just in the US but world-wide.

The danger was that the land that introduced the first universal credit card back in 1950 had done such a good job of meeting consumer needs that it would be hard to get people to adopt new methods. It took a number of different initiatives of a decade or more to finally get this to happen.

Mobile Payments starts to take off at last

Did you know that mobile payments in America are expected to grow from $3.5b spent by 16 m shoppers in 2014 to a massive $27.5b by next year? Even then this will still be just a fraction of the $4.3t retail store payments made in the US. The common man or woman in America is seeing changes in the way they pay for tolls on the roads and how they pay each other, as well as pay bills and shop online.

Digital wallets – not there yet, but on the move

For the longest time it seemed as if this would not happen, especially after the strong push towards digital wallets in 2011 seemed to fizzle out. However now it seems this was simply the calm before the storm. Each side has reinforced itself as major battle commences to win hearts, minds and mobile wallets, but this time I believe what happens in America will not stay in America.

The US market becomes NFC-ready

Finally this year we have seen important moves towards new forms of mobile payments vi a NFC, QR Codes, MST, BLE and more, with a reported 70% increase in mobile commerce in the US since 2012.

On the one hand US POS is finally beginning to support EMV, as the October 2015 deadline looms. As the difference between the cost of contactless and non-contactless terminals is not vast, retail outlets are increasingly becoming NFC-ready.

Retailers look for online and mobile innovation

On the other hand top US Retailers have finally realised that the future of their brands depends on a golden braid of inextricably woven marketing and payments campaigns that rely on ever deeper market understanding to help get, keep and grow their customer base.

As in other countries, transport is becoming one of the first applications for consumer adoption of digital payments, as existing methods for paying get removed and replaced by new ones. Online payments are now widespread, but fear of loss of identity and security breaches still leaves a gap to be filled, causing a lot of focus on biometrics, authentication and fraud prevention. However for adoption to deepen across America the real driver will be offers and marketing campaigns.

Marketing and Payments: Perfect Partners

Here is where mobile payments comes into it’s own, with a unique appeal with respect to marketing. By 2016 over 196 million smartphone users become accessible to persuasion to buy in new ways. When Amazon was founded on July 5, 21 years ago (Happy Anniversary Amazon!), Jeff Bezos and team showed that deep understanding of what we want can actually be used to help us in finding what we’re looking for without proving overly offensive. Now we are at the cusp of a new revolution, as every possible route is being explored in pursuit of a new American Dream. The subtlety with which the new marketing capabilities are used will largely decide how quickly people adopt new payment methods.

Loyalty provides an incentive for change

Today store-issued credit cards and store rewards are being added to Apple Pay, Google Android Pay. Soon Walgreens hopes their 80 million members of Balance Rewards program will be able to use loyalty points with Apple Pay, and all eagerly anticipate smartphone, device and watch payments to increase. The new mobile payments methods will allow consumers to save on their shopping, by directly saving with the use of loyalty rewards.

American providers look for world markets

But this time American providers have a much larger canvas. If they get the digital loyalty-payments nexus right, there are other markets in a high state of readiness across the Atlantic that can help their brands grow. Apparently I am not the only one to leave my loyalty card behind, on the day when I find a retailer has one of their nicest sales on - in the UK unused loyalty cards reportedly cost us shoppers an estimated £5.2 billion.

The future – real time payments

But as I have said before, the real value comes when channels are made to properly work together, and this is what is starting to happen in the US. On my recent visit a short while ago I found payments really getting embedded into very interesting user experiences thanks to growing investment in FinTech.

Consumers and merchants are likely to see a lot of value-add over the coming months and years as Americans increasingly declare independence from cash payments, especially if payments can become real-time, something that has proven elusive until now. Importantly, it will not be long before the ecosystems grow beyond the US, and partnerships that are under formation now are likely to be important at least in the first phase of expansion.

Happy Independence Week America!

Mobile wallets – helping consumers enjoy life more in Canada

Posted on July 1, 2015 by Charmaine Oak

In honour of Canada Day today, I fell to thinking about how mobile payments may be able to help folk lead happier lives, for instance by providing more opportunities to enjoy things exactly the way we like them, through the great things technology can now do for us.

Chances are if you live in Canada you will probably already be waving you card to pay today, as I do here in the UK. Thanks to debit payment network Interac having set a 2012 deadline for adoption of Chip-and-PIN for merchant liability shift, Canada pulled way ahead of the US. By February 2014 over 75% of major retailers already accepted contactless payments, with just 2% of retailers doing so in the US, leading Ben Myers to argue Why Apple Pay Should Have Launched in Canada First.

You are probably less likely to pay using your mobile phone though from what I hear consumers already do so at McDonalds, Loblaws, Starbucks and others. Now with the re-launch of Suretap mobile wallet a few days ago, use will hopefully broaden, as the ecosystem includes 5 mobile operators, 38 credit cards and 30 gift cards, with support to NFC as well as barcodes. Recently Humza Teherany wrote an interesting post on the status of mobile payments in Canada.

So the question is will Canadians be tempted to pay with their mobile phones at last? I believe this depends on how the services are positioned to help the merchants and consumers. Being a foodie, here is an example that appeals to me, to speculate same time next year how things might look, if all goes well.

As we all want what we can’t have, it caught my eye that Burger’s Priest has a special, succulent offer just for Canada Day today. It is a surf & turf Confederation burger, with all the good things I associate with Canada: topped with Ontario-farmed bacon, Nova Scotia lobster tail, and Quebec maple syrup.

But what if you preferred just the surf or just the turf? Or more importantly, what if you’d love a burger but are on a low salt, low fat or gluten free diet? One of the huge problems the food industry has is catering to the different preferences. Sure we can state a few preferences when we drive by, but to save embarrassment of holding up a queue of cars I expect many consumers may prefer to simply stay away.

Here is where mobile wallets such as the TD Bank/PC Financial Ugo or Suretap, now preloaded on Rogers devices could come into their own, hopefully before Apple Pay captures market in Canada. Once you’ve ordered and paid with a mobile wallet, it should be quite easy to say “Same again”, order ahead, pay as you please and get your burger where you please, when you please and how you please. The new processes could do so much more. And if it is your birthday, you may even be surprised with a little something special – picture that!

So perhaps come July the 1st, 2016 more people may be enjoying more of what they like, while still staying healthy and fit. Anyway, all this wishful thinking was just a prelude to wishing Happy Canada Day to all our friends north of the world’s longest land border. I may not be able to share that burger with you (yet), but we can raise a glass of bubbly together!

Mobile Payments in Europe: State of Play and Future Outlook

Posted on June 26, 2015 by Charmaine Oak

In this interview Christian von Hammel-Bonten shares insights on how he sees mobile payments develop across Europe, from his key position as EVP at Wirecard AG, a technology and financial services payments company that is a leader in both acquiring and issuing business across the region and world-wide.

Christian thanks very much for your time today. Could you please give us some context of Wirecard and what you do?

Simply said, Wirecard is a global technology group that supports companies in accepting and issuing means of electronic payments. We offer services in all roles of the payment value chain: issuing, issuing processing, payment service provider, acquiring and acquiring processing. Group operating activities in our core business are structured into key target industries: Consumer Goods, Digital Products, Travel & Mobility and Telecommunications. The idea of these verticals is to understand needs of our clients and deliver focussed solutions. In my current role, I am in charge of the Telecommunications sector that includes all products & services related to mobile payments.

Europe has historically had the longest history with pursuit of mobile payments. From your experience over the years how has 2014-2015 differed?

In past years, NFC was always a topic that was discussed but had not seen solutions being commercially rolled out. This changed in 2014-2015. We’ve seen launches in mobile payments, with Wirecard involved as well. Bank activities have increased with cloud based payments involving Visa and MasterCard. On top of this, the launch of Apple Pay in the US and now announced for UK, has increased awareness and interest on the merchant and consumer side.

Would you say that mobile payments is converging or diverging?

I believe we are at the early stage of Mobile Payment and as I look at the early activities in Fintech we’re at the beginning of a disruptive era. When we started Wirecard 16 years ago e-commerce was below 1% of retail sales, no one would have predicted the size of retail sales online today. Looking back I compare it with the trend relating to digital cards.

The activities and discussions focussed too much on the term mobile payment. It is digital payment that may be delivered through the mobile but other device types such as wearables may be equally promising. One thing that is clear is that the physical element, namely the plastic card, increasingly disappears – it will be transformed into another form factor, digitized credit credentials.

But how would we extract cash in that case?

In a number of European countries we observe initiatives that are resulting in cash fading out. Take Sweden, Denmark and UK for instance. In my opinion, cash will not ever disappear in the near future but the majority of payments you receive will increasingly be digital payments going forward.

What are some peculiarities you observe in Europe versus your other activities in other regions such as APAC, UAE and South Africa?

Developments in E-commerce across all these regions differ, and even within Europe, countries are at different levels of maturity. E-commerce in Europe as a whole is highly developed, as we enjoy high levels of mobile coverage of good quality. Infrastructure is essential, of course, for the success of digital payments. Communications infrastructure becomes the highway for retail stores and effective communication networks are a pre-requisite.

Another factor is payment culture in various countries. The use cases and consumer needs differ. If you look at Africa it’s not NFC mobile payments that is needed, rather it is mobile money because of the lack of banking infrastructure. Across APAC again it differs widely. In Singapore there is a high penetration of cards and terminals, but in nearby Philippines this may be completely different. Similarly you can compare Germany and UK on these parameters. In Germany ELV solves merchant problems and consumers still prefer cash.

Success in payments comes from understanding the needs of players in all parts of the ecosystem. Paying with a mobile device may not be needed as a tool for financial inclusion where we have well-developed banking infrastructure, but in Western countries and world-wide, crowd funding, P2P lending and other services are rising up to meet unique consumer and business needs.

M-Pesa recently launched in Romania possibly as they identified a larger proportion of under banked, largely based on cash. This may be a viable solution in the Romanian market but not suitable for UK or Germany. Although there is a short distance geographically between European countries, there can be big difference in payments.

Could you share some insights from your work on mobile wallets such as with the BASE Wallet, Deutsche Telekom MyWallet, Orange Cash and Vodafone SmartPass?

We see huge differences in European markets that cause different states of readiness. In UK we have markets ready for digital payments, but Germany is somewhat behind in this respect as payment culture is different.

A good way to understand this is to study the number of terminals and the number of cards in each European market, and trace the growth of contactless in POS. Apart from UK, Switzerland is also heavily contactless. In Spain too consumers have embraced contactless payments. In other countries we have to be patient until the necessary relevance is established on the consumer side.

So we have to be somewhat patient but no one contradicts that in a few years the majority of payments will be made digitally – with a smartphone, wearable or other digital form factor.

Is it digital natives who are installing these apps or others interested as well?

It is really both. The ones who adopt are generally people who have an affinity to the service, but also towards technology. If you use your mobile phone today only to make phone calls you’re not perhaps someone who would adopt mobile banking and mobile payments.

Generation Y use smartphones heavily and rely on mobile banking for managing family finances. We also see that males are more predominantly early adopters of the new services.

Would you say there is a growing importance of the mobile number in all of this?

Yes, Certainly. Like the email address is already more important today for your communication than your postal address is, the mobile number is already a personal identifier for many activities.

The mobile number has the potential to act as a proxy for many underlying financial services. Take for example P2P transfers. It is challenging to remember bank details, more so with IBAN, so the mobile number becomes a link to your bank details in successful solutions such as Pingit, Paym or MobilePay. Also, you don’t have to remember phone numbers as the phone book does this.

Do you see SEPA as an instrument for achieving more consistency in payments across Europe?

At first people took some time to be convinced but today SEPA Credit Transfer and SEPA Direct Debit simplifies things for people making payments across Europe. It is a future enabler for a number of bank services and if banks want to stay competitive they need this form of interoperability.

The only thing missing is instant payments, and I hope this will come, European-wide. However banks are finding it difficult to set something like this up on their own. Really it should already have been made available across Europe, as UK already has Faster Payments. There are a number of banking innovations in the UK such as Pingit, Paym and Zapp (expected) and these are greatly facilitated by real time instant payments.

A good financial and payment infrastructure is crucial for supporting businesses and consumers. It is as important as a good road infrastructure and it is the prerequisite for innovative digital services.

Yes, I see how this could help to address some of the disruption to banks from FinTech, but also enable innovative new services from new entrants that compete with the banks. Speaking of this, Wirecard launched the Wirecard Smart Band based on HCE – could you please share a bit about your experience with HCE?

HCE or Cloud based payments has greatly increased the possibilities for banks, telecommunication companies and others to offer mobile payment services. In the past, almost all such projects depended on hardware-based elements such as the SIM and embedded secure elements (eSE). However, something that is hardware based has an owner who seeks control and finding collaborative models between all stakeholders delayed or prevented the launches of mobile payment solutions.

With HCE/Cloud-based payments however, such collaboration is less essential, which is its best advantage. Financial Services groups across Europe are looking closely at this technology. No solution I’ve seen is as convenient in being able to enrol users and deliver digital cards to them. Why should we buy gift cards in supermarkets, when we can just send them digitally and use gifted money through apps?

I believe the distribution of cards is about to change, and plastic cards will increasingly disappear as we have digital cards, and not just one each!

What does Wirecard do to help companies, say a UK-based retailer wanting to move on this opportunity?

Wirecard offers two different approaches. Firstly we help our partners to build up new card portfolios by issuing cards, irrelevant of the form factor as an issuing bank with licences for the SEPA region.

Secondly, we enable our partners to digitise their existing cards and it does not matter which NFC approach – SIM, eSE or HCE – clients prefer, we are technology-agnostic and support them all. So with respect to retailers, we enable them to issue digitized cards to their customers as part of their loyalty solution. This allows retailers to offer their customers a convenient and fast option for paying, in order to simplify overall checkout and at the same time leverage additional opportunities to engage with customers.

Do you also provide an app if clients don’t have one?

Yes, we have built a flexible, agile platform to cater to different environments. We offer to integrate through Software Development Kits (SDKs) with existing apps or we can provide a customized app.

All apps of our live solutions including Orange Cash and Vodafone SmartPass have been customized to meet the client’s branding and functional requirements.

What is the best path to interoperable mobile payments across the EU, for instance for a UK customer using a smartphone to pay in Spain, and what’s the outlook for 2015 and beyond?

Right now existing solutions are based on Visa and MasterCard specifications and may be used not just across Europe but also world-wide.

Your example is an interesting one, as travel is one of the biggest drivers for prepaid in the UK market. If you are going to Spain, instead of buying a card you can just go online, register and get your digital / virtual card, top-up and start to spend.

This is a good example of how we see the future of cards. Digitization started and progresses in many areas of our life and payment cards will be clearly affected as well. Short term we will see the first big success of a mobile payment solution with the launch of Apple Pay in UK in 2015. This will spur all activities around mobile payments in Europe and bring us closer to a world of digital cards and a cash-less society.

Thanks very much Christian, it has been very useful to gain your insights on mobile payments in Europe and I take this opportunity to wish you the very best for the future.

Christian von Hammel-Bonten is Executive Vice President Telecommunications at Wirecard AG. Christian has almost a decade of experience in the online payment industry. From 2002 until 2009 he was responsible for Project Management at Wirecard. Before returning to Wirecard in October 2011 Christian worked as Senior VP of Product Management for Clickandbuy, a company of Deutsche Telekom. In his current role Christian is responsible for the Telecommunications sector at Wirecard.

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

The Future for Direct Carrier Billing – Views from the world leader

Posted on June 18, 2015 by Charmaine Oak

In this exclusive interview with Jon Prideaux, CEO of Boku, we explore the potential impact of recent highly important mobile payments announcements on Direct Carrier Billing (DCB), which has so far been one of the most successful means of mobile payments, putting the charges through the mobile operator bill.

I posed key questions on how we may see DCB evolve, to obtain Jon’s insights, from the perspective of a FinTech disruptor that is today a world leader in DCB. Jon reflects on key trends and shares insights and expectations on how the market might evolve over the next few years.

Jon, I recently heard you speak of “payments moving into the background”. For me Boku has been one of the first to achieve this, having since 2009 offered a great way to do this, but how might this change going forward, with all the new mobile payments services recently announced?

The basic philosophy is if you are trying to promote a new method of payment, it needs to do something additional both for consumers and merchants. I believe Payments to be in the category “If it ain’t broke don’t fix it”.

Here’s why what we do works - as more people have phones than bank accounts, and it’s easier for you to remember your mobile number than other details, we remove friction in payment and allow more sales. As merchants sell more, although Boku may not be the cheapest acquiring method, we justify our role by facilitating outreach to new customers and helping customers check out more easily.

But with the impact of lower interchange rates in Europe making card payments cheaper and availability of new bank based payment solutions, are merchants going to think “It is broke”, and they can find cheaper new ways to pay?

Ours may not be the first payment option, but certainly Facebook, Spotify, Sony and our other merchants find that by adding Boku to their suite they sell more. Our merchants could see conversion rate increase by as much as 20%, and that’s the advantage we strive for, to keep ourselves relevant. If a disruptor tries to compete just on price, this fails as incumbents have scale. A disruptor must compete on “sale”.

I see Boku as a ubiquitous single convenient acquiring payment gateway or hub between merchants and mobile operators. But is Boku looking to be more than this, has this changed?

No, this has not changed. An essential part of our value is we connect into mobile operators. While Visa and MasterCard are networks that connect merchants to banks to help them sell, our job is similar, but we connect merchants to mobile operators, to help them sell.

As customers of mobile operators are different and more numerous and geographically distributed, we provide a unique value to merchants.

Where do you see this moving over the next 2 years?

Perhaps the best way to consider how things are likely to evolve is to reflect on the recent past, where I believe there have been three main areas of change.

Firstly, it’s about the technology. Telcos do not have systems as accurate as banks. What we now have in place is a system that is important in terms of creating an enabler for merchants. This facilitates charging precise amounts, authorising, reserving amounts, reconciliation, refunding and this opens up a mature enabler for new merchants.

Secondly, mobile operators differ in each market in terms of pricing expectations, Brazil, Indonesia, France, UK, Japan all differ - but in all of those markets pay-out levels to merchants are going up, allowing more merchants with lower gross margins to participate.

Lastly, it is to do with regulatory change. With our E-Money license we already have services live in 5 European markets, and this will see further expansion.

So we started with digital content where there was no distribution cost, but the pay-outs were initially not good enough for services such as music. With subsequent changes, we can now sell content from Spotify and other merchants.

As the three trends continue to further play out, in addition to digital you will see charges for real world transactions such as parking, coffee and bus tickets. This will become one of the ways to pay for ANYTHING you are purchasing – one will be card, second will be PayPal and third will be some kind of carrier billing, normally provided by Boku.

Charging to mobile phone bills will become normal in transportation, ticketing, coffee and fast foods.

With regards to the new Airbnb, Uber type FinTech entrants, what are your thoughts on your ability to support them as Braintree and others do today?

At one level we ourselves are a FinTech company. There is a limit in terms of the amount people are prepared to put on their phone bill. Our ambition is not to be the dominant payment method for all purposes.

Braintree will continue to embrace a growing suite of payment services including cards and banking. I would like to think companies like Braintree and Stripe will add carrier billing to their portfolio. We’re not far away from being a desirable addition to their ways of charging customers.

That sounds very interesting. So the whole FinTech and API trend could work in your favour!

Sure, we are offering a single API and are connected to all mobile operators. Although we make it look as if it’s the same, under the hood it works differently. In the next generation with digital technology enhancements we are trying to offer a single card like API that removes friction for merchants, and attracts more categories of merchants.

You can charge for physical goods too?

Yes, in many European countries we operate an e-money product and can do so, although the consumer experience remains similar to carrier billing. Under the hood the consumer is buying e-money and using it to buy things via their phone bill.

Is the limit that can be charged based on regulations or is it more of a policy decision?

Under the extended regulatory structure, in the e-money world it is the decision of the carrier. Mobile operators have limits in place for risk protection reasons. Also people would not want large amounts taken from their bill so this is typically a low amount. In practical terms the limits are the same whether under our e-money license or not, and are currently set to £30 in the UK.

Could you share more on your partnerships and new services?

We currently work on behalf of a number of important merchants including Spotify, Sony PlayStation across key markets in Europe, Facebook and a number of games related clients.

In terms of our plans, we’re currently working towards bring on-board a number of important and ground-breaking merchants and a number of different projects are expected to launch in the second half of this year.

In 2014 your whitepaper projected a potential market of $6b for DCB by 2017. Do you see this changing in the light of recent developments in contactless payments and mobile payments?

If anything I think the market is likely to be higher. We’re seeing increased interest from new merchants due to trends in technology, regulatory and pricing to take this to new levels.

What changes are likely over the near future, in the light the evolving role or mobile operators in payments?

There is a lot of change. Mobile operators previously launched billing to support ringtones and downloads and then Premium SMS. Both those markets are in terminal decline and so a big chunk of their revenues is shrinking. On the other hand, the direct carrier billing side is growing and we can bill without sending SMS around.

What about services such as Samsung Pay, Apple Pay, Android Pay and others? We also see the various new Checkout services. I can visualise each catering to a sphere of their interest – so for instance Samsung could turn their focus to TV-related payments. Is this a concern for you?

Is it of concern - No, although I agree this is a particularly historic period of change, and these are all significant developments. In the UK context, and indeed across Europe there is a lot of interest in innovation and contactless payments is exploding across the region. These services are however largely reliant on bank-based initiatives and banked customers. Our service is meant for those who do not have a bank account, or who want to buy and charge to a bill. Who will co-operate, who will compete remains to be seen. We could be a source of funds across a number of the emerging services, to sell more stuff through this charging mechanism.

I expect that in the face of rapidly increasing fragmentation, you could represent a source of stability for consumers and merchants?

Sure, we certainly hope so. Most of the time it may not be a Boku logo but a picture of a phone, and it’s so easy for people to visualise how the payment works.

We spoke about some of the opportunities, but how about the risks for mobile operator initiatives, as a number of ambitions towards payments have failed?

Yes, it’s hard to find a mobile operator joint venture that’s worked. The fact is banks are well entrenched and it’s been hard for MNOs to compete. Mobile operators have certain core assets in terms of the infrastructure, but they have a bigger massive advantage in terms of customer base. Enabling existing customers to pay using the bill is something that really works for our mobile operator partners.

In terms of risks, a key concern could be in terms of regulation. Mobile operators don’t want further regulation as there is already a great deal from telecom regulators. Voluntarily assuming new forms of regulation is tough and that’s where we come in, to help monetise existing customer relationships to help to manage that area for them.

What do you think about proposed API access to bank accounts, new digital banks?

This is about opening up to more competition and I see this to be a welcome move from the regulator. However as far as Boku is concerned we are here to provide merchants access new customers, not really banked adults, so we stick to our task and make what we uniquely do successful.

How is the UK market different to the rest of Europe, especially in the light of recent moves towards mobile payments and also the focus on FinTech?

UK is an interesting and highly competitive market. There are more enlightened, progressive mobile network operators. Merchants have more options than they could want, comparative to rest of Europe. Germans prefer debit cards, French may use cheques a lot, and each European market has its own characteristics.

Jon, this has been very interesting. Thanks very much for your time today and wish you the very best for the future.

Jon Prideaux is CEO of Boku, a company that has since 2009 created the standard for online payments using your mobile phone, making it easy to pay for digital goods and social experiences across the web.

Jon Prideaux has a wealth of knowledge of how we pay, having held key roles at Visa and helped in the migration to Chip and PIN, when on the Executive Committee of EMVCo.

Charmaine Oak is Author of The Digital Money Game and co-author of Virtual Currencies – From Secrecy to Safety

Join me on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn

How Android Pay changes Mobile Payments–and why you should care

Posted on May 29, 2015 by Charmaine Oak

Now that details regarding Android Pay have emerged, I thought it would be interesting to contemplate on how key mobile payments “ecosystem builders” as I term them, stand with respect to the on-going mobile payments game. Here is the State of Play in the Mobile Payments Game, post Android Pay

The latest move is Google’s announcement of Android Pay at the Google I/O conference today. This allows customers to pay at retail stores by simply unlocking their phone, without the need to open an app, in a “Tap and go” experience. Loyalty programs and offers can be applied at checkout. Also the contactless terminal receives not just the payment details but also loyalty points and offers.

Assuming things go to plan as per announcements, here are my thoughts on where players are positioned.

The Prize

Over 2014 to 2016, the mobile commerce market is set to grow by a factor of five. This is 10 times faster than the E-commerce market. But by 2016, with less than 500 million mobile payments users, and a market worth $600 billion there is ample scope for further growth. PayPal recently announced that while online and mobile shopping accounts for $2.5 trillion in annual retail sales, with the convergence of the online and physical world, a unified world of commerce could be worth $25 trillion, resonating arguments I made in my book “The Digital Money Game”.

Key Players

The current scene of the battle is playing out in the US with heavy-weights placing large bets on paying by mobile phone. Big players currently making investments include Apple, Google, PayPal, Samsung, Facebook, Visa, MasterCard, MCX and others. Also there are several mobile payments providers who have obtained some traction in the market and may now be up for grabs.

Some have folded their hands – Softcard (formerly ISIS) was recently acquired by Google, as an important precursor to their current play, as now handsets from AT&T, Verizon and T-Mobile can come pre-loaded with Android Pay.

Key Enablers

Once an area dominated by mobile operator SIM-SE standards, the dam has burst and we have a number of possible technologies emerging. Samsung’s embedded approach recently announced is similar to eSE introduced by Apple for ApplePay and both work with tokenization services of card schemes. HCE and tokenisation hybrid models first introduced by Google for Android Kitkat (4.4) have since resulted in the launch of a number of pilots around the world. Meanwhile QR Codes have seen good traction, being behind some of the best adopted services, such as the Starbucks Wallet.

Now Android Pay says their service is secure as they won’t send your actual credit or debit card number with each payment. Instead a virtual account number represents the account information. Android Device Manager is to allow consumers to instantly lock their device from anywhere, secure it with a new password or even wipe it clean of personal information.

Country Positioning

Apple Pay is still largely US only, although reports have emerged from Singapore of people successfully using their Apple Watch to make payments there. Android Pay has a huge potential in terms of reach but for now nothing much seems to be clear in terms of when it will launch outside of the US. While Apple benefits from premium user status, in terms of sheer numbers , once the gameplay extends out of the US, Android is better placed in terms of penetration.

US is pulling ahead, but China, India will not be far behind as they develop apps to meet the requirements of the US and then seek to bring out cheaper and more appropriate services for Asian and emerging markets. Europe though risks being left behind in all this, pity, with it (arguably) being the birth-place of e-money.

Customer Adoption

Recent reports claim $2 out of every $3 spent using contactless payments across Visa, Mastercard, and American Express were being made with Apple Pay.

PayPal now with Paydiant seeks to challenge this thanks to Paydiant’s earlier work with MCX. This month PayPal reports it processes nearly 12.5 million payments for customers every single day.

Now Android Pay promises to offer better ease of use than Google Wallet, benefiting from support for fingerprint authentication in Android M. Also with pre-loaded handsets the only challenge that remains is having led the horse to the water, to actually get it to drink: as several steps will still be needed before customers actually make their first mobile payments transaction.

Samsung Pay though claims potential acceptance at 30 million merchant locations worldwide, with near universal acceptance thanks to Magnetic Secure Transmission (MST) magstripe emulation platform, LoopPay.

Reactions from the rest of the ecosystem

Merchants are signing up to many of the new services, whilst also engaged in MCX and so far tending to favour the QR Code approach.

Schemes are not taking sides. Visa, MasterCard, American Express and Discover have announced support to Android Pay, as also with other services. In general schemes are keen to support all options, something that brings joy to their investors.

Mobile operators are on a back foot, but regrouping – more co-operation, greater focus on transport (such as Mi-FARE) where they still hold an advantage, and a continued emphasis on security – though biometrics, tokenisation and the passage of time will leave this argument somewhat weakened.

For now banks can play with the different providers, but where will they invest and how long will it take them? The banks in the US are moving quickly – USAA and US Bank have already declared their support for Android Pay. Citibank had been quick to provide the support needed by Google Wallet.

Regarding processors, for Android Pay Google is partnering with Braintree, CyberSource, First Data, Stripe and Vantiv to make integration easier. There is a huge opportunity from tokenisation which is up for grabs and processors need to also back every horse, while continuing to build the required infrastructure.

Outlook for Mobile Payments

This further confirms the growing fragmentation, with potentially myriad implementations as service providers seek to navigate a murky minefield of patents relating to mobile payments, and still bring out something that helps maintain some control over large, desirable customer segments.

What is quite clear though is that massive disruption to existing business models is now well and truly on the cards. Current retail, banking and payment systems must consider their roadmaps as payments becomes invisible, embedded, transparent and often free. The future of payments is in the cloud, but could this result in massive “honey pots”?

When will Android Pay, Apple Pay, Samsung Pay and PayPal’s newest services launch across Europe, UK, Canada, Australia, Poland Germany, Singapore and other countries ripe for these services? And where does Android Pay leave Google Wallet? A lot of important, yet unanswered questions that will become clearer in the next few months perhaps.

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

I'm speaking on “Role of mobile in omni-channel payments”

June 10 at 13:30 at PayExpo 2015 Mobile Money Europe, London.

Come say Hello!

Apple isn’t interested in payments

Posted on May 19, 2015 by Charmaine Oak

Shift Thought recently completed a set of interviews where we spoke to experts from a range of industries and parts of the world to get their gut reactions on the state of the payments industry and what to expect next.

In this post I share highlights of my discussion with Roy Vella, Digital Services Evangelist and Entrepreneur with a rich experience across a wide range of organizations in EMEA and the U.S. Roy reflects on what for him were some highlights of 2014 and shares his thoughts on what to expect this year.

Roy, thanks for your time today. I would like to start by asking what, for you has been the most innovative service you’ve seen over the last year, at the intersection of mobile/ online and financial services?

For me, Apple Pay has been the most significant. Once again, they did what they do so well. They take something messy and refine it. Just as they did with iPods/iTunes and the iPhone, they’ve created a great customer experience by making a few key changes. Apple tends to be able to take things off the shelf but then simplify and get the experience right.

When they launched the first iPhone, arguably they did it with what could already be bought off the rack in China. It’s not what they deliver but rather how they put it all together, to make it simple, intuitive and delightful. That is the innovation! It is not making something radically new but it’s making something truly simple.

But in order to make it simple, they’ve managed to bring together a lot of different technologies for the first time, to allow a simple “press the button” experience.

True, they had to bring together Passbook, Touch ID, NFC capabilities, encryption, tokenisation and more. Apple is probably going to kill the business proposition of a lot of providers accidentally, even though they don’t actually care about payments. All they care about is bringing together those three things that you, I and everyone need before we leave home: your keys, your wallet and your phone.

Apple simply wants to put it all together. They want to get rid of your wallet. And they’re making progress on this with Apply Pay, the Apple Watch, with their work on access to hotel rooms and security. I’m sure they’re talking to major hotel groups, luxury car manufacturers and others, to make big changes in how people gain access to all sorts of places and things.

What are the pain points that providers encounter when they try to bring out Payments Innovations?

What they find difficult is what Apple does so well. It’s essentially the battle of getting people to adopt something new. That is what Apple is good at – changing consumer behaviour, getting people to change the normal way that they do things.

For any infrastructure play the most difficult thing is that most people don’t want change. And innovation is hard because key stakeholders, regulators and others also often don’t like change.

Actually people often talk about achieving “mainstream adoption” but that’s not what concerns Apple. They want those premium customers. That is their segment. The top 15-20% max really.

But if Apple is solving for the 15-20% premium customers, who is solving for the rest?

Before Apple Pay we had similar solutions on the Android, 9 months to a year earlier! Google, Samsung, PayPal and others offered quite similar services as Apple Pay. But did anyone take notice? We did not see them move the needle – then Apple announces and boom, consumers sit up and we have change.

Who for you are the winners of 2014? Which categories of players impressed the most?

I don’t think mobile operators as an industry were able to do that much. Sure, we’ve heard of various partnerships between banks and operators or other categories. However it was not ground breaking innovations. I believe that both banks and mobile operators have taken a back seat to the big tech services, GAFA, at this point. And they’re all innovating rapidly.

The other group that’s made significant progress over 2014 is the regulators. They’re no longer spending all their time protecting the incumbents. They want more competition, entrepreneurs and a better deal for consumers. This is playing out across the US and Europe, and also worldwide.

Talking about regulations, what’s your opinion of Bitcoin?

I feel that Bitcoin tends to be misunderstood. It is a currency of sorts but more importantly a protocol, the blockchain, but often people are fixated on the first and don’t quite get the second. Reliably moving value between parties, without a middleman, is a brilliant innovation. It is not all about money. It could be any object of value or ownership – it could be a birth certificate or a lease, for example.

No matter what anyone may think, cryptocurrencies are here to stay. It’s impossible to stop them. Saying that you don’t like bitcoin or the blockchain and it should be stopped is like saying your don’t like SMTP or HTTP… it’s merely a technical protocol for value transfer that now exists and won’t simply evaporate as such, even if regulators attempt to quash it.

Yes, banks have not made it easier, with their massive FX scandals and other issues. Do you see this pushing people further toward P2P and innovative new entrants?

Absolutely! Take the example of Transferwise. I think they’ve done a brilliant job shining a light on fees and making things more transparent. Ultimately consumers care about how much they pay and what their receivers get in terms of currency. Transferwise states that in terms of what you put in and how much you get out it’s hard to get a comparable rate. Significantly, Transferwise has gotten their marketing and message right… it resonates with people.

Roy, from your experience at PayPal, it would be good to hear what you think about the PayPal/eBay separation – how’s that going to work out?

We were talking about this way back in 2004. It is something that had to happen, but back then they needed each other tremendously. However staying together is holding them both back now. I know they will be better apart. It’s going to be good for PayPal, sure, but it’s also going to benefit eBay. I think individually they could each have the same valuation as they have together.

You talk about the digital wave and how that is subsuming things - What really changed over 2014 thanks to mobile?

I think 2014 has been all about smartphones achieving deep, mass penetration. This is not just in developed countries but also in the high-growth emerging ones.

What do you foresee for 2015? What’s most exciting?

I think the chip is going into everything. Having all these devices become smart, there is an early adopter phase that is quite exciting. It is not all about payments. Payments must be transparent, just an enabler and it must make everything simpler for consumers and merchants.

Thanks Roy, it’s been a pleasure speaking with you. Wish you the best for 2015 and beyond!

Roy Vella is Managing Director of Vella Ventures Ltd where he offers strategic advice as an expert in the Fintech industry.

Roy is special Advisor to MEF and on the board of several companies. Notable clients include Visa, Vodafone and Lloyds.

Previously Roy was Group Executive, Director of Mobile Financial Services for the Royal Bank of Scotland Group. Roy also has rich experience from his work at PayPal Europe as Director, Mobile Payments for Europe and in Business Development for PayPal Inc. See more at linkedin.com/in/royvella.

How one Fintech start-up is rolling out mobile payments services across Europe

Posted on May 12, 2015 by Charmaine Oak

As Fintech firms continue to make breakthroughs and disrupt banking and payments services around the world, I am delighted to share the perspective of someone at the forefront of innovation in Europe.

Cashcloud has received a number of awards for its’ innovative payments service, most recently winning the Fintech Innovation Awards 2015 held here in London. I was therefore delighted to have a chance to get their story from the man who is behind much of the success, Olaf Taupitz, Managing Director of Cashcloud SA.

Olaf, Congratulations on winning the Fintech Innovation Awards 2015. Could you please give us an introduction to your company and services?

I look after all the operational entities of the Cashcloud group of companies. We have our headquarters in Switzerland. Cashcloud SA in Luxembourg is the unit through which we manage the relationship with partners & customers. We have an important operations base in Germany and Romania which has agents for customer service. We also have near-shore development teams in Ukraine and Spain.

So although we have just 35 people on board, it is an international setup focused on European markets. My partner Sven Donhuysen was the Founder of the company in 2012. By the end of 2013 we launched in the first 4 European markets where we have over 100,000 customers and over 500,000 downloads of our app.

We are proud of the award you mention, that we recently won in London. This was the third award we received in 6 months with wins in Switzerland (Nov 2014), Germany (Dec 2014) before that. These have been encouragements for us to become better and better, and provide us motivation to tackle the host of issues we as a start-up face.

Could you tell us a bit about your products, services, markets and segments, and what is behind the recent awards you’ve received?

What was particularly appreciated is how easy it is to use our application and the fact that we combine a number of things, not just payments.

Our primary segment is the “native digital” youth market, who can transfer money easily between each other, make payments at POS through NFC stickers and earn cash credits in return for buying specific goods, sharing information or inviting friends. Coupons and cashback activities have been launched in Germany and Spain.

We allow customers to easily transfer money between friends through a simple message. They can pay at POS using NFC stickers and will shortly have cards with MasterCard acceptance around the world. And importantly, people can obtain offers and bonuses for using us through Cash Credits.

Why did you decide to get into mobile payments, and how did you select the countries you’ve picked (Germany, France, Spain and the Netherlands)?

Regarding the motivation to enter mobile payments, I have a background in Telecoms and Finance and was convinced that we could make a strong play through a Telecoms+Finance+Card offer, especially as the smartphone kept getting cheaper.

Through the mobile Cashcloud eWallet we aim to offer this: a means for people to pay online with no need to enter personal data, good control over their transactions and special incentives for using our service to make payments.

Which of the four European countries showed the most take-up of mobile payments?

So far for us Spain showed most adoption. With NFC stickers, there are more NFC acquiring terminals there. As you know, card usage itself is not as popular in Germany, which is a cash-driven market. Netherlands is not bad but we don’t promote so many activities there - it is a good test market for us.

So right now if I was to go on holiday from UK to Spain, could I use your service to pay in Euros?

We primarily issue the service to citizens of the countries in which we’ve launched.

However people could receive a secondary card or sticker up to the limit of 2,500 Euro a year, beyond which KYC requirements apply. People can use the MasterCard to pay everywhere in the world.

How easy has it been for you to expand to new countries in Europe? Any plans to go outside Europe?

We had to start with one currency first – Euro based and chose 3 big markets and one small. Later this year we hope to investigate launch in other Euro-based countries as well as in UK, Poland, Romania and Switzerland in their currencies.

Going outside Europe is not on our plans right now. In our future work, we look forward to enabling remittances as well, especially as we enter the UK market.

How does your business model work, and how have customers reacted to your Freemium/Premium pricing?

We’re not about making money from payments itself. With the new rulings across Europe we anticipated that transaction fees, interchange would drop, merchants want to pay less.

What we are able to do is to obtain aggregate knowledge on consumer trends and profile typical customer shopping behaviour. This is very important for the emerging campaign management and advertising models.

What key technology decisions did you have to make since 2012 and how have these contributed to your success?

Two key decisions we made from the start have proved right, and helped in our success. Firstly we decided that our service must be mobile and supported Android and iOS from the start. Secondly, from the start we focused on building a platform – an online API that would help us integrate and be a part of other ecosystems and use cases.

What is your view on the competition especially Apple? How would a startup service fare against such global competitors?

Actually we welcomed the Apple Pay launch as it supported the NFC solution. We are happy to see the success in the US. We anticipate it will take longer to launch in Europe, perhaps it could take another 12 months for the pieces to be put in place.

What’s been the most difficult challenge for you so far?

I’d say we found it easy from the issuing side, but it was the acquiring side that is harder for us to control. As the acceptance network rolls out across Europe we expect this to be resolved.

Secondly it has been a challenge to build strong drivers for adoption. This is the problem faced with mobile payments in developed countries where people already have good banking and card services. I think the role of the mobile phone as an authentication device is now being acknowledged and we expect better take up due to this.

What are your plans for 2015 and beyond?

We are hard at work on our plans for expansion. Apart from more countries across the Eurozone, we are investigating in market launches in the UK, Switzerland, Romania and Poland – so will have to support a number of new currencies.

It has been fascinating speaking to you Olaf. Thanks for sharing your story that I hope will be an inspiration for the many Fintech startups, across Europe and around the world. I wish you the very best of success in your plans!

Olaf Taupitz is Head of Product and Innovation and a Member of Board at cashcloud.

Olaf is in charge of managing all initiatives of the company and he oversees the development of cashcloud’s application and technical set up, including management of outsourced partnerships. He brings to his role key expertise from his experience at IPS International Prepay Solution AF, CALL4T, Tele2 and his other work at the intersection of Telecoms, Payments and Card services.

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

http://www.linkedin.com/in/charmaineoak

Join me on Twitter @ShiftThoughtDM and The Digital Money Group on LinkedIn

Trends in Mobile Money and Mobile Financial Services – Views from a veteran

Posted on April 19, 2015 by Charmaine Oak

The origins of Mahindra Comviva date back to 1999. Since then the company has enabled mobile operators and financial institutions around the world to address opportunities presented by money going digital. As part of Shift Thought’s assessment of the state of the market, it was a real pleasure to speak to Srinivas Nidugondi, to obtain his views on the latest trends and future directions. In this post I share highlights of our discussion on mobile money and mobile financial services.

Srinivas, thanks for your time today. Could you please give us a bit of background about your expertise and your role at Comviva?

I head the mobile financial solutions unit at Mahindra Comviva. For four years now, I head the entire commerce portfolio within Comviva. We have 3 verticals that include commerce, content and data, all with the underlying theme of mobility.

Within our horizontal of managed services, our fastest & largest pillar is commerce. I look at the overall opportunity, to grow our operations into a leadership position. I have a background in banking and payments, commerce and smartcards. My last position was at ICICI bank where I was Head of Internet Banking platform and Mobile Banking and worked on the launch of ICICI’s first mobile banking app 8 years ago; further I was involved in a collaborative offering with Vodafone to cater to the unbanked and under banked segments in India.

Could you please give us a brief background about Comviva?

We’ve been around for 15 years, beginning with the Telecom Revolution in India and other emerging markets focussing on products that would help mobile operators, in our capacity as part of the Bharti group.

Our mobiquity® Money solution now has over 50 deployments in 40 countries, enabling over 35 million registered customers to transact approximately USD 13.5 billion transactions annually.

Over the last five years we have streamlined and also broad-based our focus. As a product company we complement Tech Mahindra’s IT services and also obtain access to new geographies, such as our recent forays into North America, Europe and Australia. Further, we have been able to penetrate into Latin America with several deployments on-going across the region.

Could you give us highlights of the kinds of products and services, and the kind of competition you face?

In our mobile financial services unit our philosophy is to leverage mobility, commerce & payment services. What this means is we do not just focus on providing payments solutions but are experts in the whole commerce process. Also we have refocused from mobile to mobility, to cover new devices that I expect will become an active part in the way people transact, for instance through wearables like Apple Watch or Google Glass.

We focus on payments behaviour within each segment that includes consumers, businesses and merchants. So we look at a diverse set of scenarios that range from under banked consumers to evolved consumers to large merchants. We are one of the largest providers for Mobile Money in the world, with services provided to pretty much every major mobile operator.

We are going up the value chain with services such as mobile wallets, mobile payments, and QR codes, BLE, HCE, NFC and Apple Pay and offering these solutions to banks, processors and retail industries apart from the traditional customer base of telecom operators. Our recent customers include banks in the North America and Asia pacific regions as well as a new age retail chain in South America. And further, we are working with a telecom operator in Europe for launching NFC based payments. Our competitors include for instance C-SAM, Toro, Airtag and Monetise.

On the business and merchant side we offer an integrated payment solution payPLUS that allows both large and medium merchants as well as SMEs to use their mobile phones as a POS, and we work with First Data and not just small & medium - there is a market for mobility based for insurance, e-commerce down to small and medium.

We are entering the US through one of the largest processors where competition is different. We don’t really see Square and iZettle as our competition as we don’t go direct to market but rather work with banks and processors. We also face localised competitions such as from Easytap in India.

What are some of the major implementations you’ve been involved in around the world?

We have over 50 mobile money implementations including a number of implementations with Airtel, Orange, Econet Wireless, Grameenphone, Banglalink, Tigo and others. In Bangladesh we are deploying with DBBL, one of the largest banks in the country.

We are working with First Data and other large processors and also with some of the largest banks for HCE, MasterPass. We are with the largest 4G operator in India for Mobile POS and Mobile Wallet. Some of our latest wins include a retailer in Chile, and US work with a processor for mobile POS, and a wallet for a bank in Canada.

In 2014, mobile money service became interoperable in 3 new markets. Could you tell us a bit about how this works and how effective this strategy has proved?

I don’t think every market could be a success. This is a function of multiple factors. In Kenya Safaricom became successful with a position of leader in the mobile business. Now Tanzania is becoming an overall leader in mobile money, but there no one operator has a monopolistic position.

Mobile money has taken off where there is low banking penetration and high mobile penetration. Agents must find it viable. Also the services need to go beyond just P2P or Cash-in/Cash-out. People must not just withdraw cash but make payments through their mobile money account. That is when profitability goes up.

It is also really important to be able to offer remittances. There is a service called Terra that is getting all the operators together for this to make the money flows easier in corridors such as Mozambique to Malawi, Zimbabwe to Malawi and South Africa to Zimbabwe.

If each operator has say a maximum of 40% market share, this means that 60% of the market is excluded, so interoperability is not a luxury but is critical for operators to explore in each market.

What are some of the other trends you observed in mobile money in 2014?

Mobile Money is used in a developmental context, where third party provides bring financial services to people who don’t have access to them.

I observed three key trends in mobile money over 2014.

Firstly, the evolution to cover more services has been recognised to be of huge importance. From cash-in/ cash-out, it is now about enabling every transaction that people have to make. So this is interoperability in the context of payments.

Secondly, there is a focus on interoperability in the context of remittances. We saw a spurt in transactions with Tigo and Airtel making their transactions interoperable in Tanzania.

Thirdly, it’s about how to build a path to offer a full suite of services, not just mobile money. We’ve had to solve for enabling payments, micro-loans, investments and insurance, so as to build a “One-Stop Shop” for all these services.

Did regulations have to change in order to enable these trends and new services added over 2014?

No I think the regulations did allow it, but it was a matter of the maturity level having grown over the last 3 years. As this grows further we’re seeing more such examples in Tanzania, Zimbabwe and elsewhere.

What is the outlook for mobile money going into 2015?

I see an evolution of the services to straddle multiple areas. From over-the-counter and one time transactions it’s now all about the mobile wallet. This needs a better understanding of the end-to-end customer journey and experience.

Srinivas, thanks very much for your time today. It has been a great pleasure speaking to you. I wish you the very best for your success in 2015 and beyond.

Srinivas Nidugondi is Senior Vice President at Mahindra Comviva, based in Bengaluru, India and has led the Mobile Financial Solutions area in Comviva since 2011.

Srinivas brings a keen interest in financial inclusion, especially as enabled by mobile phone and digital channels and has a wealth of experience in banking, payments, Internet and e-commerce. He set up & led the business for online banking and mobile payments in a large multinational bank and has led product management & business development in start-ups and IT product companies.

Charmaine Oak

Author of The Digital Money Game, co-author Virtual Currencies – From Secrecy to Safety

http://www.linkedin.com/in/charmaineoak

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