Apple Pay Cash and the matter of trust

Posted on January 2, 2018 by Charmaine Oak

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

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

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

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

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

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

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

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

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

How people pay in the USA – Fed Reserve Payments study 2016

Posted on July 3, 2017 by Charmaine Oak

The Federal Reserve has just reported their estimates of the total number and value of all noncash payments made in 2015 in the United States, both by consumers and businesses. The study provides insights on adoption trends for new payment methods. Main findings of the study may be considered under 3 key areas:

(1) Differences between consumer and business payment choices in 2015 and changes over the 15-year period since 2000

No surprise, check payments are being replaced with card payments and ACH transfers. In number, check payments dropped from 57.8% of non cash payments to 13.4%. By value the drop was from 66.7% to 15.4%. However this still remains high in comparison to leading European economies that have considered altogether doing away with checks.

Total noncash payments by households increased by around 94.7% over the 15 year period, again no surprise as this period from 2000 to 2015 precisely marks the growth period for electronic payments worldwide.

New methods studied included payments initiated via a mobile device (for instance mobile wallet), payments through specialized services for person-to-person payments, and the use of online or Ecommerce payment authentication services to help verify the payer and secure payment information.

(2) Adoption and intensity of use of different types of general-purpose payment cards in 2015, along with more recent changes since 2012

Consumer and Business payments differed in terms of popularity of payment type. Top four consumer payment types were non-prepaid debit cards, general-purpose credit cards, checks, and ACH debit transfers, with the first two categories substantially in the lead. The top four business payment types were ACH credit transfers, checks, general purpose credit cards, and non-prepaid debit cards. The number of checks written is still alarmingly high as compared to that in many Western economies such as the UK, that have made the transition to instant electronic payments.

The figure above, drawn from the Federal Reserve report illustrates the way in which US consumers and businesses pay and how this differs in terms of payment type.

(3) Growth in selected alternative payment initiation methods and services

Over the 15 year period there was strong growth in the number of mobile wallet payments, but online bill payment through banks increased only marginally as payments can now be made directly to billers. The figure below, extracted from the report shows the change from 2012 to 2015.

Although P2P and money transfer payments increased over the period, they remain very low by number. Online payment authentication methods on the other hand grew from 1.8 billion in 2012 to 3.4 billion in 2015.

The full study report from the Federal Reserve may be downloaded at The Federal Reserve Payments Study 2016: Recent Developments in Consumer and Business Payment Choices, June 2017.

Amazon’s new Subscribe & Save Offer: Could prove sticky?

Posted on January 20, 2016 by Charmaine Oak

As I report that Amazon has been making further inroads into the UK online shopping market, I realise it is probably an under-statement. As it was our go-to provider long before the holiday season it is no wonder we got most of our gifts from them, availing of the great selection of offers during November/December. Free home delivery, the peace-of-mind from trouble-free returns and refunds and a most reliable service has made Amazon the darling of many Brits over the recent past, as can be seen from the volume of reviews pouring into the site.

I was interested therefore to notice today that their “Subscribe&Save” offer earlier launched in the US is now available in UK. The offer claims to provide regular users the ability to save up to 15% as well as gain free shipping on recurring deliveries. To me this seems to be yet another step in the evolution of Amazon from book supplier to online provider of the first resort. For UK shoppers who are now spoilt for choice of online retailer with most grocery stores offering great home delivery options, this appears to be designed to tempt us away, for purchases of a wide range of household shopping items, of which a vast array has now appeared on the site. With its legendary knack of mind-reading Amazon quickly suggested a few items that I had already bought on a number of occasions, while I was checking out the offer.

I must admit this looks promising but also from my past experience from launching digital content services in the UK, I recall the “Crazy Frog” incident where junior mobile subscribers unwittingly found themselves with costly subscriptions, I am sure there could be a number of issues that must be navigated by the marketing team to ensure that people don’t end up with deliveries they did not expect and suppliers don’t have to contend with higher levels of refund.

Within an overall great experience, I found one particularly irritating feature. Introduced over 2015, their “Add 0.01 p to get free home delivery” never fail to irritate our household, and probably a lot of UK online shoppers. A number of desirable products are priced at £19.99 (Why?). However, one needs £20 of “applicable items” for home delivery and finding out what is applicable is quite a chore. For people who would like to save around£4 delivery cost this means a thankless job of looking through “Add-on items”. The concept of Add-on is itself an admirable one as it is a way for sellers to offer small items online. However, believe me it can be most irritating to find an item that qualifies for the 0.01p required, heave a sigh of release and lug it into your online basket only to find that it’s not made your delivery cost go away.

Not to mention the additional time you are forced to spend trying to save money on Amazon must come with a health warning as one can end up buying so much more than one planned – the shopping experience is so slick that it can be quite addictive! I think the same will soon be said of a number of the online stores that are burgeoning in the UK market, and as a delighted consumer I am not complaining (yet?).

PS: For full disclosure, I am not connected with Amazon in any way, apart from being a shopper and a passionate observer of the way money is going digital, to power payments and commerce around the world.

Building an agent network for a direct-to-bank led strategy for remittances to Africa

Posted on September 8, 2015 by Charmaine Oak

In this exclusive interview with Charmaine Oak of Shift Thought, Samish Kumar, CEO of cross-border payments company Transfast, shares about his vision and the recent expansion of Transfast in building a network in 23 countries across Africa. Kumar discusses why the network is good for Africa, how Transfast hopes to be different from its competitors, and how it addresses financial inclusion needs, to further goals of governments in Africa.

Samish, thanks for your time today. I am keen to understand more about Transfast and your expansion in Africa

Transfast is a provider of online and cross-border payments solutions. One of the fastest growing cross-border funds transfer companies in the industry, we operate the third-largest proprietary network, covering 120 countries. We recently announced the launch of an extensive direct-to-bank network in Africa, reaching 23 African nations, and covering up to 90 percent of adult bank account holders in those nations. We believe this to be the most extensive network of its kind on the continent.

Our omnichannel offering enables customers in the US and Canada, and shortly from UK and EU as well, to send money online or via mobile, directly into recipient bank accounts or for withdrawal in cash at around 600 banks representing an estimated 6,000 cash pick-up locations of banks in Africa.

Direct deposits are currently available at banks in Nigeria, Kenya, Ghana, Gambia, Ivory Coast, Senegal, Ethiopia and Mali. Soon, direct deposits will be available in 17 more countries, including Benin, Burkina Faso, Cameroon, Cape Verde, Chad, Congo, Egypt, Guinea, Morocco Niger, Sierra Leone and Togo.

How could this be beneficial for Africa?

Remittance plays an important role in African nation economies, as an estimated 30 million Africans diasporas send around $160 billion to the continent annually. Direct bank deposits and electronic payments can play a key role in building financial inclusion and help further the financial inclusion goals of governments in Africa by engaging account holders in the banking system.

But how is this different to the services of other cross-border payments companies?

Direct-to-bank is the most efficient and cost-effective way to receive funds. At present we believe that we are the only cross-border payments company enabling direct-to-bank in this many countries in Africa.

We are able to do this because of our proprietary network and excellent bank partner relationships. But direct-to-bank isn’t all we’re doing in Africa. Stay tuned for more announcements on new product offerings in Africa in the coming weeks!

Can you explain how your direct-to-bank network builds financial inclusion?

Banking penetration continues to grow in Africa. For unbanked recipients, the ability to pick up cash at a bank provides a positive experience in a bank environment. This is a first step toward becoming banked, when they can enjoy further advantages from our direct-to-bank deposits.

Could you share a bit about the challenges faced in getting this of the ground?

Building a network is definitely one of the most challenging aspects of this business, and at the same time, it’s been very rewarding. Our independent, direct-to-bank network is arguably one of the world’s largest, and the result of blood, sweat and air miles racked up by Transfast executives travelling to India, Sri Lanka, Philippines, Bangladesh and more countries than we can list here, to create and solidify relationships with banks globally.

When it comes to compliance, regulation and fraud protection, they can present challenges in this industry as well. We believe in keeping those functions in-house, and our compliance teams and well-established regulatory systems have taken years and millions of dollars to build, including obtaining and maintaining the licenses necessary to operate in over 50 jurisdictions around the world.

Then comes the talent framework needed to comply with each separate and distinct set of regulations. This translates to hiring experts that make up more than 10% of our employee base – who are solely dedicated to compliance.

Fraud protection completes this trilogy of important factors. Fraud control is serious business, as remittances supply vital funds that support families back home and keep them thriving. Our bank-level security has to ward off hackers on a daily basis. So we have systems in place to ensure our security and privacy for our customers.

How do you plan to differentiate your services?

One of our goals is to build a close relationship with our customers, and that’s always on our minds as we move forward. To us, this means not inviting a third party into the process of sending our customer’s money around the world.

The real untold story of cross-border payments is that many companies don’t have their own bank networks. They “ride the rails” of other companies.

Our customers come to Transfast and whether or not they realize it, the reason they are satisfied is that everything we promise as part of our value proposition – great rates, reliability and fast delivery times – is backed up by our product and network, not potentially unreliable third-party offerings. We also run our own in-house treasury, which cuts out the middleman and enables our customers to get better foreign exchange rates.

When you talk of omnichannel, what channels have you found to work best for different segments? Could you please share a couple of unique characteristics from the US-Africa corridors?

Each corridor has its unique characteristics, calling for differing channel mix. In the African continent, one unique characteristic we see however, is a strong interest in direct-to-bank transfers, which tracks along with the growth in the banked population in each country.

When you talk of direct-to-bank, which market segments can/ cannot participate, and how do you choose the countries you’ve expanded to?

We’re realists who understand that collaborating with the banks to build a better network is smarter than working against them. Our strategy works well with the culture in the communities that we are sending payments into, as national and community banks are often well regarded and have the trust of our customers in developing countries. This factor is critical to our strategy.

As such, we expect to expand into any country where our network can build on that trust level while offering speed and competitive pricing for those transferring funds. So far, we are in more than 120 countries — and growing every day.

Samish, thanks for sharing about your vision and I wish you the very best for your future growth.

Samish Kumar, CEO and Director of Transfast, is an expatriate from India who moved to the US with his family in 1982. After graduating from the University of Colorado-Boulder with a degree in Aerospace Engineering and obtaining an MBA from Columbia University, Samish went on to accumulate nearly 20 years of experience in financial markets at global banks.

In 2007, Samish led the acquisition of Transfast in partnership with GCP Capital Partners, a New York-based $1.9 billion private equity fund. Under his leadership, Transfast has become one of the fastest-growing companies in the world-wide remittance market.

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!

Payments and Remittances Industries meld further into Digital Money as PayPal acquires Xoom

Posted on July 2, 2015 by Charmaine Oak

When I first entered the remittances industry the separation of these two industries was seen to be one of the laws of the universe, just as mobile was seen to be a desirable channel for which new silos were being built.

I wrote The Digital Money Game to address the issues I foresaw with the convergence of industries and services into a multi-trillion dollar space we at Shift Thought continue to map out as Digital Money through our research in each country, as it transforms industries we have so far taken for granted.

While the remittances industry is alone worth over $580billion, when you consider the melding of industries into Digital Money the prize increases exponentially as I prove in my book. Why would a consumer care to sign up to a new service (with perceived security, identity and operational inconveniences) for executing what is likely to be at most a single transaction a month? Would the consumers who choose to stay with cash as an economy goes digital really be the segment the brand wishes to deepen relationships with?

So it is no surprise that PayPal announced a few hours ago that it acquired Xoom for $890 million, as it prepares to leave eBay. As I see it, there was no option. When viewed from the Western perspective PayPal seems like a market leader, but as I studied each Asian country in depth, many challengers came to light as far back as 2011, when we announced that Alipay was claiming to have way more digital wallet users than PayPal. Since then Alibaba has grown substantially and Ant Financial Services has become a comprehensive digital money brand, as we report in our China analysis.

In our recent analysis of PayPal versus Alibaba’s ANT Financial Group we discovered that while PayPal, Paydiant and Venmo together form a strong capability this leaves a big gap to fill. To what extent will Xoom help fill this gap? This will depend on how soundly it goes international with PayPal’s help.

Xoom founded in 2001 today operates only to send money from the US, with 1.3 million active customers who send $7 billion to 37 countries, and this will have to change rapidly. Xoom has been recently entering emerging markets such as Mexico, India, Philippines, China and Brazil, but this has been in terms of receiving money electronically. What Xoom has capitalised on is the real-time payment infrastructure beginning to be established around the world, and this is how it entered India for instance. What is has yet to do is to establish Send operations from other markets.

So for me the success of this venture hinges on the question of whether with Xoom, PayPal has better success in the last mile in India and China, and other key emerging markets. To achieve the ubiquity of Western Union and MoneyGram PayPal will need to address remittance corridors in 200+ countries and territories, and do this rapidly.

As I’ve said before, brands are being built and broken by the trend towards Digital Money and we’ve entered the age of mega-groups, but it will not be easy to get this right. There are substantial differences between the market segments, as I’ve learnt through numerous studies, focus groups, interviews and research we carry out in each part of the world. However it is well worth attempting, and indeed as I repeat, I see no other option.

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!

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

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

Citi’s view on being a global digital bank

Posted on March 24, 2015 by Charmaine Oak

Today I am delighted to share highlights of my interview with Aditya Menon, Managing Director, Digital Strategy at Citi. Citi is one of the largest banks in the world and has long been at the forefront of innovation.

Aditya Menon explains why the bank, already known as the world’s leading digital bank is focusing now on simply being the best bank, backed by the power of technology. We learn of the journey over 2014 and how this is likely to further play out over 2015.

Aditya, I am excited at this opportunity to benefit from your deep knowledge on trends in global digital banking and especially delve deeper into developments in the US and India markets. Could we please start with a bit of background about your remit and the deep experience you have in payments?

As Managing Director, Global Digital Strategy at Citi I work on Citi’s global digital strategy for stakeholders in our consumer bank including card and Citi retail services in the US.

We do 3 things for our internal stakeholders. Firstly we assist them to formulate their digital strategy, particularly on payments, commerce, capability and technology. Secondly, an area in which I am most involved in is informing on the digital capability we need to grow and compete with banks and non-banks. Thirdly, we define and drive alignment around key strategic initiatives including key digital metrics and KPIs – both internally and against competitors.

Citi plays so many different roles around the world in Corporate Finance, Retail Banking, Investment Banking and more. How does your digital strategy support all these areas?

There are three key strategic imperatives for us to deliver on:

Firstly we must be Customer Centric and from a digital perspective this requires that we track metrics such as net promoter score, to recognise and reward the segments we want to serve with valuable personalized services.
Secondly this must be Globally Common. Globally, we serve approximately 200 million client accounts and operate in more than 100 countries. The challenge we address is to deliver globally common services across all these markets. For instance, taking the example of high net worth individuals, they do have certain globally common needs that we identify and help address.
Thirdly, it is about being Digitally Connected and creating digital partnerships. We see financial flows are digitising and we need to be in the middle of those flows, to drive greater access to our core products through digital channels and strategic partnerships.

For each of the three areas we have launched initiatives that help us to further enable our core business, go beyond the core and finally, drive innovation by creating disruption.

What led you to select this digital strategy for Citi?

At Citi we studied how digital disruptions eroded value across multiple industries including news, travel, video, music and advertising. Across these industries we found that over 10 years there could be a substantial market share shift. If we take year zero as being peak of physical manifestation of an industry, we saw a typical trend play out for each. An initial gradual decline was followed by an inflection point between year 2 to 4 and then a rapid transition from physical to digital.

In most of these industries the disruptor was not one of the incumbents. In most cases the total revenue of the entire industry declined over time due to disruption and commoditisation and revenues never really returned to the earlier peaks. This is interesting as it means that fewer players at end of year ten have to share a smaller pie and a number of incumbents make a loss.

Extrapolation to US retail banking made it clear to us what strategy we had to adopt.

We then extrapolated to see what this could mean for the US retail banking industry. We expect to see a substantial share shift over 10 years. Looking at payment and retail banking industries separately we expect retail banking to see even more disruption than payments in terms of value.

Our conclusion is that over 10 years the laggards could lose a major share of their revenues and profits, while leaders will gain moderately. So clearly it pays to be a leader, and as a laggard one could get into a vicious cycle which takes you down a point of no return.

We concluded that Citi must therefore rapidly enact a strategy that would help to best position our bank with respect to the digital disruption trends across the world.

What are some of the important ways this strategy was enabled by Citi in 2014?

Our strategy of globally common enablers has led to the launch of our award-winning retail banking mobile app that we deploy globally. In the area of corporate banking our Citi Velocity digital platform is the world leading FX trading app in terms of volume and value. We also have CitiDirect BE Mobile, which allows our corporate treasurers to use our payments infrastructure to complete payments anywhere.

With respect to driving disruptive innovation, we have brought out the Citi Wallet in partnership with MasterCard. We were also one of the first banks to launch with Apple Pay. The strategy played out in many ways across the world. For instance we launched a contextual offer and wallet platform in Hong Kong that went beyond the ordinary, to create contextual experience using location based services.

I am curious, considering Citi’s size and global footprint, how do you still manage to achieve high levels of innovation?

We place a lot of importance on innovation through a number of initiatives, of which one example is our Citi mobile challenge initiative.

Our US challenge in December was a great success and we just kicked off the same challenge in EMEA.

We have already got innovation labs set up around the world and the work there feeds into our business of crafting new services for the future. For instance our innovative work with our API opens up transformative potential through third party development.

Over 2014 what were some factors blocking the progress of money going digital?

This has continued to be a time when financial institutions must transform themselves in line with the demands of the economy and to support evolving consumer needs. This involves considerable rebalancing within the business.

Regulatory pressures and the need to balance AML requirements and security against innovation and superior consumer experience continues to make this process challenging.

From Shift Thought’s recent work in India we identify it as one of the most complex, yet promising markets for digital money. Please could you share your thoughts on this?

In the Indian market the regulator helped to create clear and transparent regulations for mobile banking, prepaid and agent banking. To my mind we have the clearest set of regulations that exist for digital payments and money anywhere in the world.

Although early services did not take off as the initial players in this space found it hard to sustain repeat usage as customers had no way to cash out But more recently, after giving banks and nonbanks a chance, what has lifted off well is the NPCI IMPS project. There has been steady growth in mobile-to-mobile payments.

What has worked well for India and what are some things the market may not have anticipated?

Perhaps one thing unique to implementation in the Indian market that was a unique requirement, but turned out to be a bit of a sticking point for adoption, is the centricity and early introduction of MMID. To my mind this could be the biggest barrier to adoption, a point I’ve raised in public forums recently.

Regarding unintended consequences, one interesting trend we’re observing is the use of the services for cash to bank account transfer. Consumers are starting to give cash to the banking agents who help to deposit this into their accounts. This use case is seeing a huge volume and value traction over NPCI rails.

What is the key development you expect in India over 2015?

Earlier in 2014, regulators asked for a new kind of institution to be created, that of a payment bank.

Alternate networks did not really work so this new type is expected to greatly help in getting subsidy programs and other important initiatives off the ground. This requires the creation of a massive number of bank accounts through a business model that works with lean 1% commissions to offer services to people who may be on or below the poverty line.

Half a dozen payment banks could be created in the near future and a number of telcos have applied for this. Under this new scheme payment banks will be permitted to operate savings and current accounts but will not be allowed to lend, thereby opening up the possibility of partnerships with scheduled commercial banks.

Aditya thanks so much for taking the time to so generously share with us your thoughts and findings. I have personally benefited so much from these discussions with you over the years and I take this opportunity to wish you every success in your plans in 2015 and beyond.

Aditya Menon is Managing Director, Global Digital Strategy at Citi.

A pioneer in the field of payments and a true entrepreneur, Aditya has helped to shape mobile payments through his work at Obopay and Yes Bank Ltd. Aditya is hailed as a visionary leader who can inspire teams to deliver their best.