Passwordless Experience – The FIDO Standards behind this

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As security breaches continued to grab headlines over 2014, I was intrigued by new claims that not only could online security be improved for consumers, but it could actually become a more delightful user experience. The launch of Apple Pay has proven to us that this is possible.

With over 150 FIDO members, the Board of Directors alone reads like a Who’s Who List: Alibaba/Alipay, ARM, Bank of America, CrucialTec, Discover Financial Services, Google, Identity X, Lenovo, MasterCard, Microsoft, Nok Nok Labs, NXP semiconductors, Oberthur Technologies, PayPal, Qualcomm, RSA Security, Samsung, Synaptics, Visa, and Yubico.

Keen to understand what attracted so many key players, I was delighted to have an opportunity to interview Executive Director of the FIDO Alliance, Brett McDowell, to understand more about how all this works and what changes we are likely to see in the world of payments because of this.

 

Brett, I’ve heard so much about FIDO as the standard behind high profile launches of 2014, and am keen to understand more. Could you share a bit about yourself and your mission at FIDO?

 

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I am currently the Executive Director of the FIDO (Fast IDentity Online) Alliance which I helped to found in July 2012, when I was the Head of Ecosystem Security at PayPal, to address the lack of interoperability among strong authentication devices as well as the problems users face with creating and remembering multiple usernames and passwords. At the FIDO Alliance, we are changing the nature of online authentication by developing specifications that define an open, scalable, interoperable set of mechanisms that supplant reliance on passwords to securely authenticate users of online and mobile services.

Previously I spent several years at PayPal where, as Head of Ecosystem Security, I was tasked with developing strategies and leading initiatives to make the Internet a safer environment for PayPal and its customers. I spearheaded authentication strategy, including working with global policy makers to evolve best practices in strong authentication regulation. Prior to joining PayPal I spent several years as Executive Director of industry standards organizations, including Liberty Alliance and Kantara Initiative, which produced standards and accreditation programs in the field of digital identity.

At the FIDO Alliance, our mission is tightly scoped to producing open standards and industry adoption programs that enable implementers to change the nature of online authentication by improving user experience while simultaneously providing better security in a very privacy-respecting manner. We just released the final FIDO 1.0 specifications at the end of 2014.

 

Why did you feel standards were needed relating to strong authentication, and how does this differ from traditional authentication?

 

clip_image004So, “traditional” is an interesting word in the context of strong authentication, as the concept has not gotten a tremendous amount of adoption, especially not from consumers. Before FIDO authentication, if you were an online service provider, in order to authenticate your users, you would typically use username and password. If you wanted more security you had to add another authentication factor from a set of options that were not necessarily designed for ease-of-use. The “historic” approach to multi-factor authentication, or “strong authentication” as it is often called, combines “something you know” (like a password or other form of “shared secret”) with another factor, such as “something you are” (a biometric for instance) or “something you have” (such as a token or physical device). The industry norm in 2011-2012, before FIDO authentication was announced, was username and password as the ubiquitous first-factor, and the second factor, if there was one, was typically a 6-digit one-time-use passcode. You’d get the second factor through an SMS to your mobile device or create it on a specialised hardware device or copy it from a code-generating mobile app on your smartphone. This 6 digit number- the one-time password (OTP) - is called a security token.

The first problem with OTP -- and one of the many issues that FIDO authentication inherently addresses -- is usability. The first word in FIDO is fast, and it helps to explain why FIDO technologies became so disruptive so quickly. We are not about bolting on extra security that puts the burden on the user. We are about delivering an end-to-end innovative approach to authentication through a new, open, online cryptographic protocol that enables best-of-breed device-centric authentication to be used for online access.

 

How does the FIDO UAF Architecture enable online services and websites to leverage native security features of devices and what problem does this address?

 

From the payments perspective our standards enable a better user experience – faster, more secure, privacy respecting and easier-to-use. An example is, Samsung has enabled a number of payments applications using FIDO to allow a user to simply swipe a finger across a sensor on their smartphone or tablet. This is arguably easier than everything else in the market, certainly easier than passwords.

Although the concept of strong authentication has been around for a while and pretty well adopted by pockets of the enterprise market, it has not achieved widespread adoption beyond the enterprise because it has lacked the means to achieve interoperability among systems and devices; FIDO authentication standards enable any strong authentication method, what we call “authenticators”, to interoperate with any online service, independent of solution vendor or device.

Without interoperable strong authentication, you are left with the classic “token necklace” problem; wearing specialized security tokens, often around your neck with your security badge at work, for each online service that requires strong authentication because you cannot use any one of them to authentication into the other online applications. This is because “traditional” strong authentication relied on proprietary centralized servers (closed systems) connecting authenticators in the hands of users to proprietary server side functionality. Limited in both reach and function, strong authentication solutions have been neither open nor interoperable, until FIDO UAF and U2F 1.0 standards , which have opened the door for ubiquitous strong authentication through “net effects” that only emerge from an open ecosystem.

 

Is this interoperability issue something you address through UAF and U2F?

 

Yes, both UAF and U2F protocols, applied to devices, client software and online servers, produce entirely interoperable strong authentication. What the FIDO Alliance founders introduced first was the Universal Authentication Framework (UAF) protocol. This solves pain points around first-factor authentication because it is designed to replace the password, usually (but not exclusively) with a biometric factor that is retained only locally on the user device, never shared centrally or in the cloud. FIDO UAF is a strong authentication framework that enables online services and websites, whether on the open Internet or within enterprises, to transparently leverage native security features of end-user computing devices. In a FIDO ecosystem online service providers can easily achieve strong user authentication, and free users from creating and remembering more online credentials, simply by leveraging existing FIDO devices to authenticate at their sites and to use their services, such as mobile payments where UAF has seen early industry adoption.

If you are going to offer a replacement for passwords, you need a robust mechanism that isn’t based on the same “what you know” shared secret security design that has been the bane of password systems of late. We decided upon asymmetric public key cryptography, which uses a private key paired with a public key for each authenticator registration. However, we knew that putting the private key in the server could create vulnerability and undesired externalities in the case of a breach. We wanted to get to a model that would have no secrets on the server side. With FIDO authentication, the server holds a public key, but the private key is held only by the individual’s personal device, such as a mobile phone, and is never shared outside of that device. We saw the opportunity to make 1st factor authentication both easy & more secure by relying upon existing device-specific user verification methods being embedded in smartphones, tablets and PC’s. FIDO UAF then enables those local device authentication methods to be used securely online.

We found that before FIDO authentication, existing strong authentication options had very low user acceptance rates, sometimes less than 3% of users choosing to register for strong authentication when it was available as an option. The user acceptance of natural authentication methods that don’t tax the user’s memory or require extra steps in the process have been far more successful as seen by the increased number of people opting to lock their phone with gesture locks, 4 digit pin codes, and now biometric sensors like fingerprint sensors. However, under FIDO UAF, fingerprints are just one of many biometric options supported by the protocol- iris scanning, voice recognition, and behavioural sensors from wearable devices, are all supported in FIDO UAF.

We wanted a standard that could support any future authentication method, and support the industry in its drive to continuously innovate. Proprietary innovation happens between the device and user; this is where the industry can compete with differentiating solutions. FIDO standards come into play in the implementation between the device and the online service.

Another question is how online Payment Service Providers (PSPs) would know that the technique between device and user is trustworthy? FIDO standards incorporate the ability for online services like PSPs to set their own security policy defining the devices or device characteristics they want to trust. The members of the FIDO Alliance wanted a solution set that enabled trust between all devices and all services, but didn’t mandate it. They want a solution to be flexible enough to leave the trust decision in the hands of the online service provider who is in the position of making the risk decision related to any authenticated transaction.

 

We have discussed UAF in some detail. What then is U2F and where does it fit in the FIDO ecosystem?

 

FIDO U2F authentication addresses a totally different use case. FIDO UAF provides a simpler, stronger 1st factor authenticator where U2F provides a simpler, stronger 2nd factor authenticator. FIDO U2F does not replace the password but instead replaces the second factor and enables a simpler form of password, like a short PIN number, because the security burden can now be placed on the FIDO U2F authenticator and not the password. FIDO U2F has already been deployed by Google Accounts and now ships in all Google Chrome browsers.

So far the implementations of FIDO U2F authenticators are in the form of external specialized devices, but these capabilities could be embedded directly in handsets or other form factors in the future. What separates FIDO U2F security tokens from the OTP tokens discussed previously is that one device will work with any FIDO U2F server, regardless of vendor solution or device manufacturer. Another key differentiator is the phishing resistance inherent in the FIDO U2F standard. A FIDO U2F user cannot be tricked into giving a secret to a fraudster the way they can in a OTP use case.

Yubico and Plug-up are the two primary providers of U2F-enabled devices today, which work by being inserted into a USB slot. NFC and BLE support for U2F tokens is coming soon and will accommodate U2F devices for use with devices that don’t have USB slots.

To learn more about all the UAF and U2F FIDO Ready™ implementations please visit our website where they are all listed along with the profiles they support.

 

This is very interesting and thanks for helping to make our online experiences easier as well as more secure. Do you have any final message for us?

 

One thing I’d like to emphasize is the relationship between authentication and payments. Payments is just another application that requires strong user authentication. FIDO standards can be used for a whole variety of use cases that require strong online authentication… for healthcare applications, airline bookings, gaming, banking, enterprise use cases and anything that requires a user to authenticate online. The reason we saw the first adoption in mobile payments is because that industry segment had the greatest amount of pent-up demand for faster, easier strong authentication from mobile devices where typing passwords was the least convenient option.

The second topic I would like to emphasize is the relationship between FIDO standards and government regulation around strong authentication. Sticking with the payments example, you recently asked me about how FIDO UAF could be used to meet the criteria developed by regulatory regimes such as the EBA Guidelines. Though an analysis of exactly how a FIDO UAF implementation could meet the requirements of this specific regulation is beyond the scope of this interview, most multi-factor regulatory regimes are looking for two or more of a “what you know”, “what you are”, or “what you have” authentication factors. In just the example we see in the market already on Samsung Galaxy® devices, it may appear there is only a single “what you are” factor being offered by the fingerprint sensor, but there is also a “what you have” factor due to the secure protection of the private keys on the device, resulting in a multi-factor authentication event from a single user gesture. The Privacy and Public Policy Working Group in FIDO Alliance is going to make a concerted effort to educate regulators across various industries and geographical regions in 2015 to help them understand how to apply FIDO authentication to the markets they oversee.

 

Thanks Brett and I wish you the very best for all the further innovation that you plan in this very important space!

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Brett McDowell currently serves as Executive Director of the Fast IDentity Online (FIDO) Alliance, the organization Brett helped establish in 2012 to remove the world's dependency on passwords through open standards for strong authentication. Brett is also an advisor to Agari and the Bitcoin Foundation.

Previously, Brett spent several years at PayPal where, as Head of Ecosystem Security, he was tasked with developing strategies and leading initiatives to make the Internet a safer environment for PayPal and their customers.

 

Charmaine Oak

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

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

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

Why markets tumbled today on Global Economic Prospects report

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According to the Global Economic Prospects annual report from World Bank just released, growth in 2014 was lower than expected. Global growth is expected to rise moderately to 3% in 2015, while high-income countries will see a smaller growth of 2.2%. Developing countries fare better with a 4.8% increase.

 

Having just studied the report I thought I should share highlights to help explain why today Asian markets sank in early trading, copper prices fell and shares plummeted across Europe. Markets reacted to the World Bank’s decision to cut its economic forecasts for this year and next, in the Global Economic Prospects report just out.

Global trade has been weak in post-crisis years, growing less than 4% a year during 2012-2014, well below pre-crisis average annual growth of around 7%.  Major forces driving global outlook include:

  • Soft commodity prices
  • Persistently low interest rates and divergent monetary policies across major economies
  • Weak world trade

Recovery in 2014 in high-income economies was uneven. As many high-income grapple with fallout of global financial crisis, USA and UK have exceeded pre-crisis output peaks. The Euro Area and Middle-income economies face structural slowdown but low income economies are expected to enjoy a more robust growth.

Since mid-2014 the sharp decline in oil prices helps oil importing developing economies but dampens growth prospects for oil-exporting countries.

 

In the graph below I show last year’s forecasts in the dotted lines and this years (just released today) in solid lines. It is clear from this why markets reacted badly to the latest forecasts that show lower than expected figures across both high income and developing countries. Global growth is expected to rise moderately to 3 % in 2015. However high-income countries are likely to have a smaller growth of 2.2%. Developing countries will fare better i 2015 with a 4.8% increase.

 

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The slowdown in global trade has been driven by cyclical factors such as persistently weak import demand in high-income countries and structural factors such as the changing relationship between trade and income.

 

Countries show divergent growth rates

But how does this potentially impact on your market selection plans and strategy for this year? In the chart below I’ve shown the projections for key countries, with estimates for 2014-2016 annual percentage change in GDP.

 

To my mind this further calls into question the BRIC categorisation we use to describe emerging markets. Jim O’Neill of Goldman Sachs first used this term in 2001 to describe a group of countries that expanded rapidly in the 1990s. Today though, these countries increasingly show very different growth trajectories noted by some experts recently, and as I see exhibited in their recent economic profiles.

While in 2016 both India and China are likely to have a 7% percentage change in Real GDP, China arrives here on a decline, while India works up to this. India is expected to show a steady increase while a  “disorderly slowdown” is expected in China. Brazil faced a steep decline in growth due to declines in commodity prices, weak growth in major trading partners, severe droughts in agricultural areas, election uncertainty, and contracting investment. Recession in Russia further distances this country from the BRIC group. Activity slowed to 0.7% in 2014 with on-going tensions with Ukraine, sanctions, falling crude oil prices and structural slowdown.

 

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Growth in Europe and Central Asia slowed to a lower-than-expected 2.4 % in 2014 due to slow recovery in the Euro Area and stagnation in the Russian Federation. In contrast, growth in Turkey exceeded expectations despite slowing to around 3.1 %.

Geopolitical tensions, currently concentrated in Eastern Europe, the Middle East, and, to a lesser extent, South East
Asia, could rise in the short- and medium-term. In low-income countries, growth remained robust at about 6 % in 2014 attributed to rising public investment, robust capital inflows, good harvests (Ethiopia, Rwanda), and improving security in a few conflict countries such as Myanmar, Central African Republic and Mali.

 

Remittance flows still resilient

The good news is that remittance flows are expected to continue to exhibit a much welcome upward trend. As the risk to private capital flows to developing countries increases, the relative importance of remittances continues to grow. World Bank notes that during past sudden stops, when capital flows to developing countries fell on average by 25%, remittances increased by 7 %.

The forces driving the global outlook and the foreseen risks pose complex policy challenges according to the World Bank.  Developing countries face major challenges. For one thing monetary and exchange rate policies will need to adapt as conditions return to normal. They also need to implement structural reforms to promote job creation. This is expected to help mitigate long-term adverse effects from less favourable demographics and weak global trade.

 

More detailed analysis of the latest economic prospects for each country and region is available in our “Digital Money in 2015” country reports. Drop me a line at contact@shiftthought.com if you’d like more information. The full Global Economic Prospects report and other resources are available at the World Bank website.

The year 2014 was a tipping point for NFC payments says Visa Europe

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Today I am delighted to be speaking to Jonathan Vaux, Executive Director, New Digital Payments and Strategy at Visa Europe. Jonathan tells us what trends impressed him over 2014, which he considers to be a really powerful year for mobile payments. We discuss the UK and European developments and Jonathan shares his views on the outlook for 2015 for digital payments in Europe and world-wide. For background see my previous blog “How payments changed in UK in 2014 and what’s next”

Jonathan, thanks for making time for this discussion. Could you please tell us a bit about yourself and your remit at Visa Europe?

Contactless PaymentsReally I have two major roles at Visa Europe. Firstly, to look at emerging technologies and gauge what our involvement should be. Is this a technology so impactful we must do something about it but not necessarily be a provider? A good example of this could be authentication or identity, where it’s probably more about us adapting our product rules and frameworks to recognise emerging technologies. Alternatively, is it a service we should provide as part of our core services? A good example of this might be tokenisation, or incorporating geo-fencing into our services as a way of improving our authorisation services and improving the customer experience to approve genuine transactions and help capture fraudulent ones.

Secondly my job is to create roadmaps and conduct prioritisation exercises.

At Visa Europe my job is really to look at changes in the way people want to pay and make sure that Visa is the preferred payment method for whatever app or wallet consumers wish to use for payments.

 

How has Visa Europe recently reorganised to address opportunities from changes in the way we pay?

We’ve undertaken a major reorganisation recently that resulted in positioning us very well with respect to the changes we expect in payments over 2015 and beyond. We have created a dedicated digital business unit as a group of 150 people looking at the services we must provide and also delivering the services. This is a dedicated team currently separate from our “core” business.

We want to make sure we are as easy to integrate into new banking and payments apps as possible, creating the connectivity and seamless payments experience consumers require.

 

What are some of the key global trends you observed over 2014?

To my mind 2014 was a tipping point for NFC payments. With the launch of Apple Pay and the number of developments over the year, some technologies that had been struggling to get adoption got legitimised. There has been more emphasis on customers wanting personalised services. Also we’ve seen much more adoption of online banking and mobile banking. More than ever banks have started to engage with digital channels, as an imperative rather than an option.

We saw some important traction in the role of biometrics, with TouchID for instance, and the technologies becoming more open.

Tokenisation is another major development. Another is the evolution of players such as Stripe with an open API approach. In short, 2014 has been a really powerful year for payments innovations.

 

On the other hand we had so many negative incidents, such as credit cards being stolen, that in a way may also precipitate tokenisation, and make paying by mobile even safer than other methods?

We need to make sure we consider this as we evaluate how to scale any potential new technologies, although the issues did not arise due to mobile as a channel as such just re-emphasised the importance of security.

Also if you look at fraud ratio in Europe, thanks to implementation of Chip and PIN, the rates are relatively low as compared to US for instance. In Europe there is more nervousness about technologies that are seen as less safe.

The other important point is we need to ensure that the way to mitigate fraud does not impact consumer experience. It is all about creating streamlined, secure methods to pay with consumer experiences that are also great.

 

On the topic of focus on consumer experience, do you see digital as an opportunity for banks to safeguard against becoming commoditised and also regain consumer goodwill?

As a general point most people look to retail banks to manage funds and trust their bank to keep their money safe. If you consider core propositions in this area, the customer looks to their primary retail bank for that. I’m not sure how much the potential peripheral services, such as loyalty, have a material effect in terms of customer relationship - the crux of it is: Is my money safe? Am I protected if something goes wrong?

However, a lot of day-to-day experiences in the banking world may not be consumer friendly enough. Consumers may shift for more convenience. PayPal, for instance, have had a lot of impact as they offered such a strong customer experience.

 

Over 2014 we saw so much traction in the UK with Transport for London (TfL). Could you please tell us more on this?

A lot of the services fail as they don’t become habitual for the customer. What is fantastic about applications such as TfL is that for people living and travelling around London the use of such services becomes habitual very fast. The use of contactless payments on TfL extends and reinforces the use of that plastic card that I use elsewhere. It’s a new use case and it works as it is something I use regularly.

It is interesting to see the number of transactions and also the number of people constantly using contactless cards has greatly increased over 2014.

Visa Europe predicts that, with the launch of contactless journeys on Transport for London’s (TfL) travel
network and the introduction of mobile contactless services, Brits will make 500 million contactless payments between now and December 2015.

Any update for me in terms of the use of mobile contactless payments? Now that services are available from some of the leading mobile operators, how are these being used so far?

I am not sure how much specific data I can share on that but I would say that today most transactions are still predominantly contactless plastic cards. We’ll probably see more focus from the operators in trying to capitalise on the press attention that things like Apple Pay’s launch in the US have received to grow their share of transactions and I think we’ll hear a lot more about wearables in 2015.

 

Within Europe, please could you describe some of the unique characteristics you have observed?

The big challenge for Europe is there are still lots of local processing systems despite Pan-European discussions. In 2014 we saw domestic regulators becoming more stringent on some issues, such as data storage required to be in the country, not overseas. This is an interesting trend that’s emerging. Over 2015 we must see how much that may counter-balance the speed rollout for global brands. It may also affect the scale of roll out of digital payments, and how that differs.

 

I agree it’s not just one market. I’m wondering if you have an update for me on Eastern European (EE) markets. I’m recently back from Poland and it was interesting to see the developments there.

Yes, there are a number of benefits in terms of markets such as Poland which have been very early adopters of contactless payments. There is a really high usage of contactless there. Merchants are actively leveraging technology to drive loyalty behaviour.

Nine Polish banks have confirmed plans to commercially launch Visa Cloud-based Mobile Contactless Payment services from early this year, re-enforcing Poland’s reputation as a hotbed for innovation in digital payment services.

Banking providers ING Bank Śląski, mBank, Bank Millennium, Raiffeisen Polbank, eurobank, Getin Bank, Bank Polskiej Spółdzielczości and Bank SMART will join Bank Zachodni WBK in rolling out services utilising Visa’s Cloud-based Payment specifications, enabling customers with payment apps utilising Host Card Emulation (HCE) functionality to make contactless payments quickly and safely using an NFC-enabled Android smartphone.

Poland tends to act more as a homogenous market, with more collaboration, as compared to some of the more developed markets in Western Europe. Sometimes entrenched legacy systems can actually be a constraint. So we are seeing some of the EE markets leapfrogging other European markets. They are building shared infrastructure backed by enabling rather than differentiating technology.

 

How do you see Tokenisation evolving – what are the promises and potential challenges?

Tokenisation already exists today and works successfully in a lot of online markets. It is important to look at the different use cases, and the ways it adds value and cost. With margins coming down markedly we need to be sure we don’t add layers of cost where it’s difficult to make sufficient money to justify this.

So if you compare the EU against US, the margins are very different in Europe. My customer asks, what’s the investment case? So there is little money to cover the costs, unless it gives significant upside.

 

I suppose big markets such as India and China already have their own cards roadmap. When we were in India recently we saw Rupay debit cards being issued for 53 million new accounts opened in just 2 months. What do you see in terms of global outlook?

The important thing is how do you transition quickly? It is a case of not just issuance but creating the necessary acceptance infrastructure. Time to scale of this would be a key differentiating factor.

 

Thanks Jonathan, this has been most interesting. To conclude, what do you most look forward to in 2015?

I think we’ll start to see material changes, new use cases and increasing adoption of the exciting new technology. As some of the things start to roll out I believe 2015 will be a really critical year as the new services become the norm and pilots go mainstream.

 

Which are the new technologies you would back?

You will see NFC, HCE, QR codes and more but as Visa we are agnostic. You will see these become more frequently used methods. You’re going to have very different consumer experiences. If Tesco offers a QR code app, that will be possible, just as other use cases such as NFC or HCE must also be possible, and that’s what we at Visa Europe are working hard to ensure the necessary support.

 

Jonathan Vaux is Executive Director, New Digital Payments and Strategy at Visa Europe. Jonathan is responsible for the development and execution of the New Digital Payments Propositions Strategy for Visa Europe. Key responsibilities include development of innovation agenda, development of digital roadmap and management of key partnerships and interaction with innovation partners, including startups, incubators and accelerators.

This is part of Shift Thought’s Focus on UK Series. Shift Thought provides unique, detailed and up-to-date Country Viewports on most developed and emerging markets around the world. Talk to us today at +44 (0)754 0711 848, or write to us at contact@shiftthought.com to learn more about how we can support your digital banking, digital payments and remittances projects.

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The Jenson Button – What bankers should do next

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These days it is not often that one can find something good to say about banks. So I was delighted at how well a recent campaign in the UK went for Santander.

 

In Windsor in the UK, Santander gave their customers a wonderful surprise this Xmas. When customers withdrew money at the ATM they were greeted by Jenson Button handing them their money through the ATM, plus an extra £100 and a hamper after they pressed the "Jenson Button".

 

Santander's Secret Santa Jenson Button campaign was very well received as the world champion engaged in the community in different ways including visiting people in their homes. The campaign video got more than 1.2 million hits on YouTube.

Earlier it was TD Bank that used a similar campaign, thanking people at the Automated Thanking Machine and engaging in conversation with very unique ways of thanking each customer as in the image below.

 

For some back-to-work-after-a-long-holiday fun I thought we could give bankers our ideas on other such lovely surprises they could think of to re-engage with customers and win back badly needed goodwill around the world. After all, why make this just a once a year exercise? This is also in self-defence, as I'm not sure I'd want someone's head popping out at an ATM, and I'm concerned that as this worked so well it could easily become the surprise of choice for banks going forward.

 

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So what do you think your bank should do to give you that little extra pleasant surprise?

How can they start to create some much needed pleasant memories to rebuild relationships with their valued customers and start to reclaim some lost ground in The Digital Money Game.

 

Charmaine Oak

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

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

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

How payments changed in UK in 2014, and the perfect storm brewing for 2015

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We in the United Kingdom already use so little cash that we could easily have gone the way of the Nordics, where consumers have such good payment systems that mobile payments took a back seat. Yet this year the UK pulled ahead in The Digital Money Game. At the player category level too we saw major upsets to the apple-carts of more than one category of providers, and a perfect storm is now in the brewing for others.

While the acceleration happened on several levels, in this blog I focus on how mobile payments took off this year and consumers now enjoy a raft of payment services on the go. It is fortunate that the Payments Council, Vocalink and Zapp had time to get a head start, as the likes of Apple Pay and Alipay prepare to descend on the UK in early 2015.

What do British consumers really need?

ukIn the UK with a population of 64 million, we have over 84 million mobile connections and more than 72% of these are smartphones. An increasing number of ‘phablets’ are rapidly coming into use.  We have 90.5% banked and a high penetration of internet services of over 84%.

We take internet banking for granted, and have enjoyed bank transfers in minutes for years now, thanks to Faster Payments. An estimated 5.7 million mobile banking transactions take place daily in the UK. We expect to pay everywhere with cards, with over 55 million credit cards and 95 million debit cards issued over the last year.

So do we really need mobile payments? We may feel overcharged by our banks, and while we may resent surcharges on card payments at some merchants in general domestically the use of cash is more of a lifestyle choice than a necessity. I can’t recall when I last used a cheque book. Yet survey results this month claim that enthusiasm for mobile payments has skyrocketed over the last 15 months, with 44% of those polled prepared to even switch accounts to access mobile payments.

London transport goes cashless

Absence of a real need may be one reason why the promise of NFC remained unfulfilled since 2005, but neither consumers nor merchants quite invited it in- until recently. I have been closely involved in projects involving mobile payments and NFC since the early days when Transport for London (TfL) was considered to be the major prize that everyone worked hard to win. Yet it took a decade before mobile payment services on the TfL network launched and even today while it is possible to pay using mobile phones, people are just beginning to use their contactless cards. While in theory mobile payments are available on EE and Vodafone, in practice some elements of the consumer experience remain to be ironed out.

Contactless payments – here at last!

imageIt was quite a novelty to see the new Barclaycard contactless payment gloves trialled for Christmas shopping at some stores this season. The Barclaycard gloves have an embedded contactless chip that is linked to a credit or debit card to pay for transactions of up to £20. Contactless payments are also supported by the Barclaycard PayTag on London buses, McDonalds, Pret, Starbucks and many other chain stores.

We’ve had contactless payments infrastructure building up for years now, accelerated by the 2012 Olympics, attracting major investments from Visa Europe and others. Today across the UK, an estimated 300,000 terminals accept contactless cards. There are over 48.3m contactless cards issued, with a quarter of all plastic new cards being contactless-enabled. Over 2014 UK consumers are expected to spend £2 billion through contactless payments,

What does it mean for the consumer in everyday life?

As a British consumer, paying for things has now become easier. Apart from the danger of card clash, for which we have been most soundly educated, we have to be savvy to protect ourselves from a constant stream of marketing offers. From the consumer perspective, the winners are those who use the new features to shop smarter, save money and stick to their budget.

We now need even less cash, and at stores there are many more self-service checkout points that there were in 2012. You won’t have to tote around a load of loyalty cards either – Tesco has already begun to trial their PayQwiq service at 32 stores. Triallists use the online grocery service and add card details for use through the app. In store they buy up to £400 a day, sign into the app with a four-digit PIN and pick the card they want to use. A QR Code appears on their phone which the till scans to take payment and credit them with Clubcard points.

Life has become easier in many ways. Just as you can easily hail a cab and pay for it through the Uber app, something that London black cabs have not been too pleased about, expect more “Uber-like” innovations wherever there are pain points to be found.

New ways to pay: Pingit, Pay-em or Zapp-em?

paymThis April the Payments Council launched an important service called Paym. This allows convenient transfer of money between participating UK bank account holders. Earlier, Barclays supported Pingit, since 2012 as a great new way to send money in minutes using a phone, but Paym is integrated into customers’ existing mobile banking or payment apps as an additional way to pay, making it possible to send and receive payments using just a mobile number.

Customers register their phone number and the account they want payments made into with their bank or building society and people can then pay directly into the account using just a mobile number – no sort codes or account numbers are needed.

How Paym works

To send a payment, you select the mobile number to pay from your list of contacts, along with an amount and a reference. Behind the scenes the sender’s bank accesses the Paym database to confirm that the recipient is registered with the service and to retrieve their bank or building society account details.

The app helps to confirm details and receive immediate confirmation. The real magic behind this is managed by the Faster Payments Service or by the LINK network, whether or not the recipient phone is on or within coverage. In most cases the payment reaches the recipient account almost immediately and they see it in recent transactions on their account.

How Zapp proposes to work

zappZapp, announced early in 2014 now claims partnerships with major merchants including Asda, Sainsbury, House of Frasers and more. People will be able to pay for goods and services using Zapp, authorising the transaction from their mobile banking app. The payment will be made directly from their bank account, with the use of tokens to offer better security.

What is most interesting really is the effect this will have in enabling payments to small businesses. Shaving off pennies on each transaction can bring welcome relief to a number of traders and servicemen who can expect to take payments using their mobile phones.

A perfect storm brewing

If you are a provider, this is no time to be complacent. Consumers are set to “select and forget” their means of payment and many will make their choice in 2015. Merchants too are selecting their partners just now.

With Paym, banks continue to compete through P2P services that bear their own brand and can be differentiated in some ways. Zapp, on the cards for (delayed) launch in early 2015 will further put the banks in the driving seat as far as payments go.

Weve, a joint initiative of mobile operators in the UK was to roll out Pouch but has already announced it would close the wallet this year. With the HCE initiative announced by the card schemes in February this year, mobile operators no longer dictate terms with regard to NFC services, and in the UK also have the larger consideration of M&A on their minds, with the proposed acquisition of EE by BT on the cards.

applepayWith Apple Pay, already in use in the US and preparing to enter the UK market, I think we may expect a mega-battle on the cards for 2015. Google Wallet, Amazon and others are already highly active in the market.

Besides, we have not even begun to discuss the wider digital money picture. This includes a host of innovation from newly funded players including not just Fintech startups but well-funded Alipay, richer by $25 billion with the largest IPO having come through this year, and WorldRemit and Transferwise, expanding rapidly in remittances.

UK then is the place to watch. Shift Thought continues to do in-depth research on this market. Our detailed interviews with leading UK providers will shortly be published. Do drop me a line at contact@shiftthought.com if you have further questions.

Photo Credits: Promotional material from Barclaycard, Apple Pay, Zapp and Paym

The Digital Money Game – a Journey Most Enjoyable, and the best is yet to come!

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The world of financial services gets ever more interesting as money goes digital. Shift Thought has just conducted interviews with over 50 of the leading payments experts around the world. We are delighted with all we have to share with you from this exercise. Stay tuned for our upcoming blog series on how The Digital Money Game is changing differently in each part of the world – and how to position yourself in the winning camp.

Warm wishes for New Year 2015!

From The Shift Thought Team - Making the right connections to help money go digital

Authors of The Digital Money Game, Virtual Currencies – From Secrecy to Safety

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Read our books? We’d love to hear from you at contact@shiftthought.com

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WorldRemit share the secret to their success and rapid scale-up over 2014

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WorldRemit has enjoyed a rapid trajectory with a number of launches recently. Ismail Ahmed started up this company with the vision of providing a low-fee digital service, moving the agent model of money transfer to an online one in the $580 billion remittances market.

Curious to understand how WorldRemit grew so rapidly into digital channels, I caught up with Jeffrey Alan Pietras, Vice President, International Product Development at WorldRemit. As the year draws to a close Jeffrey reflects on the progress made this year and their ambitious plans for 2015.

 

imageJeffrey, please could you give us a brief background about yourself and an introduction to WorldRemit?

WorldRemit was founded in 2010 by Ismail Ahmed with an idea of changing the money transfer industry, having experienced a degree of expense and inconvenience first hand. WorldRemit began as an online service that enabled people to send money to friends and family in other countries.  Customers can today use WorldRemit anywhere, anytime on their computer, smartphone or tablet. For those receiving money, WorldRemit offers a range of options including bank deposit, cash collection, Mobile Money, and mobile airtime top-up.

This year WorldRemit has seen significant expansion, with new products, channels and partnerships in important corridors around the world.

I joined WorldRemit this year, and bring to my role a combination of experience from working with global players and growing start-up companies. I have worked within the converging financial services, payments, mobile & digital commerce industries at global players including J.P. Morgan, Western Union, Nokia and Yahoo!. This is complemented by my transactional experience with growing start-up companies.

WorldRemit has been expanding rapidly recently. Could you please give us a background, and a summary of your current footprint?

imageYes, WorldRemit’s international reach has grown significantly in the past year. Our service is now available to senders in 50 countries, up from 35 earlier in the year. Last month WorldRemit launched in the United States, which is expected to become one of the company’s largest markets, once fully online in 2015.

The number of countries to which people can send money with WorldRemit’s platform has also increased significantly over 2014, growing from 100 to 117. Among the new additions were 15 countries in the emerging Central & Latin America region.

Those are significant achievements indeed. What has driven your recent growth?

A critical enabler has been the $40M investment by Accel Partners (an early backer of Facebook, Dropbox and Spotify) in March this year. We have since been steadily growing our staff as well as our market presence. We now have over 110 employees and plan to open a new US office in Denver, Colorado shortly.

From a product perspective, we recently launched a successful version of our mobile App for iOS as well as Android. We continue to be one of the most flexible remittance platforms in terms of service interoperability, providing more choice for the way in which senders and receivers can conduct their transactions.

We have a growing number of mobile partnerships to enable instant mobile wallet transfers which have seen great traction in 2014. We currently enable mobile wallet transfers to EcoNet Wireless subscribers, as also to Safaricom, Globe, Smart, MTN, and Vodafone to name just a few.

Jeffrey, what has been the secret to your success?

imageIn my opinion there are two things that set us apart in our industry:

1) the interoperability of our digital money transfer platform and

2) our customer satisfaction rates

As I mentioned before, the WorldRemit platform is one of the most flexible in terms of the interoperability which we offer – this allows us to stay relevant to senders as well as receivers in facilitating the means by which they would like to conduct their transaction.

For instance, aside from cash pickup and bank account transfers, the WorldRemit platform easily integrates with mobile operators to tap into quickly evolving payment ecosystems whereby we can enable mobile wallet transfers. Our platform provides us the flexibility to offer new send and receive options in alignment with partners to truly service the evolving needs of the international remittance market globally, as “one size fits all” does not work in this changing industry.

And on a related note, our flexible money transfer platform & business model equates into a high level of customer satisfaction. Without an agent intermediary (like in the traditional money transfer business), WorldRemit can be truly customer-centric and tailor a money transfer service that delivers speed, convenience, and low-cost to the sender and receiver.

In an era of declining brand attributes for the traditional money transfer business, WorldRemit continues to garner great positive feedback on our service and a high level of customer retention.

What are some of the main challenges for the remittances industry?

The evolution of the international remittance market is fragmented and multi-dimensional – a real challenge in creating a consistent norm for a global scale business which is disrupting the traditional MTOs. In some markets the remittance ecosystem is dominated by financial institutions. In other markets, the ecosystem is driven more by retailers and mobile operators as traditional financial players have not touched the majority of consumers with their services. This fragmentation has led to a number of externalities which influence the evolving ecosystem country by country (e.g. regulatory bodies, mobile operating systems, retail point of sale infrastructure, etc.).

Another challenge in the evolution of the business are new regulations. Especially of interest at the moment are APMs (alternative payment methods) like BitCoin and the influence this will have on the industry.

Digitization is another huge challenge in this industry. How do the traditional MTOs modernize their agent-based model when digital money transfer platforms are cannibalizing the trade (especially with multi-channel offers)? And, what roles will digital consumer services (e.g. social & messaging) play in the consumer to consumer money transfer space?

What are some of the key changes you have observed in the money transfer industry over 2014?

In line with increased regulation in the industry, particularly around the KYC (know your customer) and KYA (know your agent) element of the business, many traditional firms have incurred high compliance costs to try to modernize antiquated offline procedures.

With the added costs of doing business in the offline world, margin compression remains a constant concern for some players. With more consumer choice in money transfer providers (both online and offline), customer acquisition and retention costs are a big marketing concern as brand alone might not be enough these days. I expect to see these concerns continue to play out into 2015.

What are some of the trends you expect to see over 2015 and beyond?

The most exciting trend I anticipate in 2015 (hopefully or in the years to come) is some “reverse innovation” in the payments and remittance space.

The media seems to have bias on the way that consumers would embrace a Western mobile payments ecosystem (e.g. ApplePay) as a global standard. However, with a head-start, many emerging or developing markets in Asia and Africa have robust mobile payment ecosystems already.

While there are some inherent development reasons behind these, I am excited to see what influence these ecosystems in Africa or Asia might have on the evolving consumer mobile payments space in the US and Europe.

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Jeffrey Alan Pietras - Vice President, International Product Development at WorldRemit

Responsible for all business development, partnerships, and new market opportunities for WorldRemit. Jeff has extensive knowledge of strategic product & partnership development with a particular focus on consumer mobile & online services within the emerging markets.

Jeff holds an MBA from London Business School and a BS in Finance from the McIntire School of Commerce at the University of Virginia. He has lived in several European countries, North America, and Middle East and speaks several languages including French and Spanish.

 

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

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

Mobile Money in Zimbabwe– freely transfer money, in minutes not weeks!

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As mobile penetration reached 106% , and effectively 60% of people in Zimbabwe now have access to mobile services, mobile operators have gone a step further. They now offer people safe and convenient ways to transfer money, pay for electricity and basic services and last but not least, add much needed top-up to their own mobile phones, or those of friends and family. Having helped people communicate, they’re now helping them transact and receive money from abroad, helping the country recover from the hyper inflation of 2008 and the loss of their currency.

 

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When the Zimbabwe dollar failed to recover in spite of multiple rebirths: ZWD in 1980, ZWN in 2006, ZWR in 2008, and it’s fourth incarnation of ZWL in 2009, foreign currency finally got legalised in January 2009 and the Zimbabwean dollar was abandoned by April 2009. It is difficult to imagine how a country of 14 million people quietly went about with “business as usual”, as less than 2 million had access to any kind of formal banking services.

In a country where every individual is an entrepreneur there was a gap for how they pay and get paid locally, regionally and internationally. Now new services are starting to fill the needs, but success for all the entrants can by no means be taken for granted.

 

Mobile money brings new hope

Now though, a transformation is under way as over 5 million people have found new ways to carry out daily transactions through a 10,000+ agent and merchant network of small stores that function as points for people to open accounts, deposit and withdraw cash and pay bills.

 

ecocashThe largest operator in the country, Econet Wireless, now has 3.5 million of their subscriber base using their EcoCash Mobile Money service, since it launched in September 2011. At the time, the other two operators had already launched similar services that failed to capture the market, so it was not clear whether they would succeed. Today though, they already handle over $4.5 billion worth of transactions, and a vibrant ecosystem of merchants and services has built up in a remarkably short time.

 

telecashThe second largest operator, Telecel (Orascom) had entered the market in December 2011 without much success, but just as Telecel closed down their service Skwama, Econet made a break through with their Ecocash service. So while it may have seemed like Telecel had an option, the reality is that mobile money is now a part of the core package subscribers expect in Zimbabwe. Early this year Telecel launched Telecash, and four months ago they launched a mobile money Android app for Telecash. This time with a promise of free transfers, free cash in and cash out have had the desired effect, with 600,000 users taking up the service and reported transaction levels of $17 million.

 

imageThe third operator Netone is also seeing better traction with their mobile money service One Wallet now supported through a 1,100 strong network, though active subscribers are still nearer to 200,000 than to their 750,000 target.

 

 

nettcashMobile operators are not the only active players. In May 2014 a service call NettCash launched with a unique contactless technology called Near Sound Data Transfer (NSDT), an additional API and promise of online payment. As of today it claims to have over 200,000 customers supported by 1052+ agents and merchants. Our Shift Thought knowledge base registers over 18 services from a variety of players, as the market grows to meet the needs of the people.

 

The banks awaken

Now that the people have voted with their feet and regularly visit conveniently located agents, banks are anxious to get a slice of the newly established market. Econet owned Steward Bank supports Telecash, but a few days back launched their own new AllSave Bank Account that is supported at some of the Telecash agents. This low cost account is expected to help to deepen the customer relationship, with loans and other services. As seen in Pakistan, I expect this could result in the other mobile operators looking around for a suitable bank to acquire, to match the business models that Econet can now aspire to.

 

Agent networks: To share or not to share?

The new battleground is the agent network. As the pressure mounts to enrol customers, there has been a reluctance to share agents. This recently resulted in a directive from the Reserve Bank of Zimbabwe to discourage exclusivity of agents. However an interoperable agent network may raise as many questions as it solves and I see a need for new processes and compliance structures that are likely to gain focus in 2015.

 

Remittances made easy

Now that domestic money transfer has been conquered, the providers are turning their attention to the $1.9 billion formal remittances (equal amount of informal?) that are sent into the country. There has been concern as this declined markedly by 15% from $2.1 billion in 2012 to $1.8 billion in 2013. The main send countries include South Africa, UK, Canada, Australia and the United States.

If these transfers can be used to fund mobile money wallets and use digital money for daily transactions, that would help the fledgling services to thrive and grow. UK-based WorldRemit  offers an internet-based money transfer service from UK, from where an estimated 600,000 diaspora send money home to Zimbabwe. Telecel has partnered with UK based Mukuru.com for remittances from South Africa, from where an estimated 2 million migrants send money home. And certainly, Econet is well placed to address the opportunity for regional remittances, thanks to their presence across neighbouring countries in Africa.

 

Online payments – at last!

The vibrant mobile money market is injecting life into other parts of the economy.  In June 2014 card based transactions increased in value by a whopping 21% over the previous month, to reach $361 million. MasterCard recently announced a partnership with EcoNet to offer debit cards for EcoCash Accounts. Mobile and Internet transactions together have risen to $388 million, with electronic payments bringing in a new era of accountability and hope for the country.

 

The future of mobile money in Zimbabwe – will it mature into digital money in 2015?

What happens next depends on whether the Zimbabwe ecosystem is able to make that difficult transition to non-cash payments, merchant payments and retail payments. As the agent network grows, the small stores must fully embrace the services and find their businesses succeeding due to this. The country must go a long way to strengthen the building blocks and weaken the real enemy, cash and this means that all will need to pull in the same direction.

But underlying all this progress is one building block that must not be forgotten. Zimswitch provides the rails that allow for instant funds transfer and also supports mobile and online payment services. These underlying enablers need to be strengthened and connected into the vast developing digital economy – regional and global.

Though this is hard at first, Shift Thought research in markets around the world show that if everyone in the ecosystem starts to believe from their hearts that the success of one money service does not mean the failure of another, more people start to embrace the services and the whole market grows. I believe we have much to look forward to with the march of digital money in Zimbabwe, not just for Zimbabweans or even Africans, but for the future of payments around the world.

 

Charmaine Oak

Practice Lead, Digital Money

Email   : contact@shiftthought.com

 

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

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

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

 

Happy Thanksgiving!

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The Shift Thought team wish all our readers a bountiful Thanksgiving. May the table of the world be filled with wonderful things, this year and for many years to follow.

Our grateful thanks to you for sharing this exciting journey, as we seek to innovate to make money digital in a way that can improve lives.

 

Authors of The Digital Money Game, Virtual Currencies – From Secrecy to Safety

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

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

 

Easypaisa Pakistan: A 5-year journey from OTC to digital money

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Easypaisa from Telenor Pakistan and Tameer Microfinance Bank has now woven 50,000 small stores into a brand new fabric of financial services that help move Pakistan from a cash based economy towards a position where the mainstream population can avail of a range of financial services that better their lives.

 

easypaisa1Easypaisa, a pioneer of branchless banking (BB) in Pakistan, today plays a key role in offering services through which customers can make payments in an assisted model as well as from digital wallets linked to their mobile phones.

Today I have the privilege to speak to Omar Moeen Malik, Head of Strategy & Projects at Easypaisa. Omar shares about his 5-year journey, some of the key strategic decisions Easypaisa took along the way and what excites him about the future.

 

Omar, thanks very much for your time today. Could you start by telling us a bit about yourself and your role

As Head of Strategy and Projects for Easypaisa, I am responsible for developing and driving the strategy for Easypaisa. I head the key strategic projects as well as the product development for Easypaisa and I am responsible for developing our mobile money financial ecosystem in Pakistan through strategic partnerships. I was part of the core team that first conceived and implemented the project in 2008.

I designed and deployed the OTC and e-Wallet businesses back in 2009, launching the first mobile money service in Pakistan, and was involved in multiple functional areas over the years. I’ve played an important role in developing and managing the distribution channels for Easypaisa and have a key responsibility of interacting with the Telco and Banking Regulators on the Regulations for Branchless Banking (BB).

 

Congratulations on celebrating 5 years of Easypaisa last month. Could you please share a bit about the early days of the service

Back in 2008 we were captivated by the possibilities of bringing financial services to over 100 million adults in Pakistan, of which just 15 million were banked, but an estimated 70 million were mobile phone users. Inspired by success stories from Kenya and the Philippines we knew that as telcos we had the dual advantage of accessible technology and a vast distribution network across the country. The last 5 years has been a journey to leverage this to offer a full range of services, while working with our partner Tameer Microfinance Bank and our regulators to create enabling regulations to make this possible.

Once Branchless Banking Regulations were issued by the State Bank of Pakistan (SBP) in March 2008, we were the first in the market, with Easypaisa launched in October 2009. We achieved this through our strategic partnership and investment in Tameer Microfinance Bank Ltd (TMFB), the first recipient of the Branchless Banking license, so as to offer services under the bank-led model.

Today as the leader in BB with 57% of the volume of transactions, we serve 7 million customers across Pakistan on a monthly basis – they walk in to a shop to pay bills, and send money or receive money. These services are not limited to Telenor subscribers, but any person in the country can avail these OTC services. However, this is still a small number compared to the potential - there is a lot of work ahead of us still!

 

What kind of work do you see ahead of you?

The big piece is our on-going struggle with our largest competitor – Cash. Moving toward non-cash payments requires the development of entire ecosystems, and while we have a key role to play some of the work we’re doing is opening up big potential for our partners.

Then there is the OTC/ mobile wallet issue. How do we move from transactions to customers, and how do we get customers to keep money digital?

 

So why did you choose to go with OTC first, and how has that worked out?

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We launched Easypaisa as an over-the-counter (OTC) service, whereby all transactions were agent-assisted and no registration was required.

We did this for 3 main reasons:

Firstly, this model made it possible to serve all mobile phone subscribers instead of only Telenor Pakistan customers, moving the needle on potential market size from 21 million to 110 million adults.

Secondly, for the agents, the cash in-cash out (CICO) business could just not be enough to establish branchless banking as a serious investment. OTC services, with their pricing model allowed for generous commissions to agents, compelling them to invest in Branchless Banking. Even if we had a wallet model we would need a CICO system anyway, and had to set up agents for this all over the country.

Thirdly, we believed in laddering the services for our customers. We started with OTC because OTC services entail the least behavior change. Customers were already used to walking into a Bank branch to pay their Utility Bills. All we asked them to do was to walk into an agent location. Customers would never have been able to do all these services on their own from a wallet. The low levels of literacy and use of technology meant customers prefer to have someone else carry out the operation for them.

 

I believe we were probably one of the first in the world to launch this assisted-model method for branchless banking. Although we only proposed to start this way and expected to soon move customers to the use of a mobile wallet, this shift has proved harder than we expected.

 

Please describe how you leverage your top-up network of a quarter of a million to build your agent network that grew from 2,500 to 50,000 agents today

clip_image006The key thing was to give the agents sufficient business and provide our customers with an incentive to use the money from their mobile wallets rather than withdrawing and spending in cash.

Over the last 5 years we’ve worked on many levels – to improve the customer experience and make it easy to use services from their mobile phones, but also to create the assisted model for bill payment, utility payment and services that people need to use for their daily lives.

 

As Easypaisa celebrates 5 years of touching the lives of millions of people in Pakistan, could you please give us some background on the services such as this, offered by Easypaisa today?

Today in addition to our walk-in customers, we have more than 3 million customers subscribed to Easypaisa Mobile Accounts. Nearly 400,000 transactions take place on Easypaisa each day and in 2013, Easypaisa moved 1% of Pakistan’s GDP.

This new network supplements the 11,000 bank branches and 6,000 existing ATMs that were all that customers had to serve them across the whole of Pakistan at the time of our launch. From walking in to stores just to top-up their phones, anyone in Pakistan with a valid Nadra CNIC can now send and receive money and enjoy a lot more services as well.

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We chose services that would help customers easily move away from cash. In addition to a range of payments and insurance services we’ve added some unique new products.

So for instance, there is a lot of interest in holding savings in gold. We recently launched two unique products with ARY Digital, a popular Pakistani television network available in Pakistan, the Middle East, North America and Europe and a subsidiary of Dubai-based ARY Group. Now customers can deposit an amount of their choice into an ARY gold account.

Life insurance, government benefit disbursement and other key services are helping to make the lives of people more secure while also helping the government address concerns relating to money laundering and terrorist financing.

 

Omar, like millions of others around the world, I am deeply inspired by Malala, the youngest Nobel Laureate winner in the world. How do you see Digital Money initiatives furthering the cause of education?

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This year Easypaisa worked with Sindh Education Reform Program (SERP) unit for educational stipend disbursements and we have a number of projects such as disbursements to 400k students and social payments to 1 million women through government social cash disbursement programs. We are also enabling about 50,000 retired Government pensioners collect their monthly pensions

 

Easypaisa is one of the few mobile money services that support international remittances into wallets. What’s your experience with this? Does this drive the take up of wallets? Do people like it?

International remittances for Pakistan are considered the backbone of the economy. Yearly an estimated $20b comes in from large diaspora in Middle East, Europe and America. SBP estimates an equal amount could be moving informally that would mean a total market of $40 billion per year.

Initially we enabled our agent network to cash out remittances. However the value cashed out tended to be almost as much as their investment in provisions in their entire shop. We now find it a better model to ask customers to open a mobile wallet first. Today customers can withdraw this money directly to their wallets, making it safer and more convenient.

However in order to make this service really useful we need to have regulations appropriate to branchless banking, as these are not yet in place.

 

Omar, what do you find most exciting in terms of new services going forward into 2015?

With the platforms and network we now have in place, as well as the entire ecosystem getting established across Pakistan, I see literally billions of services that could take off. I am most excited about the immediate potential from online payments, retail Payments and merchant payments.

Paying for goods and services online has huge potential as more customers start to expect this service. Similarly we’re introducing ways to pay at the store through a customer experience that is actually the simplest of all services and we expect this to vastly help in the uptake and use of our mobile wallets.

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Could you please share a bit about the huge potential of merchant payments in Pakistan and the project you recently launched for supply chain management?

We’ve recently launched a very successful initiative to streamline the supply chain for FMCGs and their distributors, leveraging our Easypaisa merchant network. This has worked out very well and is one of the transformational services that will further develop over 2015.

Starting with a paper-based system for order management, inventory and payments we’ve been able to create ways for our agents, who are also small stores, to order from and pay their distributors. This reduces wastage and risk for distributors while also helping our agents – a clear Win Win that we hope we can now replicate with our merchants in Pakistan.

 

Omar, speaking to you today has sent tingles down my spine. I am captivated by the vast transformational potential of what you have done and what you plan to do going forward. Thanks for so generously sharing your experiences and I wish you and the entire Easypaisa team the very best for achieving your ambitious goals.

 

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Omar Moeen Malik, Head of Strategy & Projects, Easypaisa

Prior to his 5 years of experience in Mobile Financial Services, Omar headed the GSM Value Added Services Products unit at Telenor. He has also worked with Teradata and has experience in Advanced Analytics with Data Warehouses for mobile operators and banks in the MEA region.

A graduate of the University of Texas at Austin, Omar also has 3 years of experience in working as a Software Engineer with different organizations in the States including IBM. He also holds a MBA degree from the LUMS, Pakistan.

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Email contact@shiftthought.com for details

Part of the Global Interview Series by Charmaine Oak

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

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

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