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Unleashing The Power of Smart Payment  - Contactless
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SPA Presentation at Cartes America ...

SPA Presentation at Cartes America
Contactless Card Shipments Break all Records as
Consumers Adopt New Ways to Pay

• Contactless technology was present on 23 percent of all payment cards shipped worldwide in 2012
• Contactless growth in Western Europe and Asia exceeded 100 percent
• More than 220 million contactless cards were delivered by Smart Payment Association (SPA) members in 2012
• SPA believes the harmonization of ISO, SEPA and EMVCo standards will ensure the global interoperability of new NFC contactless services for consumers.
23rd April 2013

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Unleashing The Power of Smart Payment  - Contactless Unleashing The Power of Smart Payment - Contactless Presentation Transcript

  • Unleashing the Power of SmartPaymentBrian Russell, Smart Payment Association (SPA) Representative andSenior Vice President, Payment and Transit, Giesecke & DevrientApril 2013 – V5 (MaMo V2.7) shaping the future of payment technology
  • Agenda 1. SPA’s role in shaping the future of payment technology 2. SPA Latest Publications 3. Contactless & Online: The payment market evolution and the accompanying CNP fraud explosion 4. SPA global smart payment card shipments 2012 – Exclusive Preview 5. SPA on standards to prompt market growth without hampering security 6. Take Away2 shaping the future of payment technology
  • Exclusive preview  Contactless technology was present on 23% of all payment cards shipped in 2012  Contactless growth in Western Europe and Asia exceeded 100%  Over 220 million contactless cards delivered by SPA members in 2012  Shipments of Dual Interface cards, incorporating both chip and PIN and contactless technologies, are now growing at 77% year on year3 shaping the future of payment technology
  • 01.SPA’s role in shaping the futureof payment shaping the future of payment technology
  • Who we areThe Smart Payment Association addresses the challenges of today’s evolvingpayment ecosystem. We offer leadership and expert guidance to help membersand their financial institution customers realize the opportunities of smart,secure and personalized payment systems and services - both nowand in the future. Since 2004 Members: shaping the future of payment technology
  • What we do  The SPA works in partnership with global standards bodies, its own vendor community, and an expanding ecosystem of established and emerging brands to offer an ever-growing portfolio of advisory and support services.Non-Traditional Ecosystem Expert Advisor Services Help shape the future of paymentsCustomers Members Customers Services Bring Value to Financial Institutions Members Services Fig 1 Trade Organization Extending advisory and support across the evolving community, the SPA is addressing today’s challenges and shaping the future Technologies direction of paymentTraditional / Smart Card Advanced/ New technologies, standards and business models. 6 shaping the future of payment technology
  • How we do it  By delivering the market’s most accurate barometer of payment trends  An annual analysis of payment trends based on actual manufacturer sales data  SPA members = 85% of the total smart payments card market  By supporting the creation and adoption of standards and best practices  EPC-CSG/SEPA: Card Representative and Vendor Sector Spokeperson, Chair of the EPC-CSG Task Force to specify the SEPA functional and security requirements for emergent & remote payments (Internet + Mobile), Convenor of the new EPC-CSG Expert Team on Card Innovative Payments, Member of the Preparatory Committee of the SEPA Security Certification Management Body  EMVCo: Technical Associate and Board Advisor for Card Sector  EMVCo Next GenerationTaskforce: Contributor  By extending expert advice and support across the payments ecosystem  An eye-catching library of expert technical resources and thought leadership collaterals to shape the future of payment7 shaping the future of payment technology
  • SPA & its members in the US Smart Card Alliance (http://www.smartcardalliance.org/) Cartes America (http://www.cartes-america.com/ ) EMV Migration Forum (http://www.emv- connection.com/ ) ISO:  Smart cards, electronic authentication, biometrics, middleware / collaboration with NIST(ISO JTC 1)  Mobile payments / collaboration with major US Banks & Federal Reserve (ISO TC 68) EMVCo Technical Associate & Board Advisor EMVCo NextGeneration Taskforce  Optimize interoperable processing of contact / contactless and mobile payment cards* *tamper-resistant hardware, personal, portable device to execute8 payments, i.e. ID-1 card contact or contactless, SE (SIM/UICC) shaping the future of payment technology
  • 02.SPA Latest Publications shaping the future of payment technology
  • SPA latest publicationsCOMING SOON  Biometrics for EMV Payment Cards  Software to Chip Fallback Solution  Security Certification for Mobile Platforms  Security for Mobile Payments  PIN by SMS  Private Label Payment Solutions  Business Continuity in the Payment Card Issuance Industry Download at: www.smartpaymentassociation.com10 shaping the future of payment technology
  • 03.Mobile & Online: The paymentmarket evolution and theaccompanying CNP fraud explosion shaping the future of payment technology
  • The payments market is moving to mobile and online  Statistics on online/ mobile/ magstripe etc.  Driven by smart devices, WPR 2011 i.e. Smartphones and CAGR 09-13 tablets Non-Bank  Driven by connectivity and Provider 67.3% convenience Bank Providers 47.6%  New players and new usages  Leading to assymetry and fragmentation WPR 2011 CAGR 09-13  Need for accelerated standardization Alternative Payments 67.3% Bank Providers 18.1% Source: World Payments Report 201212 shaping the future of payment technology
  • So is the fraud!  Total level of fraud has reduced overall for the SEPA region  However, card-not-present transactions now represent the biggest share and the biggest growth in terms of fraud  Risk with perception of lack of security of existing standards Source: ECB Card Fraud Report 201213 shaping the future of payment technology
  • NFC revolution is happening 14 Transport Payment Smart Poster Tags & Cards14 shaping the future of payment technology
  • Internet payments  Back in the 50’s  Card-not-present problem  3D-Secure brings some improvement  EMV card enables  Dynamic card generation  One-time passwords (e-Banking)  SPA supports & promotes EMV utilization of technology with stakeholders  Use of EMV card with a personal terminal device / NFC Chip  Scalable, secure  Interoperable15 shaping the future of payment technology
  • 04.SPA global smart payment cardshipments 2012 –Exclusive Preview shaping the future of payment technology
  • 975 Million smart payment cards shipped in 2012 by SPA Members* +9% +12% +18% +16% +39% +23%Mio. Pcs 418 580 675 798 898 975sold 2007 2008 2009 2010 2011 2012 *includes all chip payment cards – EMV represents more than 90% of SPA shipments17 shaping the future of payment technology
  • TAM > 1.1 Billion units in 2012* EUROPE TAM: 322M NORTH ASIA TAM: 238MNORTH AMERICA CISMEA** & EASTERN TAM: 84M EUROPE TAM: 208 M SOUTH EAST ASIA SOUTH AMERICA TAM: 89M TAM: 225M Payment Chip cards deployed or in advanced deployment Chip cards in deployment Chip cards migration initiated * 2012 Estimated Total Available Market (1166 units) by Geographies in Millions – Includes all chip payment cards No Chip cards ** Includes Turkey 18 shaping the future of payment technology
  • SPA regional growth 2012 vs. 2011* SPA +8% EUROPE & CISMEA** • WE: Moving from SDA to highly secure DDA/CDA • Accelerating pace of European contactless card shipments • SEPA rules enforce chip and PIN • CISMEA’s EMV growth supported by Russia+ 1% and newly migrating African countries SPA AMERICAS +24% • Canada finished migration to EMV APAC • US EMV migration has been initiated (Visa, MC, AMEX liability shifts 2015) • China massively migrates to chip based • LATAM is still SDA oriented payments (PBOC 2.0 mandate until 2015) • India initiated move towards EMV Chip & PIN deployed or in • Strong contactless growth in APAC advanced deployment region too Chip & PIN in deployment Chip & PIN migration initiated * 2012 SPA Shipments by Geographies Compared to 2011 SPA Shipments – Includes all chip payment cards No Chip & PIN ** Includes Turkey19 shaping the future of payment technology
  • 220+ Million increase in contactless payment card shipments in Europe in 2012, notably Dual Interface  Contactless technology = 23% share of smart Adoption rate 23% payment card shipments contactless cards 15% 13%  Dual Interface = 77% YoY growth 12% (represents 89% share of 11% contactless shipments) 8% Contactless Contact 418 580 675 798 898 975 2007 2008 2009 2010 2011 201220 shaping the future of payment technology
  • SPA regional contactless growth 2012 vs. 2011 CTLES +106% CTLES WESTERN EUROPE +111% •Contact: 240 Mio. •Contactless: 62 Mio. CTLES CT CT +17% -14 % +1 % CTLES +34% ASIA PACIFIC AMERICAS CT •Contact: 142 Mio. •Contact: 205 Mio. +26% •Contactless: 80 Mio. •Contactless: 54 Mio. CT CISMEA & EASTERN -4 % EUROPE •Contact: 164 Mio. Chip & PIN deployed or in •Contactless: 29 Mio. advanced deployment Chip & PIN in deployment Chip & PIN migration initiated No Chip & PIN21 shaping the future of payment technology
  • More convenient payment options  Contactless: fast, secure and convenient technology  Bring convenience to cardholder  Undisputed advantages for issuers, able to increase card usage and ticket size  Combined with transit features, grants issuers “Top of Wallet” benefit  Pave the ground for mobile payments  Contactless payment infrastructure (terminals, POS, etc.) in deployment  End user education to pay contactless with cards or others form-factors (stickers, …)  Accelerate NFC introduction to mass market  Migration to contactless: a reality  Spreading in more than 30 countries on all continents (Canada, UK, Turkey, Poland, France, Australia, ...)  220+ Million contactless cards delivered by SPA members in 2012 The Next Payment Evolution: From Contactless to Mobile Payment – December 201022 shaping the future of payment technology
  • More than half of shipments are DDA  DDA Growth in 2012: +28% 21% 26% 32% 41% 47% 56% DDA ADOPTION 418 580 675 798 898 975 2007 2008 2009 2010 2011 201223 shaping the future of payment technology
  • SPA DDA regional growth 2012 vs. 2011 DDA +6% WESTERN EUROPE •DDA: 258 Mio. DDA •nDDA: 43 Mio. +60% DDA DDA +45% nDDA +69% -33% nDDA +7% AMERICAS ASIA PACIFIC •DDA: 39 Mio. •DDA: 117 Mio. •nDDA: 220 Mio. •nDDA: 105 Mio. nDDA CISMEA & EASTERN EUROPE -7% •DDA: 133 Mio. Chip & PIN deployed or in •nDDA: 60 Mio. advanced deployment Chip & PIN in deployment nDDA Chip & PIN migration initiated -18% No Chip & PIN24 shaping the future of payment technology
  • More secure ways to pay  Big payment schemes pushing for DDA/CDA  DDA/CDA reducing fraud  Mature markets now migrating to DDA/CDA technology  Majority of Dual-Interface cards using DDA technology White Paper Available on DDA Migration April 201025 shaping the future of payment technology
  • 05.SPA on standards to promptmarket growth of secure,interoperable contactless payments shaping the future of payment technology
  • SPA on convergence of contactless standards  INTEROPERABILITY of any contactless device is KEY to deploy applications  SPA considers the way forward to be through Common Testing Methods  SPA supports EMVCo convergence project with NFC Forum and ISO 14443  A first analysis performed by EMVCo in order to identify gaps and overlaps  Consistency between ISO standards and EMV specs to be managed  With regards to NFC Digital Protocol, the objective is that NFC devices may pass the L1 EMVCo certification27 shaping the future of payment technology
  • SPA on interoperability as a driver for security  Interoperability can’t be achieved at the price of weakening the security of the overall payment processing chain  Best technology to secure Mobile Devices through adoption of the Trusted Executing Environment as standardized by GlobalPlatform  Common Certification practices based on PCI & EMVCo specifications  Optimization of Mobile Payment Platform certification practices  Migration towards Elliptic Curves Cryptography  Promotion of Biometrics as a standard Cardholder authentication method in EMVCo  Chip to Software secure fallback solution pushed in SEPA and EMVCo28 shaping the future of payment technology
  • SPA proposal for EMV2.01. Seek the interfaces for interoperability most needed to maximize the number of transactions2. Identify those technologies and services that should remain in the competitive space3. Standardize peripherals to be integrated on the smart card body to support new card functionalities4. Establish a well-designed policy to address IP5. Carry out a comprehensive risk analysis method for new payment instruments6. Enhance mechanisms to facilitate free choice by the cardholder of the payment instrument7. Carefully plan technology migrations and introduce a card fallback mechanism8. Facilitate central acquiring by adopting new ISO message structures and data elements AVAILABLE ON9. Revisit appropriate Cardholder authentication methodologies and standardize a DEMAND Biometrics profile for Payment Applications10. Revisit privacy protection practices in the light of mobile payment adoption and upcoming regulation 29 shaping the future of payment technology
  • 06.Take Away shaping the future of payment technology
  • Take away  Smart payment card shipments hit the one billion mark in 2011, and exceeded 1.1 billion in 2012  Ever increasing penetration of contactless payment (23% in 2012)  Move towards more secure ways to pay (DDA more than half of shipments)  EMV is a truly established, global secure & interoperable infrastructure, and NFC is the contactless extension paving the ground for the evolving connected world  SPA plays a key role in shaping the future of smart payments through recommendations and strong involvement in SEPA, EMV and ISO Standards31 shaping the future of payment technology
  • One Address: www.smartpaymentassociation.com Contact: info@smartpaymentassociation.com32 shaping the future of payment technology
  • Appendix shaping the future of payment technology
  • SPA Market Data Monitoring Process The figures in this presentation are actual shipments published by SPA. Actual shipments data, segmented by region and by interface, are sent on a quarterly basis by SPA members to an independent third party. There is no direct exchange of data between SPA members. Consistent with SPAs practices for the exchange of historical data, the third party aggregates and anonymizes the data so that no SPA member is able to identify another SPA members contribution. The data is published on an annual basis, at the end of the first quarter of the following year. Once a year, total market estimates by region are also sent by SPA members to this independent third party to evaluate TAM (Total Available Market). shaping the future of payment technology
  • Comparing Market Figures  Cards in circulation / installed card base:  Cards in circulation means that all cards that have been issued in the current /covered year, as well as all previously issued cards that are still valid, are taken into account.  Card validity differs across markets, typically between 2 Source 2010* 2011* 2012* Growth to 5 years.  Total Available Market (TAM): EMVCo Cards in 1,083 1,340 1,549 16%  Only cards issued in the current / covered year are Circulation counted (new cards, replacement cards, re-issued cards) – this number is estimated by SPA. SPA Estmated 916 1,036 1,166 13%  Actual shipments: TAM  Actual shipments data, segmented by region and by interface, are sent on a quarterly basis by SPA members SPA Actual 798 898 975 9% Shipments to an independent third party who aggregates and anonymizes the data so that no SPA member is able to identify another SPA members contribution.  Differences in card types counted:  EMVCo reports on EMV payment cards only.  Other reports may include local / domestic schemes and other non-EMVCo member payment chip cards. *In million units35 shaping the future of payment technology
  • Alternative Payment Options  Checks  QR code  Less and less utilization  Appealing:  Small checks replaced • (almost) no infrastructure needed by debit cards  Optical reading:  Large checks replaced • Not-fast, light ambience by money transfer dependent  No standard, dependent on issuers  Cash  Apps dependent  Still most convenient for small  Security: genuine codes are payment amounts checked inside phone apps  Legal value money  User recurring costs (SMS)  It is there to stay  Slowing down NFC deployment  Cash virtualization could happen  Pre-loaded mobile  Cloud-based currencies36 shaping the future of payment technology
  • The NFC Deployment  NFC technology based on Secure Element  NFC Contactless technology is not just for mobile payments  NFC deployment is happening beyond Mobile Handsets and NFC POS  Many devices will be NFC capable  NFC transactions  Not just payments  Co-locating with other services  Get ready to exploit NFC pervasiveness  Strong Standardization effort: ISO, EMVCo, NFC Forum37 shaping the future of payment technology
  • Are EMV Cards Protecting You? 5.2 Billion Payment Cards  EMV deployment is pushing fraudulent transactions out shipped in 2011 of EMV countries  Good implementation of EMV proven to significantly reduce fraud  25% are private label cards: Retail, Airlines, Petrol, Transport, ... Source: EMVCo & Nilson Report38 shaping the future of payment technology
  • SEPA  SEPA = Single Euro Payments Area  There are 17 countries that are members of the European Union (EU) and use the Euro currency  There are 10 countries that are members of the EU and do not use the Euro currency  There are 3 European countries (Liechenstein, Island and Norway) that are not members of the EU and do not use the Euro  + Switzerland & Monaco39 shaping the future of payment technology
  • Thank Youwww.smartpaymentassociation.com shaping the future of payment technology