Thoughts on Payments & Cards Trends


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"Thoughts on Payments & Cards Trends" -- a brief talk given at European Merchant Services, Amsterdam Zuidoost - on 19 September 2013.

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  • ContentsSome thoughts on paradigm shiftsRe-thinking the nature of transactions and transaction actorsProximity mobile payments: card emulation or not? 3 case studies from The Netherlands to validate consumer acceptance of NFCRebooting the conversation from a consumer point-of-viewWhat do we expect from a wallet, or a payment instrument?Is NFC a “tech-push’ or a “consumer pull’?How to differentiate with NFC?
  • So I was thinking about some of the old conceptions of “e-commerce” and the “e-wallet” that we used to have at Netscape and MCI (1994-1996), when we were first deploying HTTPS.
  • Speed & efficiencyGlobal marketsProducts & choicesComparison, reviewsThe long tailSocial mediaViral movements & newsMonetising clicksSpamPorn
  • Hard to ignore card’s ubiquity for retail payments in developed markets.However, for online payments – will this apply in the same manner? Especially for the younger generation ..
  • “Pinnen met je mobiel” retail shopping and payments trial using contactless PIN (NL direct debit) from Aug 2007- Feb 2008 Payment with a secure application on the mobile phone (Samsung x700)Also featured storage of value for recycled bottles on the phone – save your value, cash it in or donate it.Highly successful trial, proven consumer acceptance/trust a mobile as secure debit card replacement.
  • Proof-of-concept programme for NFC payment for soft drinks using MiniTixPartners: Capgemini, Coca-Cola, Rabo Mobiel, Yoonison, MiniTixBeginning in Apr 2007, 30 locations nation-wideProof-of-concept ‘Kroketjeuit de muur’ met je telefoon, Oct-Nov 2007 Capgemini, FEBO and Mertens GroupMiniTix NFC trial in Amsterdam (NFC mobile phones, cards)Proof-of-concept programme to explore cash management, saves coin traffic, fraud management
  • Major Dutch retailer Albert Heijn wanted to trial a new retail formula in their “To Go” storesNFC shelf-level tag shopping, as customer filled her basketCustomer built up a list of what they were buying, and performed self-checkout without queuing at busy store countersDiscounts and specials applied automaticallyReceipt can be printed upon existOccasional control checks to validate purchases
  • MNOs tend to generate their revenues from “transaction-based business” (sale of SMS, data, voice calls), whereas margins on actual “transactions” for banks are thinning in most markets, and in some cases unprofitable in general.For banks, the question about the value of payments services is a burning one these days – especially for developed world banks, but also for the developing world as well.Deposit-taking and lending are major differentiating business lines of banks, although some MNOs and other parties are starting to make moves in this direction.
  • The case is clear for our creativity to make virtualised ecosystems work.But it will take a lot more creativity, usability and value to become a real business driver.And for banks, they also need to achieve this without sacrificing trust, security, longer-term relationships, and (a certain degree of) transparency.
  • Thoughts on Payments & Cards Trends

    1. 1. Thoughts on Payments & Cards Trends EMS (19 September 2013) Dan Armstrong (
    2. 2. marketplaceMCI (1994-96)
    3. 3. marketplaceMCI (1994-96)
    4. 4. 1-800-MUSiC-NOW (1996)
    5. 5. Mobile “Transactions” CallCentre Banking IVR Banking & Payments SMS & Calling Alerts (spending, ATM usage, fraud, etc.) Transactions with Teller or Agent using Mobile Devices Mobile Banking & Payments Remote Payments & Electronic Wallets Mobile Contactless / Proximity Payments MNO “Mobile Money” Mobile Remittances Advertising or Loyalty Models = banks deploy = bank-led models = cooperative models = mobile operator-led models = mobile operators deploy = third-parties deploy = public transportation-led models Mobile Contactless / Proximity Payments
    6. 6. Mobile Proximity Payments: A Fundamental Divide Card Emulation Bypass Card Emulation  Phone takes the place of a physical card to transact at a physical merchant location  Consumers are comfortable with card operating models  Standardisation and ubiquity of acceptance points a must for economies of scale  Requires compatible card/mobile acceptance infrastructure  Trigger remote payment with phone (apps, other manner)  Confirmation can be pushed to merchant, but how to localise the payment location without NFC?  Receipt can be printed at POS  Latency in making payment this way vs. cards  EMV / secure PIN keypad  Card acceptance still required
    7. 7. Card Emulation vs. Bypassing Card Emulation CounterEnables Payment value on the card value in “the cloud’ Mobile Authentication EnablesPayment card-emulationbypasscard-emulation Card Authentication EnablesPayment
    8. 8. Mobile NFC PIN Emulation Trial @ C1000 (2007-08)
    9. 9. Mobile NFC for Low-Value Payments in Vending (2007-08)
    10. 10. NFC Mobile as Retail Shopping Tool, Issued Device & Acceptance Point @ AH To-Go (2008)
    11. 11. Mobile phones accepting cards, leverages existing card bases And of course, allowing traditional credit card payments, without a card present ..
    12. 12. But then again, if you were a merchant - you could also just say you accept PayPal too .. But the per-transaction charges of moving online payments to the supermarket point- of-sale are usually prohibitive to retailers, and PayPal wants to keep it’s margins healthy too .. Fully cardless payments, some people trying to figure out “proximity payments” without an additional hardware element HERE
    13. 13. Square Card Case
    14. 14. Will BLE fill the gaps? (last week’s announcements) PayPal Beacon Estimote iBeacon
    15. 15. PayPal Beacon
    16. 16. But PayPal Beacon and iBeacon aren’t really about the “transaction” in the traditional sense. They focus on the “customer journey” – and seek to address the next- generation merchant’s priorities.
    17. 17. Focusing on “transactions” Transactions are the Channel ”I have a pipe and/or network and I want to monetise the investments I made in creating it.” ”I want as much to get through that pipe and the (mobile) phones accessing it as possible.” Transactions via the Channel ”I have stuff I want to do via channels. Enable my consumers to control their bank account, make a payment, get a ticket, see an ad, save or use loyalty points, etc.” ”I need as many (cost effective) channels and pipes to do it.”
    18. 18. How shall we define “transaction”? Bank Account Value Transfer, Payments Value Depletion, Prepaid, Wallets, Transportation Loyalty, Points, Coupons, Transformation Moments Eyeballs, Trust, Engagement, Action <?>
    19. 19.  50% of consumers will pay more for products they trust  78% of consumers will look first to trusted brands when in need of products or services  78% of consumers are willing to give trusted brands a chance, even if unsure of what value the product or service will bring to them  82% of consumers will choose to use a trusted brand’s products or services frequently, rather than move between brands  83% of consumers will recommend a trusted brand to others, often un-prompted Trust? Concerto Marketing Group, Vancouver BC, Canada / Ontrack Advisory, Singapore (April 2013)
    20. 20. What do we expect from a wallet?  A place to store cash?  A place to store payment tokens?  A place to store other tokens?  A personal object?  A private object?  Something small enough to be portable/mobile?  … but … do we need a physical object?
    21. 21. Then, what do we expect from a transaction device?  Identification of myself, my rights and capabilities, memberships.  Identification of myself, an authentication tool for payment.  Secure, multi-factor  Tamper-resistant/evident  Personal and private  Easy to use  … but … do we need a
    22. 22.  Consumers seem to love and trust it • But who will pay for it’s implementation … merchants, banks, mobile operators, handset manufacturers?  Given the “app revolution” in so many of our markets, what value does NFC bring to payments? • Convenience? • Put all cards in one apparatus? The phone-shaped wallet .. • Addiction to mobile phones, but not to our wallets? • Leave cards at home? • Add value to transactions? The Consumer’s Perspective on NFC?
    23. 23.  Cards seem to be entrenched in many markets, and are likely to remain in play for the foreseeable future, simply increasing the issuer and acquirer costs.  But, is NFC is fundamentally different from previous steps forward in functionality .. ? The Consumer’s Perspective on NFC? SMS Mobile Data Apps Online Shopping & Payment
    24. 24. Virtualisation benefits are clear, from the business POV .. 0 50 100 150 200 250 300 350 400 450 500 1980 1985 1990 1995 2000 2005 2010 *1million Contacts via devices (e.g. web browser/internet, mo bile phone, IVR) Total Customer Contacts Contact via a bank advisor, bank branch
    25. 25.  The case is clear for our creativity to make virtualised ecosystems work.  But it will take a lot more creativity, usability and value to become a real business driver. Virtualisation benefits are clear, from the business POV ..
    26. 26. For your consideration .. impulse purchase / spam
    27. 27. For your consideration ..
    28. 28.  Although item-level NFC/RFID tags are too expensive right now. Maybe we can print them soon ..  And you could do the same thing with image recognition software presumably in the future ..  And you could still (more easily?) pay with a card when you get to the POS … However ..
    29. 29. Thank You! Dan Armstrong Takashi Mobile | Financial Services Rapenburgerplein 81 1011 VJ Amsterdam The Netherlands +31 652 085 071 skype: dd.armstrong