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Presentation Innopay Buckaroo partner day 15-11-2016
- 1. Shikko Nijland – November 2016
- 2. 2 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. • Innopay: innovation experts since 2002 • Offices in Amsterdam and Frankfurt • 35 consultants • Payments, Digital Identity, e-Business • Strategy, Co-creation, Transformation • Member of EBA, EPCA and ECP • Founding member of HollandFintech Introduction
- 4. 4 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Today four key trends will be highlighted 2. Open business models 4. Changing POS infra 3. Omnichannel authentication 1. Regulation
- 7. 7 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Today’s focus: market entry of two new regulated Third Party Providers (TPPs) under PSD2, i.e. ‘PISP’ and ‘AISP’ XS2A (‘API’)1 Customer Bank domain PSD2 XS2A ERA Bank account Internet banking and mobile app 1 There seems to be industry consensus that Application Programming Interfaces (APIs) provide for cost effective, easy and secure means of enabling XS2A. However, EBA RTS do not mandate use of API for XS2A PISP AISP TPP Source: Innopay analysis • BigTech • ERP vendors • Accounting software vendors • e-invoicing providers • No contractual agreements required between TPP and AS-PSP • Non-discriminatory payment account access for licensed TPPs (in terms of timing, priority and transaction charges) Key XS2A provisions • Incumbent banks • Payment institutions • E-money institutions • (Large) Merchants • FinTech Potential TPPs Payment account SETTING THE SCENE1 OPPORTUNITIES AND THREATS PAYMENT STAKEHOLDERS2 EXAMPLES USER EXPERIENCE ‘XS2A’3
- 8. 8 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Account information service (AIS) value stack is very promising from an innovation perspective AIS VALUE STACK Application of data Insights Raw Data Addedvalue Personal Finance Management ‘Best offer’ selection Credit scoring & loans Purchase offerings (micro) Savings & Investments e-Wallets & payment services Source: Innopay analysis
- 9. 9 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. RTS security requirements will influence innovation in the PSD2 era SCA required for ALL remote electronic payment transactions (Cards, SCT) above 10 EUR, no risk based approach after transitional period 1.STRONG CUSTOMER AUTHENTICATION 1.EXEMPTIONS 1.COMMUNICATION INTERFACE 1.PAN-EU REACH SCA exemptions are optional for AS-PSP, outside remit EBA to make decision on this Direct access (Internet banking) versus indirect access (Dedicated API), at discretion of AS-PSP Pan-European standardisation of interface, rather than fragmented reach 1 2 3 4 Source: Innopay analysis SETTING THE SCENE1 OPPORTUNITIES AND THREATS PAYMENT STAKEHOLDERS2 EXAMPLES USER EXPERIENCE ‘XS2A’3
- 10. 10 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. PSD2 must be transposed and enforced as of January 2018, with earliest enforcement of security standards in October 2018 Min. 35 months Transitional period PSD2 published in OJ Dec ’15 PSD2 enters into force Jan ‘16 April ‘17 Adoption RTS by Commission Oct ‘18 RTS on strong Auth. & secure Comm. enforced Jan ‘16 Start EBA work on RTS & Guidelines Jan ’17 Submit RTS on strong Auth. & secure Comm. Transposed and enforced PSD2 by Member States Jan ’18 24 months 18 months Source: Innopay analysis
- 11. 11 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Trend 2: Opens business models 2. Open business models 4. Changing POS infra 3. Omnichannel authentication 1. Regulation
- 12. 12 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. The financial industry is exploring opening up, while other industries have already embarked the road towards open business models THIRD PARTY INPUT APIs MAPS UBER APP MESSAGING PAYMENT PROCESSING DELIVERY ON DEMAND RIDE REQUESTS TRIP EXPERIENCES UBER OUTPUT APIs Source: Innopay analysis, Uber
- 13. 13 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. REDUCED COMPLEXITY • Offers separation of business logic and presentation logic to speed up product development cycles • Simplifies connectivity and security by adhering to common, easy to use web standards. OMNI-CHANNEL REACH • Integration of product/service in any application in any channel allowing reach to different customer segments INNOVATION BOOST • Build services on top of your data and/or functionality. • Allows for an ecosystem of third party services to grow around your products/services, • Cultivation of business partnerships Open APIs are key enabler for open business models and create value in three ways 1 2 3 Source: Innopay analysis
- 14. 14 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. COMPANY API USAGE % REVENUES APIS A novel approach to deliver their CRM position and make it easier for customers to integrate the Salesfore CRM into their existing workflows and customise it 50% Create a mutually beneficial relationship between third party developers to enable more functionality and convenience for customers Not publically available Extend their product offering to other digital platforms so customers can benefit from their large product offering 69% APIs can be used to book hotels, flights and cars 90% Enable developers to develop applications ‘on top of’ platform that enable intelligent lifestyle choices, and assessment of new business ventures Not publically available The goal of the platform goes beyond being a network access point but a global distribution platform for its products and services by using APIs to unbundle their services Not publically available Improving engagement and customer relationships with clients by enabling developers to develop applications ’on top of’ the platform (e.g. social applications and games) Not publically available Many companies use APIs for various commercial purposes and for developing services that fit customer needs Source: Innopay analysis
- 15. 15 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. PRICING MODELSREVENUE MODELS Various revenue models are used to price the benefits that the API owner or user receive Source: Innopay analysis, John Musser, CEO of API Science and founder of ProgrammableWeb • Pay as you Go: Fixed price per transaction • Tiered: Different prices according to volume • Freemium: Free, but paid upgrade • Unit-based: Price per batch of transactions • Revenue share: Pay share of revenues • Affiliate: Pay when API is used • Cost per click (CPC) • Cost per Action (CPA) • Referral • Blended: Combination of revenue models User pays API owner pays Indirect / No one pays • Whether the API owner pays or the user depends on who derives business benefits from the transaction • The API owner however sets the price and can do so based on the user’s willingness to pay
- 16. 16 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Depending on the target group, the level of openness differs Public API Partner API Internal API Closed Open • Innovation by engaging relevant developer community • Extended market reach • Monetization options BENEFITSFUNCTION APIs used by external partners and developers to build innovative apps • Extended digital value chain • Partner integration efficiency • Enhanced customer experience • Monetization options APIs used by business partners and/or customers (e.g. corporates/merchants) • Operational efficiency • Cost reduction • Internal cost management APIs used by internal developers within enterprise (e.g. bank) Source: Innopay analysis
- 18. 18 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. BUNQOnboarding in twenty minutes is the new benchmark in banking
- 20. 20 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Recognising a customer early in the customer journey is key to personalisation Orientation Selection Transaction Delivery Customer care Check out Check in Orientation Selection Transaction Delivery Customer care Hi, I’m John and authorize this payment Hi, I’m John I authorize this payment Source: Innopay analysis
- 21. 21 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. But the main challenge is to recognise customers through various channels along their customer journey CUSTOMER JOURNEY FYSICAL SHOP WEBSHOP (MOBILE) APP EMAIL INSPIRATION CHANNELS CUSTOMER SERVICE Orientation Selection Transaction Delivery Customer care WEBSHOP Source: Innopay analysis, Expertgroup ‘Omnichannel Customer Identification - Shopping 2020
- 22. 22 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Connecting channels requires accounts/identifiers that can be shared across channels WEBSHOP Source: Innopay analysis, Expertgroup ‘Omnichannel Customer Identification’ - Shopping 2020
- 23. 23 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. If you have the capability and the budgets you can get the accounts and connect the channels BIG RETAILERS • Omni-channel capability • Can bare large IT investments • Are relevant to consumers in a way that justifies a dedicated relation • Lead the way WEBSHOP ALBERT HEIJN EXAMPLE Source: Innopay analysis, Expertgroup ‘Omnichannel Customer Identification’ - Shopping 2020
- 24. 24 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. BIG RETAILERS • Omni-channel capability • Can bare large IT investments • Are relevant to consumers in a way that justifies a dedicated relation • Lead the way SME RETAILERS • Multi-channel (mostly web and shop) • Limited IT budgets and/or Limited relevance to consumers LONGTAIL RETAILERS • Only one ’developed’ channel (maybe info website) • Virtually no IT budget • Maybe relevant to consumers SME retailers will only have a business case when reach to relevant consumer and IT capabilities are provided to them Source: Innopay analysis, Expertgroup ‘Omnichannel Customer Identification’ - Shopping 2020
- 25. 25 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. BIG RETAILERS • Omni-channel capability • Can bare large IT investments • Are relevant to consumers in a way that justifies a dedicated relation • Lead the way SME RETAILERS • Multi-channel (mostly web and shop) • Limited IT budgets and/or Limited relevance to consumers LONGTAIL RETAILERS • Only one ’developed’ channel (maybe info website) • Virtually no IT budget • Maybe relevant to consumers Majority of merchants cannot create enough reach themselves and need to be part of a community to effectively engage consumers Need for Platform Source: Innopay analysis, Expertgroup ‘Omnichannel Customer Identification’ - Shopping 2020
- 26. 26 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Digital Identity is a prerequisite for open APIs, and banks are in a prime position to leverage this capability • Whether payments or sharing of customer’s data explicit consent of the consumer is required Explicit consent • Strong digital identity (onboarding and authentication) processes are key requirements to offer payment services • With introduction of PSD2, PISPs and AISPs will need to comply with similar AML/KYC requirements as banks • This gives banks competitive advantage in offering third party services as they already have these measures in place for their own payment and account processes Example: Using account information service API to check eligibility for loan at consumer’s bank REQUIREMENTS TO PROVIDE CONSUMER CONSENT EXAMPLE Source: Innopay analysis
- 27. 27 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Trend 4: Changing POS infrastructure 2. Open business models 4. Changing POS infra 3. Omnichannel authentication 1. Regulation
- 28. 28 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. 46% 48% 51% 51% 51% 55% 56% 56% 59% 66% 68% 29% 27% 32% 23% 25% 26% 25% 25% 25% 20% 17% 11% 15% 7% 12% 13% 9% 10% 12% 6% 7% 9% 14% 10% 10% 14% 10% 10% 9% 7% 10% 7% 7% Dedicated App Mobile QR codes Smart card based loyalty program Tokenisation Mobile NFC Non network or branded card (e.g. Store card) Direct connection between retailers or billers with… Location specific payment services EMV Real time clearing & settlement Contactless cards WHICH PAYMENT PROVIDER DO YOU THINK IS MOST CAPABLE OF HELPING YOU OFFER THE FOLLOWING PAYMENT TECHNOLOGIES My existing bank or payment acquirer A third party payment specialist (e.g. PayPal) A telecoms provider A startup Banks are viewed as the most capable providers across all payment technologies Source: OVUM survey 2015 (n=700)
- 29. 29 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Fragmented wallet landscape creates complexity for consumers and retailers TECHNOLOGY CHANNEL Web QR&Barcode NFC Proximity (POS) Remote (e/m-commerce) Rabowallet Source: Innopay analysis Not applicable
- 30. 30 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. ‘Extinction’ of physical POS terminals? Time S-CURVES OF CARD DEMATERIALISATION Relevance of technology CardsCash Contactless NFC cards Mobile NFC (wallets) Wearables/QR/BLE/ check-in Cash is still king in most countries Source: Innopay analysis
- 31. 31 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Devices Customer Journey Orientation Selection Transaction Delivery Customer care Context (Cross border) Payments anytime, anywhere on any device also increases number of potential touchpoints Source: Innopay analysis
- 32. 32 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Source: Innopay analysis New type of infra is necessary to fully exploit potential of new touchpoints: Omni-touchpoint Conversion Infrastructure (OCI) SHARED INFRASTRUCTURE BENEFITS • Customers have one single experience and have full data control • Customers gain from automated rewards and applied gift cards • Organisations benefit from transparency of touchpoints and encounter full accountability of marketing spend • Organisations can connect directly and are more flexible and versatile • To close loop; presence on consumer mobile AND integration in Cash Register is mandatory Source: Innopay analysis Media Brand Retailer
- 36. 36 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. • Founded in 2002 • Offices in Amsterdam (HQ) and Frankfurt • 35+ consultants plus International network of associated experts via EPCA network (see also picture) • Three core practices: Payments, Digital Identity and E-Business • Strategy, co-creation and transformation • Member of a.o. EBA, ECP and EPCA • Founding member of Holland Fintech Moscow Warsaw Budapest Milan Rome Malta Frankfurt Amsterdam Paris London Copenhagen Source: EPCA (2015) Zurich Riga Innovation experts in Payments, Digital Identity and E-Business
- 37. 37 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Innovation Services Core practices Strategy Co-creation Transformation PAYMENTS DIGITAL IDENTITY E-BUSINESS • Market and product assessment • Multi-sided platform design • Vendor and solution selection • Co-creation of products and services • Developing platforms for co-creation • Building co-creation capabilities • Content-based project management support • Opportunity based operating model improvement • Digital change and migration management Our service portfolio ensures clients can count on us throughout the whole digital journey
- 38. 38 Buckaroo trends and developments – November 2016 © Innopay BV. All rights reserved. Strong assets in co-creating value in complex multi-stakeholder fields Bron: Innopay 2. Payment EU1. Payment NL 8. Account based traveling & ticketing7. Invoicing 3. (Open) Banking 4. PSD2/Open API OTA Open Transaction Alliance 6. Inclusive SCF5. Omni-Channel Authentication & Onboarding