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Transformation of the Electronic Payments Industry - Strategies for Growth


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This presentation provides a glimpse into the evolution of the digital payment industry and a discussion of both short-term and long-term strategies that players in this space could potentially adopt to stay ahead of the competition.

I've diverse interests across wide-ranging topics and industries and I thoroughly enjoy analyzing information and devising strategies to help companies better position themselves for the challenges ahead.

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Transformation of the Electronic Payments Industry - Strategies for Growth

  1. 1. Transformation of the Electronic Payment Industry - Strategies for Growth
  2. 2. Topics A) Overview B) Evolution D) Short-term strategies C) Change Drivers E) Long-term strategies F) Key Takeaways
  3. 3. Digital Payments : “ Payments made over an electronic network such as the Internet ”
  4. 4. Electronic cash e.g. PayPal, Bitcoin Electronic / Mobile Wallets Smart cards Modes of Digital Payment 3 e.g. Google wallets, Credit / Debit Cards 1 2 4
  5. 5. “The value of global payments via mobile devices will reach around $507 billion in 2014, a rise of nearly 40% year-on-year.” PwC World Payments Report Juniper Research “Rapid growth in contactless card payments is the single biggest trend in payments in some markets at the moment – 278% growth in Europe.” The future of payments & banking is digital. “Mobile payments doubled between 2012 and 2013 to $1 billion. Mobile payments in the U.S. will top $58 billion by 2017, and phones are just the beginning of e-cash.”
  6. 6. 1887 – First concept of credit cards in Edward Bellamy’s “Looking Backward” novel 1918 – Electric money was born 1950 – IDC (Diners Club International) was created 1958 – American Express emerged 1968 – First networked ATM 1978 – First debit card was issued by The First National Bank of Seattle. First credit card terminal was introduced by Visa. Birth of e-commerce. 1994 – EMV (Europay / MasterCard & Visa) standards were created to foster global interoperability. 1996 – Launch of Google Checkout Evolution of Digital Payment
  7. 7. 1997 – First contactless payment system – Speedpass was launched by ExxonMobil 2007 – First digital / mobile wallet created by M-PESA 2009 – First digital currency – bitcoin – was born. 2011 – Starbucks accepted mobile payments nationwide in the U.S. Cascading effect on industry with many major retailers adopting mobile payment technology Evolution of Digital Payment (cont’d)
  8. 8. Key Change Drivers : 1. Technology 2. Consumer / Social Behaviors 3. Legislation & Regulation
  9. 9. 1 ) Technology Time Gap 1887 First mention of credit card concept - 1918 Electric money was born 31 1950 IDC (Diners Club International) 32 1968 First ATM network 18 1978 First debit card. First credit card terminal introduced by Visa. Birth of e- commerce 10 1985 First online purchase made. Discover Card introduced 7 1994 EMV standards introduced 9 1996 Google checkout launched 2 1997 First contactless payment system launched by ExxonMobil 1 2003 NFC (near field communication) approved as standard 6 2006 Payment card security standards council established 3 2007 1st digital / mobile wallet 1 2009 Bitcoin born 2 2011 Starbucks accepts mobile payments nationwide 2  Technology is disrupting the payment industry Accelerating Industry transformation  Other fast-evolving technologies (e.g. Near-Field Communication) will facilitate the move to payment using mobile technologies.  The distinction between channels and devices is blurring, with interactions over the internet, mobile across multiple uses converging into a common set of digital services.  Cloud computing
  10. 10. 2010 - Square allows consumers to buy, sell and send money using any Apple or Android mobile device. It is designed to help small businesses accept credit card payments and to help consumers transition to a cashless, cardless lifestyle. >> 1 ) Technology 2013 - LoopPay allowed me to make contactless payments at virtually every retail point-of-sale terminal >>
  11. 11.  2012 - Barclays’ “Pingit” mobile payments service launched  Enables customers to send money using just a mobile number 1 ) Technology
  12. 12.  Greater willingness to adopt new technology – shift from telegraphs to credit cards to mobile wallets  Online generation  Demand for seamless, instant connectivity  Social networks will flourish and dominate + Opportunity  Information availability  Target customers + Opportunity  Consumers’ spending increases when they pay with mobile technology (sometimes even twice as much)  Business growth Implications : 2) Changing consumer / social behavior
  13. 13.  Durbin Amendment, U.S. 2010 - The bill drastically lowers swipe fees – the fee charged to merchants every time a customer pays with plastic  Consumer Credit Act, UK  Regulation on card profitability is making non-card payment propositions more attractive  Removes market friction  Instills consumer confidence in new digital systems 1974 - Legislation comes into force, giving extra protection to people using their credit cards to buy goods costing between £30 and £10,000 (the limits changed to £100 and £30,000 in 2005). 3) Legislation & Regulation  US National Science Foundation 1991 - Lifts restriction prohibiting commercial enterprise on the Internet – cleared the way for e-commerce to thrive
  14. 14. Agents of change will continue to revolutionize the digital payment industry.  Credit cards have gone from being one of the most profitable areas of lending to one of the least – changing fortunes  Proliferation of smart gadgets, including wearable technology  Adaptation of the chip and PIN technology  “Money 3.0” Era – voice recognition, fingerprints, retinas, DNA  Near-field communication (“NFC”) could see further innovation
  15. 15. Short-term Strategies
  16. 16. Changing consumer / social behavior Legislation & Regulation  Be the first-to-market – roll out mass market offerings that are robust yet simple. Once consumers make their first mobile payments, they are much more likely to convert to regular usage.  Utilize the power of data analytics to segment and target customers  Enhance partnership with retailers and review the interchange fee revenue model to include additional value- adds  Focus on transparency and security in marketing / customer communication to pre-empt regulatory issues  Reinforce market positioning Short-Term Strategy (1-3 Years) Driving Force Strategy
  17. 17. Technology Driving Force Strategy  Leverage third party technology and form alliances with strategic technology partners to provide a seamless multi-platform experience e.g. healthcare, lifestyle companies (e.g. Uber or GrabTaxi), e- commerce (e.g. Amazon) Short-Term Strategy (1-3 Years)  Build on existing installed user base to introduce new offerings and diversify revenue streams e.g. advertisement on app
  18. 18. Short-term Strategies Long-term Strategies
  19. 19.  Hard or impossible to predict the future  Learn from history and from successful companies that were able to transform themselves Long-Term Strategy (>3 Years) Recommended Strategies 1. Organizational Culture  “Move fast” – A strategy is as good as its execution.  Change from being a perfectionist to a risk-taking/ entrepreneurial culture.  Set up nimble teams that focus on innovation. First-mover advantage might prove critical 2. Anticipate consumer concerns and needs  Turn concerns into opportunities  Mounting concerns on cyber security and privacy  Banks enjoy natural advantage as trusted institutions  Provide products that give customers assurance of mind; give them control over the sharing of personal details
  20. 20. Long-Term Strategy (>3 Years) Recommended Strategies 3. Technology  Invest in world-class technological infrastructure  Reinforce data and analytics capabilities to enable the bank to offer targeted, differentiated offerings to retain and attract customers 4. Partnerships & Acquisitions  Build long-term partnerships across industries  Focus on initiatives that could better connect bank customers with retailers (working with retailers, both brick-and-mortar and online) to explore ways to enhance overall customer experience  Consider acquisition of target companies that could accelerate bank growth and enhance attractiveness of product offerings
  21. 21.  Digital revolution will change the digital payments industry  Technology, changing consumer behavior and regulatory actions will accelerate transformation  Short-term – Reinforce and move fast  Long-term – Anticipate, adapt and invest Key Takeaways
  22. 22. For more information, contact