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Kurt Schmid
Managing Director Digital Payments
Swiss Payment Forum Zurich
5. November 2018
Digital Payment
Quo Vadis?
Agenda
• Where we are coming from?
• Wallets, OEM Pays versus Issuer Pays?
• Proximity and eCommerce payment
trends
• The business case and strategic value
for issuers?
2
Why we are scaling:
Tokenization & Support from Schemes
3
Card
Issuer
Token
Service
Provider
Token
Requestor
The central use case is to digitize (tokenize) a card
4
Yellow Case
Step-up Auth.
The easiest and most secure way of digitalization
5
Token
Requestor
Token
Service
Provider
Card
Issuer
Authenticates
Encrypted PAN
Green Case
Scalability through scheme token services
6
Token
Requestor
Token Service Provider
Card
Issuer
MDES, VTS, AETS
Different kinds of token requestors
7
Token Requestors
Token
Service
Provider
Card
Issuer
like X Pays, Issuer Pays, Smart Devices, IoT, ….
Issuer Pay
Merchant
App
Wallets, X-Pays and Issuer Pays
8
The offers from the X-Pays
 The only way to emulate a card on an iOS
device (Note: Tag reading is possible on
iPhones)
 Apple interested in a part of the
interchange
 Yellow path and green path by support of
issuer app
 Offered for “free”
 Google interested in the payment data of
the customer
 Google interested in selling value added
services in the future
 Yellow path and green path by support of
issuer app
Google PayApple Pay
9
What are the challenges of a card issuer?
10
Why it is important to keep
the customer interface?
• Deliver & Promote Your Brand
• Build and Sustain Trust
• Know your customer
• Offer additional services
Payments:
@POS, in-App, eCom, P2P
Control & Security:
Strong Customer Authentication
Card Control Center
Information:
Balance, trx history, PFM, e-receipts
Value Add:
Insurance, Installments
Coupons, Loyalty
Is a wallet only about payment?
11
Where are the majority of touchpoints?
12
1x per quarter
1x per month
1x per week
1 x per day
Banking
Payment / Wallet
Where are the majority of touchpoints?
13
Banking
Payment / Wallet
PSD2,
X2A
Where is the risk?
14
Banking
Payment / Wallet
PSD2,
X2A
So what to do on a wallet strategy?
 Oh Jesus!
 You will not be in business in the future
 Only a good strategy, if you are shortly
before retirement
 Oh Jesus!
 You will not be in business in the future
 Only a good strategy, if you are shortly
before retirement
Do X-Pays onlyIgnore – do nothing
15
So what to do on a wallet strategy?
 In CH e.g Twint, Bluecode (A, DE), Swish,..
 Problem is reaching merchant and
consumer critical mass
 Problem could be user experience
 Needs long breath
 Do a feature rich wallet compliant to PSD2
with cool onboarding
 Do own mobile contactless payment for
Android, enable Apple Pay with green path
activation once conditions are acceptable
 Look to omni-channel use cases
Embrace in smart setupDefeat – do other ways of payments
16
The complexity of tokenization in MCP
Is hidden under the hood of our ToPay Cloud Payment Product
17
MyBankApp
Accounts
6,750.00
Recent Transactions
Ready to Pay
ToPay SDK
Token
Requestor
(CMS-D,
MAP)
ToPay
Server
Scheme
Token
Service
(MDES
VTS
AETS)
Card
Issuer
Authenticates
Encrypted PAN
PSP,
Acquirer
Network
Aut
h
DeTok.
eCommerce Payment Trends
18
But there is this other payment playing field: eCommerce
19
 Card Not Present and 3DS are today’s
prevailing methods for checkout
 “Global e-commerce payment market
is expected to grow from US$ 24.26 Bn
in 2017 to US$ 64.69 Bn by 2025 at a
CAGR of 13.1% between 2018 and
2025.”
 Even stronger growth for m-commerce
and in-app payments
Questions to you – the audience
 Who had already fraud on his/her
card(s)?
 Who likes to enter PANs again and
again for every new merchant?
 Who knows all the places where
his/her card data is stored?
20
And what are the concerns in e-commerce payments?
21
 Risk/fraud through
different attacks
 Low conversion rates
on mobile channels
 Abandonment of
checkout process
 Higher costs for CNP
versus CP
Merchant concerns Issuer concerns
 Risk/fraud through
different attacks
 Cost of customer
care
 Lost transactional
revenues
Consumer concerns
 Ease of onboarding
 Shopping convenience esp.
from mobile devices
 Efforts & pains too high for
small value transactions
So, why not use tokenization in e-commerce?
VISA uses VTS for tokenization in
E-Commerce and Card on File (CoF)
Mastercard started M4M (MDES for
Merchants)
The basic ideas
 Each merchant does not store the PAN
but a token
 By using a cryptogram, security will be
like Card Present
22
Tokenization in E-Commerce is using same principles like MCP
Token
Requestor
(CMS-D,
MAP)
Scheme
Token
Service
(MDES
VTS
AETS)
Card
Issuer
PSP,
Acquirer
Network
AuthDeTok.
CoF
PAN Entry
17
Four main use cases of merchant tokenization
24
Enroll:
 Add card manually or tokenize
from card on file
Display cards
 Card art coming from token service
(user sees his real card image)
Transact
 Generate EMV cryptogram
(can be used for one or more transactions)
Lifecycle
 Issuer account update
Key points of the EMV® Secure Remote Commerce Framework
“SRC”
25
 Defined by EMVCo (https://www.emvco.com/emv-technologies/src/)
 Scheme agnostic to help interoperability
 Pay securely via single SRC checkout button
 Will be scheme-neutral successor of MasterPass & Visa Checkout starting 2019 / 2020
 Will support card tokenization using MDES, VTS, and AETS
 Will support card present type security (“cryptograms”)
 Demonstrator available from Netcetera, training courses coming as soon as specification out
The Business Case
26
Material Benefits
 Cards that are also available on mobile
devices generate a higher transaction
rate also on plastic (replacing more
cash payments)
 Additional services like insurance,
loans, installments can be sold
 Less churn (e.g. to Fintech banks)
27
Immaterial Benefits
 Deliver modern image
 Stay in touch with your client
 Give confidence and trust to your
customer
28
Summary
 A clear ROI on digital payment alone is hard to calculate
 Value added services can leverage the payment business case
 Loosing the customer interface will have a huge negative impact to the future
business
 Consider an investment in digital payments as a strategic / marketing investment
 Be agile but start the journey today
29
Europaplatz4
4020 Linz
Austria
kurt.schmid@netcetera.com
+43 664 112 11 00
Kurt Schmid
Managing Director Digital Payment
Kurt.Schmid@netcetera.com
https://www.linkedin.com/in/kuschmid/

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Digital Payment Quo Vadis

  • 1. Kurt Schmid Managing Director Digital Payments Swiss Payment Forum Zurich 5. November 2018 Digital Payment Quo Vadis?
  • 2. Agenda • Where we are coming from? • Wallets, OEM Pays versus Issuer Pays? • Proximity and eCommerce payment trends • The business case and strategic value for issuers? 2
  • 3. Why we are scaling: Tokenization & Support from Schemes 3
  • 4. Card Issuer Token Service Provider Token Requestor The central use case is to digitize (tokenize) a card 4 Yellow Case Step-up Auth.
  • 5. The easiest and most secure way of digitalization 5 Token Requestor Token Service Provider Card Issuer Authenticates Encrypted PAN Green Case
  • 6. Scalability through scheme token services 6 Token Requestor Token Service Provider Card Issuer MDES, VTS, AETS
  • 7. Different kinds of token requestors 7 Token Requestors Token Service Provider Card Issuer like X Pays, Issuer Pays, Smart Devices, IoT, …. Issuer Pay Merchant App
  • 8. Wallets, X-Pays and Issuer Pays 8
  • 9. The offers from the X-Pays  The only way to emulate a card on an iOS device (Note: Tag reading is possible on iPhones)  Apple interested in a part of the interchange  Yellow path and green path by support of issuer app  Offered for “free”  Google interested in the payment data of the customer  Google interested in selling value added services in the future  Yellow path and green path by support of issuer app Google PayApple Pay 9
  • 10. What are the challenges of a card issuer? 10 Why it is important to keep the customer interface? • Deliver & Promote Your Brand • Build and Sustain Trust • Know your customer • Offer additional services
  • 11. Payments: @POS, in-App, eCom, P2P Control & Security: Strong Customer Authentication Card Control Center Information: Balance, trx history, PFM, e-receipts Value Add: Insurance, Installments Coupons, Loyalty Is a wallet only about payment? 11
  • 12. Where are the majority of touchpoints? 12 1x per quarter 1x per month 1x per week 1 x per day Banking Payment / Wallet
  • 13. Where are the majority of touchpoints? 13 Banking Payment / Wallet PSD2, X2A
  • 14. Where is the risk? 14 Banking Payment / Wallet PSD2, X2A
  • 15. So what to do on a wallet strategy?  Oh Jesus!  You will not be in business in the future  Only a good strategy, if you are shortly before retirement  Oh Jesus!  You will not be in business in the future  Only a good strategy, if you are shortly before retirement Do X-Pays onlyIgnore – do nothing 15
  • 16. So what to do on a wallet strategy?  In CH e.g Twint, Bluecode (A, DE), Swish,..  Problem is reaching merchant and consumer critical mass  Problem could be user experience  Needs long breath  Do a feature rich wallet compliant to PSD2 with cool onboarding  Do own mobile contactless payment for Android, enable Apple Pay with green path activation once conditions are acceptable  Look to omni-channel use cases Embrace in smart setupDefeat – do other ways of payments 16
  • 17. The complexity of tokenization in MCP Is hidden under the hood of our ToPay Cloud Payment Product 17 MyBankApp Accounts 6,750.00 Recent Transactions Ready to Pay ToPay SDK Token Requestor (CMS-D, MAP) ToPay Server Scheme Token Service (MDES VTS AETS) Card Issuer Authenticates Encrypted PAN PSP, Acquirer Network Aut h DeTok.
  • 19. But there is this other payment playing field: eCommerce 19  Card Not Present and 3DS are today’s prevailing methods for checkout  “Global e-commerce payment market is expected to grow from US$ 24.26 Bn in 2017 to US$ 64.69 Bn by 2025 at a CAGR of 13.1% between 2018 and 2025.”  Even stronger growth for m-commerce and in-app payments
  • 20. Questions to you – the audience  Who had already fraud on his/her card(s)?  Who likes to enter PANs again and again for every new merchant?  Who knows all the places where his/her card data is stored? 20
  • 21. And what are the concerns in e-commerce payments? 21  Risk/fraud through different attacks  Low conversion rates on mobile channels  Abandonment of checkout process  Higher costs for CNP versus CP Merchant concerns Issuer concerns  Risk/fraud through different attacks  Cost of customer care  Lost transactional revenues Consumer concerns  Ease of onboarding  Shopping convenience esp. from mobile devices  Efforts & pains too high for small value transactions
  • 22. So, why not use tokenization in e-commerce? VISA uses VTS for tokenization in E-Commerce and Card on File (CoF) Mastercard started M4M (MDES for Merchants) The basic ideas  Each merchant does not store the PAN but a token  By using a cryptogram, security will be like Card Present 22
  • 23. Tokenization in E-Commerce is using same principles like MCP Token Requestor (CMS-D, MAP) Scheme Token Service (MDES VTS AETS) Card Issuer PSP, Acquirer Network AuthDeTok. CoF PAN Entry 17
  • 24. Four main use cases of merchant tokenization 24 Enroll:  Add card manually or tokenize from card on file Display cards  Card art coming from token service (user sees his real card image) Transact  Generate EMV cryptogram (can be used for one or more transactions) Lifecycle  Issuer account update
  • 25. Key points of the EMV® Secure Remote Commerce Framework “SRC” 25  Defined by EMVCo (https://www.emvco.com/emv-technologies/src/)  Scheme agnostic to help interoperability  Pay securely via single SRC checkout button  Will be scheme-neutral successor of MasterPass & Visa Checkout starting 2019 / 2020  Will support card tokenization using MDES, VTS, and AETS  Will support card present type security (“cryptograms”)  Demonstrator available from Netcetera, training courses coming as soon as specification out
  • 27. Material Benefits  Cards that are also available on mobile devices generate a higher transaction rate also on plastic (replacing more cash payments)  Additional services like insurance, loans, installments can be sold  Less churn (e.g. to Fintech banks) 27
  • 28. Immaterial Benefits  Deliver modern image  Stay in touch with your client  Give confidence and trust to your customer 28
  • 29. Summary  A clear ROI on digital payment alone is hard to calculate  Value added services can leverage the payment business case  Loosing the customer interface will have a huge negative impact to the future business  Consider an investment in digital payments as a strategic / marketing investment  Be agile but start the journey today 29
  • 30. Europaplatz4 4020 Linz Austria kurt.schmid@netcetera.com +43 664 112 11 00 Kurt Schmid Managing Director Digital Payment Kurt.Schmid@netcetera.com https://www.linkedin.com/in/kuschmid/