More than 400 card experts and key speakers from 50 countries gathered in Marrakesh for the HPS PowerCARD Users Meeting last week (5-7 April 2017) to explore how they can collaborate to create the future of payments.
Payments market in full reconfiguration, HPS tells card experts at 2017 users event
Digitization is reconfiguring the payments landscape and banks, FinTechs and technological activators, such as the e-commerce giants Amazon and Alibaba, must collaborate to “fight cash”.
That’s according to the electronic payments specialist HPS.
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Speaking at the company’s biennial PowerCARD Users Meeting 2017 in Marrakesh, 5-7 April, HPS chairman and CEO, Mohamed Horani, said digitization was also driving the sharing economy and new business models.
“Thanks to digitization, the customer is more connected and better informed but also more demanding,” he said.
Horani highlighted the trend to a cashless society with the number of mobile payment users forecast to increase from 250m in 2013 to 450m in 2017. Payment cards, meanwhile remain the leading non-cash instrument, growing by 11.8% in 2014; while cheques suffered a -10% decline.
Horani highlighted new payments eco-systems, which have developed in markets including Sweden and Denmark, where 80% of transactions are already non-cash; plus the latest technology trends including AI and machine learning and the interaction between digital and physical experiences.
Horani told delegates HPS was focused on three pillars: PowerCARD products, providing structured payment solutions; delivery and business models and he revealed the company invested 12% of its annual revenues in R&D.
HPS customers want agility and need to be able to future proof their businesses, he explained. “We need to harness today’s achievements together, to build the right payments model, to help you best serve your customers tomorrow.”
Sebastien Slim, head of marketing and innovation, HPS (France), presented the latest PowerCARD product enhancements and key industry trends. Slim revealed HPS has won its first US customer and has deployed NFC technology for mobile payments in Japan, a top contactless market.
“We are now trying to enter new markets,” Slim told delegates.
Mobile payments, enabled through PowerCARD Tokenization in partnership with Gemalto, a leader in digital security, will be a key future payment technology, said Slim.
The process, in which account information is replaced by an alternate value called a token means issuers, merchants and processors who use them are able to significantly reduce the risk that sensitive cardholder data may be stolen.
Connected cars, as well as cards, are already a possibility, Slim added; referencing Jaguar and Shell’s new in-car payment system, which enables owners who install the Shell app to drive up to any pump at a Shell service station (initially in the UK and then globally) and use the vehicle’s touchscreen to select how much fuel they require and pay using PayPal or Apple Pay (http://media.jaguar.com/news/2017/02/jaguar-and-shell-launch-worlds-first-car-payment-system-just-fill-and-go-your-car-pays).
PSD2 presents a further opportunity and Slim said HPS planned to partner with FinTechs in this arena to develop new PowerCARD APIs. The company will launch a portal in September to showcase the services it can provide with the aim of going live in early 2018.
The growth in the number of payment channels will fuel more transactions but presented challenges, Slim added. “Mobile means payments need to happen in real time – that’s the customer expectation,” he said. Digital technology must also be fit for all generations, including older consumers who are increasingly tech-savvy; while operators must be prepared to cope with new spikes in demand, outside of the traditional Christmas peak, such as enrollment, Slim said.
Retailers consolidate payment platforms to better understand customers and follow their journeys
Retailers are building central payment platforms in order to understand their customers better and follow their shopping journeys, delegates at the 2017 HPS PowerCARD Users Meeting learned.
Laurent D’Amécourt, consultant at payments consultancy, ADN’Co, said his company has researched leading retailers to understand the drivers for central payment platforms and their investment plans.
According to D’Amécourt, retailers want to better monitor their businesses, enhance their security, provide full management at the point of interaction and know their customers along their shopping journey.
On the technology front, D’Amécourt said retailers wanted to enhance their PoS security in order to reduce fraud; since they are liable; ensure PCI compliance and to detect and reduce fraud in real time.
From a marketing perspective, retailers are keen to add new payment channels to the mix and centralise their reporting and data, D’Amécourt added. From a financial point of view, meanwhile, central payment platforms help reduce PoS and processing costs and help to build trust, D’Amécourt said.
Arnaud Crouzet, secretary general at Nexo, the organization set up to drive global card payment standardization and protocols, highlighted the retailers which are launching new payments platforms compliant with Nexo standards.
They include Auchan, which has introduced a pan-European payment solution based on Nexo protocols. Crouzet said there was now demand from Auchan in China and Africa too.
Carrefour has deployed with Nexo standards in Spain and France and is targeting Belgium and Total is live in France, Belgium and Germany.
Based on ISO2022, the Nexo Retailer Protocol, interfaces between the retail PoS system and card payment application; Nexo Fast enables a uniform transaction user experience at the terminal across all payment networks ie it adapts to the user’s card; while the Nexo Acquirer Protocol addresses the interface between an acceptor and an acquirer.
Callum Gibson at IT consulting company DXC Technology, formerly HPE, showcased his firm’s work with a global multi-national retailer, which has invested in a central payment platform. A publicly-listed company, the retailer operates in 50+ countries with 26,000 merchants and posts €5bn payment card transactions on an annualized basis.
According to Gibson, the retailer had six legacy mainframes in operation, multiple operating and reporting models and it lacked commercial and customer insight.
Gibson said his client had a mission to build centralized payment platform but brand consistency was also important.
“We have to reinvent the business model going forward and be able to implement global business rules, including a retail help desk,” said Gibson. The platform was rolled out in the first retail territory in the first half of 2016 and will be introduced to multiple territories in the first half of 2017 with completion in the second half of this year.
According to Gibson, the solution has enabled an opportunity to introduce dynamic pricing across all geographies, several times a day.
Crucially, it has also driven better customer insight for the retailer. “Understanding their customer base and how they move through their outlets is critical,” said Gibson.
Instant payments look to reshape customer experience
Instant payments are the industry’s next frontier and provide an opportunity for banks to reshape the customer experience, according to David Bannister, principal analyst at Ovum. Presenting at the HPS PowerCARD Users Meeting, Bannister tracked the development of instant payments, which have been live in the UK market since 2008, and the volume growth of BACS and CHAPS payments during that time; plus new peer to peer services such as Pingit, Barclays’ mobile payment service that allows users to send and receive money using a mobile number.
Instant payments are a clear focus area for corporate SME banking functions, Bannister said. However, they are part of the digitization process and need to be looked at in the round. “It’s all about moving from the old BACS schemes to real time payments,” he said.
Archie Hesse, chief executive office at GhiPSS, a subsidiary of the Bank of Ghana, presented the company’s Instant Pay service and user benefits.
“Instant Pay is one of two key ways [the other being mobile] of moving from a cash-economy to a cash-lite one,” Hesse said.
Hesse said Instant Pay was “fighting against cash”, which is expensive to process compared with electronic payments. Instant Pay – unlike cash – also enables online transactions, he added.
According to Hesse, an GhiPSS Instant Pay transaction takes between one to two minutes to complete and it is integrated within 18 of the 35 banks in Ghana, which account for 80% of the market in Ghana – 14th among the top 20 fastest emerging economies (The Economist).
The main users are B2B, P2P, B2P and P2B customers, Hesse told delegates. The service benefits individuals because it is an easier way to settle IOUs with a reduced end to end transaction cost. Late payment fines or fees are eliminated and users are able to delay payment until the last minute, aiding convenience; plus it’s secure. The benefits for merchants include instant access to funds, enhanced cash flow, increased revenue, payment assurance and reduced fraudulent activities.
For banks, Instant Pay is a catalyst to innovate, provides a 24/7 service culture, attracts new customers, increases their float levels and delivers a reduction in the frequency of bank/branch visits.
For central banks, Instant Pay drives a reduction in the use of cash, increases the amount of money in the banking system and therefore drives better policies, said Hesse. It increases the number of bankable citizens and enhances transaction monitoring and reporting. The wider economy also benefits, Hesse claimed. Instant Pay helps drive GDP growth, results in a decrease in certain types of crime and an increase in tax receipts, provides enhanced traceability and fuels growth in the FinTech sector.
Implementation did not come without challenges, however. These included integration, cost, ROI and the fact that the switch was irreversible.
GhIPSS took two months to design and implement the project with an initial pilot in four banks. The service is now being actively promoted, Hesse said.
Technology and biometrics help payments industry tackle fraud
Anas Drihany, managing director of the Payment Centre for Africa, a subsidiary of the Popular Bank of Morocco, and Philippe Vinci, managing director at Vinci Advisors, showed how new anti-fraud systems and biometric technologies can help in the fight against fraud.
Drihany said fraud increased by 21% between 2014 and 2015 and fraudulent activity, which is now well planned rather than opportunistic, has migrated from Morocco to West Africa. Drihany presented the PCA’s new anti-fraud system, which provided centralised management of fraud and was built using the expertise of digital natives. The system is based on an analytical model, which monitors behaviour and fraud movement. It scores transactions against a model and will raise suspicions if behaviour deviates too far from the model. As a result, PCA has moved from a reactive to proactive approach to fraud and reduced the cost of operations management by 30%, said Drihany. Four fifths of customers have continued to use their cards over a period of five days following a disaster, Drihany said.
Vinci presented the case for biometric technologies as a logical replacement to passwords. “We all hate passwords – they are things of the past and not secure. They are not useful and need to be strong. A simpler and stronger authentication method is required.”
Smart devices, which incorporate finger print technology and can see, hear and touch you, provide an opportunity for online authentication, locally, said Vinci; adding that the diversity of sensors continues to grow.
Vinci highlighted Mastercard’s new selfie payment technology, which enables cardholders to verify their identity by using the fingerprint scanner on their smartphone or via facial recognition technology by taking a “selfie” photo (http://newsroom.mastercard.com/eu/press-releases/mastercard-makes-fingerprint-and-selfie-payment-technology-a-reality/); and Visa research (https://www.visaeurope.com/newsroom/news/european-consumers-ready-for-biometrics), which revealed 68% of European consumers want to use biometrics for securing payments and 84% would trust biometrics.
Vinci presented the use of voice print technology to tackle fraudsters who target call centres, which are typically weak and easy targets since they rely on caller ID or knowledge-based information, which the fraudster already knows; and they are predicated to helping the user. Using voice records and passive screening can identify previous fraudulent calls, said Vinci.
Banks in the US are now integrating this technology, combining biometric voiceprint and phone print technology, Vinci reported. HSBC has also incorporated voice technology for telephone banking https://www.hsbc.co.uk/1/2/voice-id.
In South Africa, meanwhile, the South Africa Social Security Association, has introduced proof of life verification, using voice activation, for beneficiaries to access their social grants.
Vinci suggested such developments looked set to win further traction since the boom of mobile and sensory technologies in devices is unstoppable. Mobile payments are also unstoppable, he said. Biometrics offer increased security and are supported by more standards, such as FIDO, he added. They also improve the customer experience and provide personalisation by offering user choice.