Srinivas Nidugondi, Sr. VP & Head of Mobile Financial Solutions, Mahindra Comviva
Being a relatively nascent market hasn’t prevented the mobile payments industry from making great advancements in recent months. As Apple announced the launch of the NFC capabilities in its iPhone 6, there has been speculation that mobile payments are now poised for take-off. But is this the beginning of the NFC revolution and what does it mean for the banking industry? Banks and Financial Institutions will need to offer their payments products to consumers irrespective of which OS platform they are on and, herein, lie the challenges.
At the heart of the issue is this; the potential for mobile money will only be fully realised if we focus on the requirements for the customer, improve interoperability and enhance the decision making process across platforms and devices.
From Closed Loop to Open Interfaces
In terms of adoption rates, the mobile money space is now something of a success story. The stats speak for themselves; according to the GSMA’s State of the Industry 2013* report, 219 services were live in 84 countries and mobile money services were available in most emerging markets. The technology is advancing daily, as is the number of subscribers signing up for the service.
For this growth to continue, however, we need to tackle the challenges in the ecosystem, the biggest of which is the lack of interoperability between mobile money services. Today, we rarely come across instances where we cannot use a particular debit or credit card because the merchant does not have a point-of-sale machine that supports that particular bank. The reality is that mobile money has a long way to go before it reaches this stage.
All of the various stakeholders in the mobile money ecosystem stand to benefit from improved interoperability. For operators, this would provide customers with more flexible payment options which could increase the number of transactions and the velocity and volume of money in the ecosystem. For regulators, it is an opportunity to draw more cash into the formal financial systems. Importantly, for customers it promises more accessible and flexible services and financial inclusion is expected to get a significant boost.
However, currently, most mobile money services currently work as closed loop systems, disconnected from other payment services. A closed loop system met the original requirements of mobile money systems, which was to provide an alternative for cash for customers who did not have a bank account. It brought the added advantages of minimised costs, simplified operations, and access to real time transactions. However demand for these services has soared and for many consumers it’s their principal route for financial and payment requirements. The impetus for open interfaces to make the service interoperable is assuming more importance.
Systems are changing in some regions, however, with the industry working together to join the dots in the global mobile money ecosystem. In Indonesia three leading telecom operators-Telkomsel, Indosat and XL went “live” last year with a ground-breaking initiative which enabled their mobile money customers to send and receive money across each other’s networks. For the first time in this space, mobile money platforms run by telecom operators could “talk” to each other: account-to-account or wallet-to-wallet, in real-time. This trailblazing initiative has helped to demystify the concept of interoperability.
Apple, Android and Beyond
What of the buzz around NFC and mobile wallet systems, of which Apple is the latest to place their stake in the ground? Although NFC to date has not made it into the mainstream, the idea of mobile payments is still seen as viable. Now, Host Card Emulation (HCE) has taken off rapidly and helped to sort out a few kinks in the traditional NFC model with big players like MasterCard and VISA announcing their specs and EMV following suit and developing their own guidelines for tokenization. Google introduced HCE specs in its KitKat version of Android and the next advancement will be extending HCE-based NFC payments outside the Android universe. Meanwhile, the next big question is: which platform would provide a more secure environment to support HCE-based wallets: the Trusted Execution Environment (TEE) or the secure element (SE) on the cloud?
As with any burgeoning technology there are challenges inherent in the different ecosystems that are emerging. We will need to see how Apple will tackle the disconnected environment and who will bring about payments and authentication to specific industries like transit which has always been regarded to be a killer app for NFC. Further, how will wallet providers, including large retailers, align their wallet offering to the Apple payment systems?
It is clear that Apple has thought the overall payment process through with a system which is not only frictionless but also secure. It builds on the tokenisation thought process which began with HCE and which looks destined to become part of any payment flow. However outside of the US, Android still dominates and will need to enable NFC so that the market becomes broad based. Banks and payment providers will need to offer their payments products to consumers irrespective of which OS platform they are on. The challenge is that dealing with HCE on Android is very different to Apple Pay and banks will have to make decisions on how to replicate the process across platforms.
Challenges aside, what’s perhaps most important is that we continue to focus on providing customers with a reason to move to mobile payments; that combines ease of use, interoperability and added value. In this way, customers will have a solid reason to buy into the mobile payments thought process.
Three ways payment orchestration improves financial reconciliation
By Brian Coburn, CEO or Bridge,
When Luca Pacioli, the 15th century Venetian monk, invented double-entry account keeping, managing financial reconciliations had its own unique challenges. The father of modern accounting didn’t have to deal with glitches in his book-keeping app but he did have to write with feather-based quills by candlelight. Five hundred years later the challenges are different but no less onerous.
As in the 15th century, solid financial reporting is at the heart of every successful high-transaction business. As Pacioli no doubt knew, up-to-date, well-documented accounting ensures good operational health and makes it easier to grow. And that’s never been more important.
While it might not be feather quills by moonlight, today’s environment of multiple customer channels can be time-consuming and labour intensive, with various payment methods and financial reconciliations from multiple data sources.
Understanding cash inflow through online transactions is a critical element of financial reporting. However, when these involve multiple payment processors and payment methods and a complex system of disjointed silos of payment data, this can become a cumbersome and arduous manual task.
Common issues in this fragmented payments landscape include working across different formats, managing different data owners and access as well as inconsistent process timings. The result is often increased inaccuracy and inefficiency. Procuring multiple tools and software can end up being uncost-effective and unwieldy. Though the current digital transformation is an exciting time for retailers, staying on top of the ever-changing payment options can be an overwhelming burden for many business owners.
Introducing payment orchestration presents a single, accessible, creative and accurate source of transactional data, crucial for today’s complex challenges around financial reconciliations.
Today, commerce is 24/7, so being able to access and analyse real-time information is vital to managing business controls. Many organisations have looked to automate these processes with account reconciliation software.
However, one key challenge is the sheer volume of transactions and the need to capture data from a variety of different sources. Payment orchestration enables transactions to be carried out by multiple payment processors and payment methods with simple and flexible plugins, centrally monitored and routed in the most optimum way.
It allows users to add or remove providers easily, knowing the complexity (detecting outages and automatically rerouting payments) is being handled by a trusted specialist partner via an intelligent platform.
Bringing disparate sources of online transaction data into one place simplifies how enterprises access and operate with multiple payment processors and payment methods. This makes it easier for businesses to remain agile.
For organisations that still depend on manual, spreadsheet driven processes, the mechanics of reconciliation can be extremely time consuming.
A payment orchestration layer creates the opportunity to automate processes and reduce manual intervention. By bringing multiple payment processors and payment methods into an integrated service layer with intelligent routing capabilities, the impact of individual outages or failed payments can be mitigated to ensure optimum payment success rates, saving crucial revenue.
Naturally, significant manual work brings with it the added risk of human error. The speed with which business moves today demands accurate accounting processes. Checking for error takes up valuable time that could be spent focusing on business growth.
Payment orchestration can improve accuracy and reduce the opportunity for error. Providing a holistic and central source of real-time transactional data, payment orchestration can offer improved transparency and greater visibility of financial data.
With all transactional data captured in one source, payment orchestration can present a data source to feed other applications – such as automated reconciliation tools and fraud management – automating business processes in a seamless way across the enterprise. Good practice like this will, of course, enable a consistent approach to fraud management across all channels and payment services.
Multiple payment choices can be onerous but, today, not adopting them at all is unwise. The key to success, and good financial reconciliation, is being able to streamline and manage them.
Circular Economy must be top of the business agenda in 2021
By Andrew Sharp, CEO of CDSL, the UK’s leading appliance spare parts distributor
The last year has been one in which we were all forced to change our behaviour. We have become far more familiar with the four walls of our home than we would have liked, we have had to give up the social activities that mean the most to us and we have spent much longer apart from relatives than we could have imagined.
But alongside the many reluctant changes that we have made, there have been some silver linings. Both consumers and businesses have reassessed their priorities, and we have seen a noticeable increase in the importance of sustainability and social value in everything we do.
Within this has been a rise in awareness of the power of the circular economy. Research from the Recycle Now campaign shows nearly nine out of 10 UK households now say they “regularly recycle” (September, 2020), while environmental organization Hubbub found that 43% of people are more concerned about plastic pollution than before Covid-19 (September, 2020).
The role of the circular economy in underpinning wider sustainability targets is now being widely realised by Government, consumers and businesses alike. The Ellen MacArthur Foundation recently found that circular economy policies contribute towards tackling the remaining 45% if greenhouse emissions that cannot be resolved by transitioning to renewable energy alone (January, 2021), and the circular economy can offer solutions to the 90% of biodiversity loss and water stress that traditional resource extraction and processing require.
However, reducing the impact of our current linear economy will require widespread change and every product that we use will need to be accommodated within this. One area that is yet to be fully incorporated into a circular economy model is e-waste – an area where the UK is unfortunately a world leader. Other than Norway, the UN has said that the average person in Britain discards more electrical items each year than anywhere else in the world, and the UK is also the worst offender in Europe for illegally exporting toxic electronic waste to developing countries.
1,000,000 tonnes of e-waste are produced annually in the UK, enough to fill six Wembley Stadiums. The WEEE Forum estimates that only 17.4% of e-waste was recycled in 2019 (October, 2020), meaning the vast majority of this is burnt or thrown into landfill, creating environmental hazards for years to come.
However, the good news is that 100,000 tonnes of e-waste would be avoided if we fixed just 10% more perfectly repairable appliances. As an electrical spare parts retailer, we have seen incredibly encouraging trends throughout 2020. Our leading consumer brand eSpares has seen record-breaking surges in demand over the past year as consumers look to fix appliances themselves rather than kicking them to the kerb.
We recently conducted a survey of 5,000 people and the results clearly show this growing interest among young people for repairing and recycling their electrical goods. The answers suggest that three times more young people than over-65s would try to fix a broken appliance at home and that the environmentally conscious under-35s are increasingly keen to fix gadgets rather than throw them away.
That is why we have taken steps to encourage our customers to drive a circular economy throughout the year with the campaign #FixFirst. As a business and a retailer, it is our responsibility to help educate our customers on the benefits of a circular economy. Free services like our Advice Centre, which has over 700 step-by-step articles and attracted 1.2million visits in 2020, contribute to this by offering assistance on making repairs around the home whenever and wherever it is needed.
It is up to businesses to ensure that we champion the benefits of the circular economy and ensure these behaviours are maintained permanently.
Certain sectors are already leading the charge in doing this. In fashion retail for example, Levi’s is paying consumers to bring back old pairs of jeans for sale on a second-hand marketplace. Patagonia similarly will take back old pieces of clothing to repair and refurbish them.
Plastic packaging is also receiving some tough attention from across the retail and food and drink manufacturing sectors. Tesco has announced that it has removed one billion pieces of plastic from its UK business in just one year through a policy of Remove, Reduce, Reuse and Recycle, while consumer brands like Nestle for example are testing reusable packaging to reduce the amount of single use plastics.
Consumer attitudes are moving in one direction on the topic of the circular economy and it is therefore essential that businesses also get ahead of this as a commercial priority. In 2020, Deloitte found that 43% of consumers were already actively choosing brands due to their environmental values, while 2/3 of consumers have reduced their usage of single use plastics. In direct to consumer in sectors like the one in which we operate, sustainability credentials are fast becoming a purchasing priority alongside price.
Legislation in the UK is also increasingly clamping down on businesses that do not champion circular economy in the products they create and use. The Environment Bill that is expected to be passed in Autumn will give Government powers to introduce new targets on waste reduction and packaging. Extended Producer Responsibility expected to be introduced in 2023 will also lead to major fees for manufacturers of products that cannot easily be recycled.
As the circular economy rises in priority over the next year, businesses must act fast. Robust policies on the circular economy will both drive environmental benefit and allow businesses to stay ahead of a trend that is fast becoming a priority for consumers.
Bitcoin steams to new record and nears $1 trillion market cap
By Tom Wilson and Stanley White
LONDON/TOKYO (Reuters) – Bitcoin hit yet another record high on Friday, and moved within sight of a market capitalisation of $1 trillion, blithely shrugging off analyst warnings that it is an “economic side show” and a poor hedge against a fall in stock prices.
The world’s most popular cryptocurrency jumped 2.6% to an all-time high of $52,932, setting it on course for a weekly jump of over 8%. It has surged around 60% so far this month.
Bitcoin’s gains have been fuelled by signs it is winning acceptance among mainstream investors and companies, from Tesla and Mastercard to BNY Mellon.
Its latest gains took its market capitalisation – all the bitcoin in circulation – to about $982 billion, according to cryptocurrency data website CoinMarketCap, with all digital coins combined worth around $1.6 trillion.
Still, many analysts and investors remain sceptical of the patchily-regulated and highly volatile digital asset, which is still little used for commerce.
Analysts at JP Morgan said bitcoin’s current prices were well above estimates of fair value. Mainstream adoption increases bitcoin’s correlation with cyclical assets, which rise and fall with economic changes, in turn reducing benefits of diversifying into crypto, the investment bank said in a memo.
“Crypto assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed,” JP Morgan said.
Bitcoin is an “economic side show,” it added, calling innovation in financial technology and the growth of digital platforms into credit and payments “the real financial transformational story of the COVID-19 era”.
Other investors this week said bitcoin’s volatility presents a hurdle for its ambitions to become a widespread means of payment.
On Thursday, Tesla boss Elon Musk – whose tweets have fuelled bitcoin’s rally – said owning the digital coin was only a little better than holding cash. He also defended Tesla’s recent purchase of $1.5 billion of bitcoin, which ignited mainstream interest in the digital currency.
Graphic: Cryptocurrencies surge multi-fold from March lows –
Bitcoin proponents argue the cryptocurrency is “digital gold” that can hedge against the risk of inflation sparked by massive central bank and government stimulus packages designed to counter COVID-19.
Yet bitcoin would need to rise to $146,000 in the long-term for its market capitalisation to equal total private-sector investment in gold via exchange-traded funds or bars and coins, according to JP Morgan.
Rival cryptocurrency ether traded down 0.5%, still near a record of $1,951 reached earlier on Friday. It has been lifted by growing institutional interest, and after its futures were launched on the Chicago Mercantile Exchange.
(Reporting by Tom Wilson in London and Stanley White in Tokyo; Editing by Sam Holmes and Pravin Char)
ECB plans closer scrutiny of bank boards
FRANKFURT (Reuters) – The European Central Bank plans to increase scrutiny of bank board directors and will take look more...
Where are we with Open Banking, and should we be going further?
By Mitchel Lenson, Non-Executive Chairman, Exizent Open Banking has the power to revolutionise the way we manage our money, but...
Oil extends losses as Texas prepares to ramp up output
By Ahmad Ghaddar LONDON (Reuters) – Oil prices fell from recent highs for a second day on Friday as Texas...
What will become of our banks and their channels in 2021?
By Mark Aldred, banking specialist at Auriga As we embark on the new year, 2020 will hopefully become distant but...
Three ways payment orchestration improves financial reconciliation
By Brian Coburn, CEO or Bridge, When Luca Pacioli, the 15th century Venetian monk, invented double-entry account keeping, managing financial...
Circular Economy must be top of the business agenda in 2021
By Andrew Sharp, CEO of CDSL, the UK’s leading appliance spare parts distributor The last year has been one in...
Analysis: Carmakers wake up to new pecking order as chip crunch intensifies
By Douglas Busvine and Christoph Steitz BERLIN (Reuters) – The semiconductor crunch that has battered the auto sector leaves carmakers...
Bitcoin steams to new record and nears $1 trillion market cap
By Tom Wilson and Stanley White LONDON/TOKYO (Reuters) – Bitcoin hit yet another record high on Friday, and moved within...
What does cybersecurity look like for the financial sector in 2021?
By Neill Lawson-Smith, managing director at CIS The landscape is changing incredibly fast, with cybercriminals using the most up-to-date technology...
Aussie and sterling hit multi-year highs on recovery bets
By Tommy Wilkes LONDON (Reuters) – The Australian dollar rose to near a three-year high and the British pound scaled...