By Alain Fernando-Santana, CAO, Spire Payments.
mPOS seemed like a straightforward business model. High street stores and other smaller retailers were able to take card payments through a terminal. But what about the smaller businesses that didn’t operate out of fixed premises or for whom a fixed terminal just isn’t practical?
Taking card payments was only possible for those who were either making large transactions or a large number of transactions. This left a lot of potential businesses out. A typical mobile hairdresser, for example, or a merchandise stall at a music gig or plumber in a white van, all still relied on cash for the majority of transactions.
A massive niche
This market of micromerchants is potentially huge. It was originally intended to be a ‘long tail’ proposition with the idea being that sum of all terminals required by micromerchants will equal or exceed those currently deployed with tier 1 and tier 2 merchants. Although, these micromerchants would rarely use more than one terminal, the sheer number of them made it a niche worth pursuing. Moreover, the new generation mPOS terminals were – by definition – mobile, low cost and flexible, and would reduce micromerchants reliance on cash and mean they wouldn’t have to turn away people who only wanted to pay by card. Other benefits include loyalty, analytics and reporting that was usually only open to much larger merchants.
In 2012, analysts were confident that six million mPOS units would be installed by 2020.
Today, revised forecasts put the market at around one million by 2020, Why?
A very very long tail
The mPOS market did show initial promise but it just hasn’t grown at the rate expected. The long tail idea, it turns out, just doesn’t work with micromerchants and mPOS. If you see micromerchants as a ‘slice of the pie’ that remains unclaimed, and target them with a single solution, it simply won’t work because they are difficult to reach and the contact will be primarily physical rather than digital..
Indeed, Micro-merchants are incredibly diverse. As well as the hairdresser, plumber and band examples above, there are micromerchants in agriculture, professional services, arts and crafts and every other vertical you can think of. Along with the massive diversity of services, these micromerchants also have a massive diversity of needs. So a band selling merchandise may need a breakdown of what payments belong to them and what the support band has sold. A plumber may want analytics to make sure he or she is billing correctly for both parts and labour. Pop-up shops may find inventory management useful. And so on – the promise of mPOS is in more than just accepting payments. To be compelling, an mPOS solution needs to create a digital experience that helps a micromerchant solve their business needs. Unfortunately, the technology today does not allow for a turn-key, feature-rich and purely digital experience, so the micromerchant is content to live with the limitations of only accepting cash and cheques.
There is also the issue that acquiring these micro-merchants is extremely difficult. Target a high street retailer and a POS provider can put their devices in dozens, possibly hundreds of outlets, all through a handful of decision makers. But each micromerchant will likely buy just one device and each micromerchant is his own decision-maker meaning thousands of personal interactions are needed to sell thousands of devices versus a handful of interactions to sell tens of thousands of devices. Finally, there is the whole issue of education. Most small businesses and, even more so, micromerchants, are not tech savvy and don’t really know what mPOS is all about, and when they find out, there are very practical questions and concerns around security and usability that make it a hard sell. Fundamentally educating the public that putting your bank card into a device connected to a phone you don’t know if you can trust for a merchant you may have just met is a difficult sell.
A vicious circle
The issue of mPOS and micromerchants is best summed up by the UK market. The UK has the highest concentration of mPOS service provision, but only 2% of micromerchants have adopted the use of mPOS. 74% of UK businesses have no employees and are sole traders – that’s a huge untapped market of businesses who have not adopted mPOS (MobileSquared, 2014).
The problem is circular: mPOS service providers are only providing card acceptance, and are failing to provide wider value-added services that would both increase top-line revenues and generate greater micromerchant interest. Providers are also struggling to acquire enough customers and build enough scale to give the adoption of mPOS by micromerchants some momentum. Service Providers need to offer value-added services to attract these customers and benefit from economies of scale, but find themselves forced to look to cost-reducing measures as the market fails to take off.
Victims of the yet-to-be-determined mPOS business model who had raised significant private equity are starting to make headline. One very public example was Powa Technologies Group PLC who went into administration in February 2016 after raising almost two hundred million of dollars. VeriFone dropped its highly publicized mPOS solution Sail within 12 months of it being announced.
The net result of the lack of a clear business model, is that the mPOS environment of today is still predominantly occupied by potentially flash in the pan start-ups who are burning through their funding while some of the more established payment players like Spire Payments and Ingenico have capitalized on their payment expertise to offer well-thought out solutions but with diametrically opposed approaches – Ingenico requires customers to buys its full mPOS solution end-to-end while Spire Payments offers the merchant the flexibility inherent in a modular solution from which different elements can be selected.
In spite of this very fluid context there is light at the end of the tunnel and a potential to break this cycle.
A shining light
Increasingly mPOS Service Providers are able to offer out-of-the-box value added services – simple to set up and easy to use. Micromerchants, without the IT support departments that bigger businesses can rely on, need something that is consumer-grade when it comes to user experience – they don’t have time to be trained on new technology, it has to ‘just work’. At the same time hardware providers are making it much easier and cost effective to expand across multiple markets and drive scale despite complexity and regulatory barriers.
Plus, there is the increased pressure on all merchants to offer card payments. In the UK last year consumers used £18.3bn of cash for their transactions, down from £21.4bn in 2009 – despite an increase in overall spending. Given the choice, most people will pay by card. Those who offer goods and services but only accept cash will increasingly be seen as archaic.
There is still potential for six million mPOS units to be in use – perhaps by 2020 or perhaps earlier if the mPOS solution is easy to use and can be bundled with value added services that meet the specific needs of micromerchants, if the mPOS devices have the form factor and flair that we are now accustomed to having in an iPhone world but, most importantly, if smart marketers can identify a digital technique to reach out to micromerchants and sign them up to the service “en masse”.. The micromerchants’ demand for better payment methods, a better understanding of their customer spending patterns, and the availability of high-value services will all contribute to the creation of a successful mPOS business model. Those participants in the mPOS eco-system that have the required payments skills and expertise to make a difference will no doubt reap the benefits of a working mPOS business model but those that are still discovering the technical, regulatory and cultural complexities of the payment landscape may find that, for them, the mPOS business model remains broken.
The Psychology Behind a Strong Security Culture in the Financial Sector
By Javvad Malik, Security Awareness Advocate at KnowBe4
Banks and financial industries are quite literally where the money is, positioning them as prominent targets for cybercriminals worldwide. Unfortunately, regardless of investments made in the latest technologies, the Achilles heel of these institutions is their employees. Often times, a human blunder is found to be a contributing factor of a security breach, if not the direct source. Indeed, in the 2020 Verizon Data Breach Investigations Report, miscellaneous errors were found vying closely with web application attacks for the top cause of breaches affecting the financial and insurance sector. A secretary may forward an email to the wrong recipient or a system administrator may misconfigure firewall settings. Perhaps, a user clicks on a malicious link. Whatever the case, the outcome is equally dire.
Having grown acutely aware of the role that people play in cybersecurity, business leaders are scrambling to establish a strong security culture within their own organisations. In fact, for many leaders across the globe, realising a strong security culture is of increasing importance, not solely for fear of a breach, but as fundamental to the overall success of their organisations – be it to create customer trust or enhance brand value. Yet, the term lacks a universal definition, and its interpretation varies depending on the individual. In one survey of 1,161 IT decision makers, 758 unique definitions were offered, falling into five distinct categories. While all important, these categories taken apart only feature one aspect of the wider notion of security culture.
With an incomplete understanding of the term, many organisations find themselves inadvertently overconfident in their actual capabilities to fend off cyberthreats. This speaks to the importance of building a single, clear and common definition from which organisations can learn from one another, benchmark their standing and construct a comprehensive security programme.
Defining Security Culture: The Seven Dimensions
In an effort to measure security culture through an objective, scientific method, the term can be broken down into seven key dimensions:
- Attitudes: Formed over time and through experiences, attitudes are learned opinions reflecting the preferences an individual has in favour or against security protocols and issues.
- Behaviours: The physical actions and decisions that employees make which impact the security of an organisation.
- Cognition: The understanding, knowledge and awareness of security threats and issues.
- Communication: Channels adopted to share relevant security-related information in a timely manner, while encouraging and supporting employees as they tackle security issues.
- Compliance: Written security policies and the extent that employees adhere to them.
- Norms: Unwritten rules of conduct in an organisation.
- Responsibilities: The extent to which employees recognise their role in sustaining or endangering their company’s security.
All of these dimensions are inextricably interlinked; should one falter so too would the others.
The Bearing of Banks and Financial Institutions
Collecting data from over 120,000 employees in 1,107 organisations across 24 countries, KnowBe4’s ‘Security Culture Report 2020’ found that the banking and financial sectors were among the best performers on the security culture front, with a score of 76 out of a 100. This comes as no surprise seeing as they manage highly confidential data and have thus adopted a long tradition of risk management as well as extensive regulatory oversight.
Indeed, the security culture posture is reflected in the sector’s well-oiled communication channels. As cyberthreats constantly and rapidly evolve, it is crucial that effective communication processes are implemented. This allows employees to receive accurate and relevant information with ease; having an impact on the organisation’s ability to prevent as well as respond to a security breach. In IBM’s 2020 Cost of a Data Breach study, the average reported response time to detect a data breach is 207 days with an additional 73 days to resolve the situation. This is in comparison to the financial industry’s 177 and 56 days.
Moreover, with better communication follows better attitude – both banking and financial services scored 80 and 79 in this department, respectively. Good communication is integral to facilitating collaboration between departments and offering a reminder that security is not achieved solely within the IT department; rather, it is a team effort. It is also a means of boosting morale and inspiring greater employee engagement. As earlier mentioned, attitudes are evaluations, or learned opinions. Therefore, by keeping employees informed as well as motivated, they are more likely to view security best practices favourably, adopting them voluntarily.
Predictably, the industry ticks the box on compliance as well. The hefty fines issued by the Information Commissioner’s Office (ICO) in the past year alone, including Capital One’s $80 million penalty, probably play a part in keeping financial institutions on their toes.
Nevertheless, there continues to be room for improvement. As it stands, the overall score of 76 is within the ‘moderate’ classification, falling a long way short of the desired 90-100 range. So, what needs fixing?
Towards Achieving Excellence
There is often the misconception that banks and financial institutions are well-versed in security-related information due to their extensive exposure to the cyber domain. However, as the cognition score demonstrates, this is not the case – dawdling in the low 70s. This illustrates an urgent need for improved security awareness programmes within the sector. More importantly, employees should be trained to understand how this knowledge is applied. This can be achieved through practical exercises such as simulated phishing, for example. In addition, training should be tailored to the learning styles as well as the needs of each individual. In other words, a bank clerk would need a completely different curriculum to IT staff working on the backend of servers.
By building on cognition, financial institutions can instigate a sense of responsibility among employees as they begin to recognise the impact that their behaviour might have on the company. In cybersecurity, success is achieved when breaches are avoided. In a way, this negative result removes the incentive that typically keeps employees engaged with an outcome. Training methods need to take this into consideration.
Then there are norms and behaviours, found to have strong correlations with one another. Norms are the compass from which individuals refer to when making decisions and negotiating everyday activities. The key is recognising that norms have two facets, one social and the other personal. The former is informed by social interactions, while the latter is grounded in the individual’s values. For instance, an accountant may connect to the VPN when working outside of the office to avoid disciplinary measures, as opposed to believing it is the right thing to do. Organisations should aim to internalise norms to generate consistent adherence to best practices irrespective of any immediate external pressures. When these norms improve, behavioural changes will reform in tandem.
Building a robust security culture is no easy task. However, the unrelenting efforts of cybercriminals to infiltrate our systems obliges us to press on. While financial institutions are leading the way for other industries, much still needs to be done. Fortunately, every step counts -every improvement made in one dimension has a domino effect in others.
Has lockdown marked the end of cash as we know it?
By James Booth, VP of Payment Partnerships EMEA, PPRO
Since the start of the pandemic, businesses around the world have drastically changed their operations to protect employees and customers. One significant shift has been the discouragement of the use of cash in favour of digital and contactless payment methods. On the surface, moving away from cash seems like the safe, obvious thing to do to curb the spread of the virus. But, the idea of being propelled towards an innovative, digital-first, cashless society is also compelling.
Has cashless gone viral?
Recent months have forced the world online, leading to a surge in e-commerce with UK online sales seeing a rise of 168% in May and steady growth ever since. In fact, PPRO’s transaction engine, has seen online purchases across the globe increase dramatically in 2020: purchases of women’s clothing are up 311%, food and beverage by 285%, and healthcare and cosmetics by 160%.
Alongside a shift to online shopping, a recent report revealed 7.4 million in the UK are now living an almost cashless life – claiming changing payment habits has left Britons better prepared for life in lockdown. In fact, according to recent research from PPRO, 45% of UK consumers think cash will be a thing of the past in just five years. And this UK figure reflects a global trend. For example, 46% of Americans have turned to cashless payments in the wake of COVID-19. And in Italy, the volume of cashless transactions has skyrocketed by more than 80%.
More choice than ever before
Whilst the pandemic and restrictions surrounding cash have certainly accelerated the UK towards a cashless society, the proliferation of local payment methods (LPMs) in the UK, such as PayPal, Klarna and digital wallets, have also been a key driver. Today, 31% of UK consumers report they are confident using mobile wallets, such as Apple Pay. Those in Generation Z are particularly keen, with 68% expressing confidence using them.
As LPM usage continues to accelerate, the use of credit and debit cards are likely to decline in the coming years. Whilst older generations show an affinity with plastic, younger consumers feel less secure around its usage. 96% of Baby Boomers and Generation X confirmed they feel confident using credit/debit cards, compared to just 75% of Generation Z.
Does social distancing mean financial exclusion?
As we hurtle into a digital age, leaving cash in the rearview, there are ramifications of going completely cashless to consider. We must take into consideration how removing cash could disenfranchise over a quarter of our society; 26% of the global population doesn’t have a traditional bank account. Across Latin America, 38% of shoppers are unbanked, and nearly 1 in 5 online transactions are completed with cash. While in Africa and the Middle East, only 50% of consumers are banked in the traditional sense, and 12% have access to a credit card. Even here in the UK, approximately 1.3 million UK adults are classed as unbanked, exposing the large number of consumers affected by any ban on cash.
Even when shopping online – many consumers rely on cash-based payments. At the checkout page, consumers are provided with a barcode for their order. They take this barcode (either printed or on their mobile device) to a local convenience store or bank and pay in cash. At that point, the goods are shipped.
There are also older generations to consider. Following the closure of one in eight banks and cashpoints during Coronavirus, the government faced calls to act swiftly to protect access to cash, as pensioners struggled to access their savings. Despite the direction society is headed, there are a significant number of older people that still rely on cash – they have grown up using it. With an estimated two million people in the UK relying on cash for day to day spending, it is important that it does not disappear in its entirety.
Supporting the transition away from cash
Cashless protocols not only restrict access to goods and services for consumers but also limit revenue opportunity for merchants. While 2020 has provided the global economy with one great reason to reduce the acceptance of cash, the payments industry has billions of reasons to offer multiple options that cater to the needs of every kind of shopper around the world.
Whilst it seems younger generations are driving LPM adoption, it is important that older generations aren’t forgotten. If online shops fail to offer a variety of preferred payment methods, consumers will not hesitate to shop elsewhere. With 44% of consumers reporting they would stop a purchase online if their favourite payment method wasn’t available – this is something merchants need to address to attract and retain loyal customers.
UnionPay increases online acceptance across Europe and worldwide with Online Travel Agencies
- UnionPay International today announces that two of Europe’s leading travel companies, Logitravel and Destinia, have started accepting UnionPay.
- This acceptance will enable users of the groups’ travel websites to make purchases using UnionPay payment methods.
The acceptance partnerships between the OTAs and UnionPay began in July 2020 for customers across 13 European countries and another 90 countries and regions worldwide. The European countries covered by the agreements include the UK, Germany, France, Italy, Spain, Portugal, Norway, Denmark, Sweden, Austria, Switzerland, Hungary and Ireland. The brands covered by these acceptances include Logitravel.com and Destinia.com which together deliver more than 8.5 million worldwide travel bookings each year covering flights, hotels, holidays, car hire and other experiences.
With over 8.4 billion cards issued in 61 countries and regions worldwide, UnionPay has the world’s largest cardholder base and is the preferred payment brand for many Chinese and Asian expatriates and students based in Europe, as well as an increasing number of global customers. These cardholders are also particularly attractive to the two OTAs. Despite the impact of Covid-19, Logitravel and Destinia expect to see the demand for travel across the European continent as well as that between Europe and Asia return to growth in the coming years. They are now placing significant focus on offering more payment options and smoother payment services to meet this demand.
The partnerships incorporate UnionPay’s ExpressPay and SecurePlus technology, which will ensure seamless transactions for the customers, contained within a single process through the relevant websites. UnionPay’s technology also provides for the requirement to authenticate transactions under the EU regulation Payment Services Directive 2 (PSD2) ensuring that sites will be compliant as soon as the relevant countries apply the requirements.
Wei Zhihong, UnionPay International’s Market Director, said: “This is a major partnership with two of Europe’s leading online travel companies. Logitravel and Destinia are brands which have been at the forefront of e-commerce for many years and we are very excited to be working with them to extend their reach to new audiences. This highlights the work that we have carried out in ensuring that our technology provides effective solutions for the biggest e-commerce sites both in Europe and around the world. We look forward to announcing many more similar agreements in the near future.”
Jesús Pons, Chief Financial Officer at Logitravel Group said: “UnionPay has always been on our radar, and since travel has become a crucial part of its development, Logitravel felt it important to develop this important partnership. It really was an obvious decision for Logitravel since both companies share a passion for e-commerce and emphasising the payment experience for their customers.”
Ricardo Fernández, Managing Director at Destinia Group said: “We believe that this is the beginning of a really strong relationship. Our discussions with UnionPay in reaching this partnership have demonstrated their understanding of the needs of major online merchants and their ability to deliver the highest quality systems. We look forward to working together on further partnership as we move forward.”
The importance of app-based commerce to hospitality in the new normal
By Jeremy Nicholds CEO, Judopay As society adapts to the rapidly changing “new normal” of working and socialising, many businesses...
The Psychology Behind a Strong Security Culture in the Financial Sector
By Javvad Malik, Security Awareness Advocate at KnowBe4 Banks and financial industries are quite literally where the money is, positioning...
How open banking can drive innovation and growth in a post-COVID world
By Billel Ridelle, CEO at Sweep Times are pretty tough for businesses right now. For SMEs in particular, a global financial...
How to use data to protect and power your business
By Dave Parker, Group Head of Data Governance, Arrow Global Employees need to access data to do their jobs. But...
How business leaders can find the right balance between human and bot when investing in AI
By Andrew White is the ANZ Country Manager of business transformation solutions provider, Signavio The digital world moves quickly. From...
Has lockdown marked the end of cash as we know it?
By James Booth, VP of Payment Partnerships EMEA, PPRO Since the start of the pandemic, businesses around the world have...
Lockdown 2.0 – Here’s how to be the best-looking person in the virtual room
By Jeff Carlson, author of The Photographer’s Guide to Luminar 4 and Take Control of Your Digital Photos suggests “the product you’re creating is...
Banks take note: Customers want to pay with points
By Len Covello, Chief Technology Officer of Engage People ‘Pay with Points’ – that is, integrating the ability to pay...
Are you a fighter or a freezer? The 4 “F’s” of Surviving Danger
By Dr.Roger Firestien, Author of Create In a Flash. The fight, flight, freeze survival response – or FFF for short...
Why the FemTech sector might be the sustainability saviour we have been waiting for
By Kristy Chong, CEO & Founder Modibodi ® Taking single use plastics out of circulation is no easy feat, but...