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MASTERCARD: “EVERY CONNECTED DEVICE WILL BE A COMMERCE DEVICE.”

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MASTERCARD: “EVERY CONNECTED DEVICE WILL BE A COMMERCE DEVICE.” 1

Author: Jessica Twentyman

Christophe Zehnacker

Christophe Zehnacker

Internet of Business speaks to Christophe Zehnacker, head of strategic digital partnerships at global payments company Mastercard, about the coming ‘Internet of Payment Things’.

After years of promises and some false starts, the mobile payments revolution is now in full swing. Consumers around the world are increasingly comfortable with using their smartphone to make payments. It’s a quick and convenient way to get their hands on that rush-hour train ticket or vital, pre-meeting cup of coffee. It’s a great way too to make that in-app purchase to access new levels of a game, for example, or renew a magazine subscription.

But mobile payments are just the start of a much bigger revolution, says Christophe Zehnacker, head of strategic digital partnerships at global payments company Mastercard.

The next big wave in what he calls “friction-free commerce”, he says, will see consumers able to make payments through the many of the smart, connected devices that make up the IoT. Mastercard is committed to playing its part in making this vision a reality through its ‘Commerce for Every Device’ program.

From wearables to washing machines

“The way we see it, every connected device is going to be a commerce device – whether it’s a wearable device, a car, a consumer home appliance like a fridge or washing machine, or another smart home device, perhaps smart home speakers… They can all become shopping devices,” he says.

That means, for example, that a homeowner will be able to pay their electricity bill directly from their smart meter. A runner will be able to pay for a refreshing post-10k drink directly from their wrist-worn fitness tracker. A driver will be able to order and pay for cinema tickets directly from their smart car, while on their way to the cinema.

Mastercard’s digital transformation journey thus far has been built on two key assets, Zehnacker explains, and these will continue to be key as this second wave of new payment types takes off.

masterpass

The first is Masterpass, a digital payment service that enables consumers to make fast, simple and secure digital payments in store (via contactless), in apps and online and is typically distributed to consumers via their issuing banks. Over 80 million Masterpass consumer accounts are already enabled, says Zehnacker, with acceptance at over 300,000 online merchants worldwide and over 6 million physical contactless point-of-sale terminals. Masterpass will also integrate with Microsoft Wallet, Android Pay and Samsung Pay in the future.

The second asset is the Mastercard Digital Enablement Service (MDES), an industry standard tokenisation service that facilitates ApplePay, AndroidPay and SamsungPay, and that will also help transform any connected device into a commerce device to make payments. Later this year, Mastercard plans to announce partnerships with a number of well-known brands that manufacture IoT devices, according to Zehnacker.

Smart collaborations

Partnership, of course, is key to all these plans, which is where Zehnacker and his team come in. Mastercard must increasingly collaborate not only with the banks and retailers that have been its traditional partners, but also with smart device manufacturers and the technology companies that help build Masterpass wallets and that connect to the MDES tokenization service.

In the space of connected cars, Mastercard is working with tech giant IBM and carmaker General Motors to embed Mastercard payments in future GM models, as part of GM’s OnStar Go in-car system. It has also worked with Samsung to allow consumers in the US to order items from FreshDirect and ShopRite supermarkets, via Samsung’s Family Hub refrigerator.

In the future, Zehnacker envisages consumers strapping on a virtual reality (VR) head-mounted device (HMD), in order to roam the aisles of a retail brand’s ‘virtual store’, regardless of their actual physical location, and make purchases from their HMD while inside that VR experience.

“The possibilities are almost endless,” says Zehnacker. “Some time in 2018, there will be more IoT devices in the world than there are mobile devices, according to industry reports. That calls for a very wide ecosystem of ideas and skills and technologies, including those that we already have at Mastercard and those we continue to develop, to bring to reality our vision of every device as a shopping device.”

Christophe Zehnacker, Mastercardis a member of advisory board for the Internet of Banking and Payments Conference 2017, along with 40 other international expert speakers focusing on wearables, biometrics, data analytics and management, ID verification, customer trust, security and how IoT can change the user experience. The conference takes place on 21-23 November in London, United Kingdom.

Agenda topics include:

  • PSD2: An amazing IoT opportunity
  • How to create a robust defence against IoT payment cyber crime
  • New Regulatory Requirements for IoT payments implementation
  • Innovative business models & subscription services with IoT
  • Technological advances in 2018
  • The future of seamless transactions
  • Blockchain: Asset tracking and payments

Complimentary passes are available for qualifying candidates. Pleasevisit the official event website to view the full agenda and to register: https://goo.gl/rnQm4g

Source: https://internetofbusiness.com/mastercard-every-connected-device-will-commerce-device/

Banking

A quarter of banking customers noted an improvement in customer service over lockdown, research shows

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A quarter of banking customers noted an improvement in customer service over lockdown, research shows 2

SAS research reveals that banks offered an improved customer experience during lockdown

A quarter (27%) of banking customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics.

This represents some good news for banks in an extremely challenging time, with 59% of customers also saying they’d pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of banking customers using a digital service or app has grown by 11%, adding to an existing 58% who were already digital customers. Over half (53%) of new users plan to continue using these digital services permanently moving forward.

Brian Holden, Director, Financial Services at SAS UK & Ireland, said:

“It’s notable that in times of need customers value being able to communicate with their bank and place an even higher value on good customer service. A rise in the number of digital customers means banks can now reach a wider audience online, leveraging AI and analytics to offer a more personalised experience.

“There is work to be done, though. Even greater personalisation is needed if banks are to win over the 12% of customers who felt banking services deteriorated over lockdown. And this personalisation will need to get right down to a segment of one to properly reflect the unique circumstances some individuals now find themselves in due to the pandemic.”

While the number of digital users grew over lockdown, there is still a quarter (24%) of the banking customer base that have chosen not to make the switch to digital services.

Meanwhile, failure to offer a consistently satisfactory customer experience could prove costly for banks, with a third (33%) of customers claiming that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service, so this just underlines how much retail banks can win or lose in these difficult times.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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Banking

Swedish Bank Stress Tests in Line with Recent Rating Actions

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Swedish Bank Stress Tests in Line with Recent Rating Actions 3

The Swedish Financial Supervisory Authority’s (FSA) latest stress test results show major Swedish banks’ robust ability to absorb credit losses. The results support Fitch Ratings’ view that short-term risks have abated in recent months, and are in line with Fitch’s assessment of major Swedish banks’ capitalisation at ‘aa-‘, which was a factor when Fitch removed the ratings of Handelsbanken, Nordea (not covered by the FSA’s stress test) and SEB from Rating Watch Negative in September.

The FSA estimated about SEK130 billion of credit losses over 2020-2022 for the three largest banks (Swedbank, Handelsbanken and SEB) under its stress test. This represents about 220bp of their loans, or about 70bp annually. However, the banks’ pre-impairment profitability in the stress test could absorb credit losses of up to about 110bp of loans annually. Fitch’s baseline expectation is for credit losses below 20bp of loans in 2020 and 8bp-12bp in 2021.

Capital remained strong under the stress test. The average common equity Tier 1 (CET1) ratio fell by only 2.8pp (1.9pp if banks did not pay dividends) from 17.6% at end-June 2020. The capital decline was not driven by credit losses, which could be absorbed by pre-impairment profitability, but by risk-weighted asset inflation.

The three banks’ 3Q20 results showed that capital has been resilient despite the coronavirus crisis. The banks had a CET1 capital surplus over regulatory minimums, including buffers, of almost SEK100 billion (excluding about SEK33 billion earmarked for dividends). SEB had a CET1 ratio of 19.4% at end-September, Handelsbanken’s was 17.8% and Swedbank’s 16.8%.

The SEK130 billion credit losses under the latest stress test are lower than under the FSA’s spring 2020 stress test (SEK145 billion), which also covered a shorter period of two years. However, they are still larger than the actual losses incurred by the three banks during the 2008-2010 crisis. This is despite tightened underwriting standards by the three banks in recent years, including, in the case of SEB and Swedbank, in the Baltics, the source of most of their loan impairment charges in the previous crisis.

In its baseline economic forecasts, the FSA assumes a harsher shock to Sweden’s GDP in 2020 and 2021 (-6.9% and 1%, respectively) than Fitch’s baseline (-4% and 3.4%), although it assumes a similar recovery by end-2022. It also assumes real estate price corrections, which appears particularly conservative in light of a 11% housing property price increase over January to November 2020.

The ratings of Handelsbanken (AA), Nordea (AA-) and SEB (AA-) are on Negative Outlook due to medium-term risks to our baseline scenario. The rating of Swedbank (A+) is on Stable Outlook, reflecting significant headroom at the current rating level following a one-notch downgrade in April due to shortcomings in anti-money laundering risk controls.

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Banking

Future success for banks will be driven by balancing physical and digital services

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Future success for banks will be driven by balancing physical and digital services 4

Digital acceleration due to COVID-19 has not eliminated the need for bank branches

Faster service (23%), smaller queues (26%) and longer opening hours (31%) are among customers’ biggest asks of their bank branch, new research from Diebold Nixdorf today reveals. But with 41% consumers saying they would be comfortable to engage with all banking services via an app, it is vital that banks respond to the full spectrum of customer needs – balancing and evolving their offerings on multiple fronts.

A third (35%) of customers say they will always want access to physical, in-branch banking services in some capacity and one in ten (10%) consumers will never bank predominantly online in the future. This demonstrates that there remains an important role for the services a branch provides. This role, however, continues to shift away from purely transactional banking:

  • A quarter (26%) value face-to-face advice when it comes to their banking needs

  • One in five (18%) seek advice on different products

  • 17% want to speak to the staff or other customers.

Matt Phillips, Diebold Nixdorf vice president, head of financial services UK & Ireland, said: “The majority of banks have spent the last decade focusing on their digital strategies and investing in improving – or establishing – their online customer experience. However, the data shows that there is still an essential role for physical branches. Banks now increasingly face the challenge of continuing to provide customers with access to a range of physical and as well as digital services, giving them the flexibility to choose the best service for them at any given moment in time.”

When looking beyond the impact of COVID-19, planned branch visits by customers are expected to rebound to 28%, following a dip to 11% during lockdown. And when asked about the new services they’d like to see inside their bank, sixteen percent of respondents said more self-service machines would improve their in-branch experience.

Matt Phillips continues: “In a world that is fast evolving and where the future is digital, there’s no doubt that high street banks must, and are, responding to the needs of highly digital customers. But not every customer requirement is digital. There is still a strong need for physical bank branches and the interaction and services they offer, and striking this balance between physical and digital is where the industry must come together to provide solutions. For example, building a strong, leave-behind strategy is something we’re seeing across the board when banks have to close branches, ensuring customers have access to self-service machines to complete all their transactional needs.”

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