and biometric payments (15 per cent). Such a spread and such relatively high percentages reflected the anticipated rate of change. While still dominant, the growth rate for online payments is expected to be considerably slower in relative terms than contactless and mobile. Hurdles for new forms of payment are being broken


down. For instance, the lack of phones with NFC has been a hindrance (a pilot by Paypal, with S1, in Poland a few years ago failed to take off for this reason) but this is changing as new devices are shipped and as the likes of Google with Android add NFC capabilities. There is innovation elsewhere. For instance, Travelex and ICE have a card that offers dynamic currency conversion so that a customer using the card abroad can know the actual cost of a purchase in his or her home currency. The operators make money on the FX. Mike Hendry, payments specialist and author, pointed out a number of challenges. The gradual disappearance of national schemes and interests means the loss of ‘protected’ markets. The credit card’s loss of favour means interest is no longer a reliable source of income for issuers, while the increase in regulation means interchange fees are heading the same way and regulation also controls direct charges in some countries. Contactless interfaces are likely to become increasingly


prevalent. This will not only be on a proximity basis but also over wide area networks. Currently particularly pioneered by the transport sector, they often work more efficiently than contact ones and are easier to maintain. Forms of prepaid will multiply, with this type of payment becoming a general purpose one, with potentially a significant impact on cash payments. Citi has had a contactless pilot in Banglalore, using mobile proximity for contactless transactions, then working alongside Visa on another project in the Philippines in 2013. The banks are trying to forge a role but it is hard not to


argue with Birch’s observation that payment initiatives driven by mobile operators are much more successful at present than those launched by banks. ‘It could be where friction will occur.’ The well-known success of M-Pesa in Kenya (see below) would look to back up this assertion. John Maynard, lead business development manager at the operator behind M-Pesa, Vodafone, has said the aim is not to cut out the banks. ‘Don’t fight against us, no one benefits, work with us.’ Emerging (or increasingly established) players in the mobile payments space have been the likes of Coinstar, Obopay, Xoom, iKobo, iDeal (part-owned by KLM), Wizzit and Zapa Technologies. Some heavyweights are also moving in or hovering, particularly Google and Apple. Not all initiatives will succeed and, indeed, the sector already has its casualties, including BillPoint, Citibank’s C2it and Yahoo PayDirect. The remarkable rise of social networks cannot be ignored and these sites are developing e-money or some form of credit


10


exchange to enable payments including, as mentioned, facebook and twitter. Thus, much of the discussion when talking about innovation


centres on retail payments but the corporate banking space could certainly do with some innovation as well. Of course, some of the breakthroughs will be applicable to both but there is often a chasm between retail and B2B, suggested Colin Digby, EMEA head of treasury solutions and markets at Deutsche Bank. There is still old technology around, including DOS-based green screens, and even in newer e-banking offerings there is seldom the personalisation capabilities that were available with Yahoo even in the late 1990s. The offerings are often disjointed, based on siloes. ‘If a client can figure out your organisation chart by how you present your products on your website then you have failed,’ he observed. In the corporate space, a number of major banks have lined up behind an SAP push for bank-to-corporate connectivity. Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi (BTM), Citibank, Deutsche Bank, Nordea, RBS and Standard Chartered announced on their intentions to support SAP’s Financial Services Network (FSN). Perhaps ironically, the banks and SAP chose Swift’s Sibos show in Osaka in October 2012 to go public despite the challenge that this constitutes to the Society’s long-running efforts to bridge the bank-to- corporate divide. FSN is SAP’s proposed solution to allow its corporate ERP customers to connect to banks using its private cloud. ‘Controlled availability’ was touted for Q1 2013, with general availability in the following quarter. There would be an ‘FSN connector’ which would initially be available to ERP customers as an extension pack, and would then become part of standard releases. There would also be data formatting and the solution would use the same cloud as SAP’s current on-demand applications. SAP claimed 200,000 corporates and 3700 banks as customers, so connecting them was described as a natural thing to do. SAP is touting the potential for banks to add services on top of the connectivity piece, for areas such as reconciliations, remittances, exceptions and trade services. There is also expected to be synergy with Ariba, the buyer-to- seller portal which was acquired in 2012 by SAP. In fact, FSN has moved slower than planned. One year after launch, the same banks still seemed to be lined up to support it but the start date had been pushed back from Q2 to Q4 2013 and it has remained difficult to find tangible examples of widespread uptake.


M-Pesa and other initiatives


The M-Pesa story is well known but Vodafone’s moves beyond here are less high profile at present and there are also one or


Payment Systems & Suppliers Report | www.ibsintelligence.com


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