cards (in December 2007 and December 2008 respectively), had come up with a number of contactless devices (watches, key fobs) and started an NFC project with Samsung phones in 2010. One challenge was the fact that the expense was around double that of standard cards and the payments are low-value. The most sustainable projects were expected to be hybrid cards that would bring added value. The bank worked with Visa on a transport card which combines prepaid (Urbancard), a school card (which included security functions and contactless payments for school shops, with scope for other facilities such as library cards in the future), and other prepaid cards for music festivals (with 60,000 issued for the large Heineken festival in July 2010). Whether any of these were commercially successful was unclear.


Among those struggling the most to identify a business case are often the retailers, for whom payments are just a tool, not a core part of their business. On the technical side, there is convergence and overlaps, between cards and e-payments, e-banking, contactless cards and mobile payments. It used to be that people saw themselves in payments or cards, observed Hendry. Now everyone is in the payments business as a result of the convergence. Hendry felt a lot of processors were now ‘well under the benchmark for profitability’


and there has been a lot of upheaval, as reflected in the sale of the biggest European acquirer, RBS. He predicted the arrival of ‘many more small operators who can turn a profit on turnover of a few million euros’. There is also likely to be a reduction in the number of certifications required, not only in Europe, perhaps aided by discussions between EMVCo and the US-based PCI Security Standards Council. The likelihood is that uptake and revenue will be driven through added-value. It is not enough to use mobile to merely replicate what is done today. It needs creative thinking to produce stand-out services that customers will be willing to pay for and that will attract new customers. And it probably needs joined up thinking and solutions, with the devices becoming an integral part of the overall proposition. One final point is worth noting: When focused on the banking sector, it is easy to lose sight of the fact that traditional players in other verticals are under pressure as well, with much of this stemming from technology (cf. Skype in the telecoms sector).


Disintermediation?


Will all of this new capability take payments away from the banks? This is a key risk of inaction. Retailers can run prepaid card schemes in-house. The likes of Luup have sought to provide accounts for their mobile payment customers (this institution selected Temenos’ T24 core banking system during 2010 for this purpose). Luup, however, ceased to exist in 2013. Many supermarkets have ATMs on their premises and currently rely on financial institutions to provide these but it is foreseeable that they could do so themselves. The potential for the PSD to open up the market was discussed above, with retailers among those that might take advantage. Paypal has a stated intention of rapid growth and to do this has decided to open up its payments infrastructure to allow others to build on top of this. That infrastructure includes Paypal’s risk checks and fraud detection. It means third-parties can ‘monetise their applications’, in the words of Paypal’s general manager for financial innovations, Dan Schatt. ‘We think there will be no bigger beneficiary than the financial services industry,’ he said. It will allow people to instantly move money around the world via a mobile phone and could also be used by small to mid-sized business for B2B payments. The two rivals, said Schatt, are cheques and cash.


Payment Systems & Suppliers Report | www.ibsintelligence.com 13


market overview


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