Asia Pacific leads digital wallet adoption

Asia Pacific leads the world when it comes to digital wallet usage via mobile and smart devices as revealed in the 2017 Mastercard Digital Payments study. Payments via ewallet tops 83% of APAC conversations compared to 75% of global conversations tracked in the 2017 study.

Consumers are also showing an increased interest in the application of new technologies to make shopping faster, easier and more secure. The topic of virtual reality generated the most positive sentiment globally and in Asia Pacific (100% positive) among emerging technology topics, as shoppers imagine completing a purchase with the simple nod of their head.

“Technology is making the promise and the potential of a less-cash life a reality for more people every day,” said Marcy Cohen, vice president of digital communications at Mastercard. “This year’s study notes a change in the level of interest for new ways to shop and pay that only a few years ago would have seemed farfetched.”

Embracing emerging technologies

The increased acceptance of digital wallets in-store, online and in-app generated more than 2 million mentions, with 84% of them taking place on Twitter. Beyond the payment, consumers looked forward to additional functionality like storing loyalty cards and supporting closed-loop public transportation systems.

Technologies like artificial intelligence and smart home assistants were the second most discussed payment topic throughout 2016. These new ways to pay generated particularly strong consumer interest in the fourth quarter, as people discussed how they might shop with newer, smarter devices.

In Asia Pacific, 93% of surveyed consumers spoke positive of wearables as a potential payment channel.

Smart assistants, virtual reality and artificial intelligence also emerged as new payment technology interests. Consumers across North America showed an increased interest throughout the year in the simplicity of sending and receiving mobile payments with one comment to a smart assistant.

The Internet of Things was a hot topic with the majority of conversations taking place in North America (44%) and Europe (34%). Discussion centered on the Internet of Things becoming the Internet of Payments where payments could be enabled in any connected device.

In their conversations, people continually noted that the success of new technologies and new ways to pay will be dependent on the security and protections delivered beyond what’s available today.

Forty-five percent of consumers in Asia Pacific are interested in biometrics and other forms of authentication to deliver enhanced security, reduce fraud and move beyond traditional passwords. Facial recognition, fingerprint and touch authentication topped 66% of conversations. The region appeared more open to these emerging technologies compared to the global average of 43% and 51% respectively.

The study also revealed frustration over activities involving the use of conventional passwords, including entering, forgetting and resetting passwords and expressed interested in getting rid of passwords altogether with easier, improved authentication.

NAB Ventures backs San Francisco payments fintech

National Australia Bank’s (NAB) venture capital fund, NAB Ventures, has led an investment round in San Francisco-based foreign exchange payments company Veem.

Veem (formerly known as Align Commerce) provides a platform that leverages blockchain technology for cross-border business to business payments, enabling organisations to send and receive payments in local currency.

NAB Ventures General Partner Melissa Widner led the series B funding round totalling USD 25 million, which also included investments from GV (formerly Googles Ventures), American VC firm Kleiner Perkins Caufield & Byers, Silicon Valley Bank and Japanese fund SBI Investment Co. Ltd.

“Technology in the global payments and foreign exchange space is evolving rapidly as customers identify new platforms to help them do business quickly and easily,” Ms Widner said.

“We identified Veem as a market leader in both technology and business model. This investment forges a close relationship with the company that will provide insights into user expectations of where technology is heading for cross-border payments.

“We’re excited to be working with Veem; their platform provides customers with a great user experience, low fees, fast clearance and great transparency.

“As Australia’s largest business bank, we’re continually looking at services that have the potential to make life easier for our business customers,” said Widner, who will join the Veem board following NAB Ventures’ investment.

Veem CEO and Co-Founder Marwan Forzley said: “At Veem, we understand even ‘mum and dad’ businesses must embrace globalisation to compete with incumbents, grow their businesses and innovate.

“Unfortunately, the current international payments experience is fundamentally broken, stifling SMBs’ globalization efforts. Veem’s platform creates an experience that is as simple and frictionless as the current process is cumbersome and frustrating.”

Randy Komisar Partner, Kleiner Perkins said: “We’re excited to be investing in Veem, along with a number of other high calibre funds from across the globe, including NAB, who impressed us with the way they managed and led this funding round. Business to Business foreign exchange payments is undergoing massive change and we’re looking forward to working alongside all of the other investors in Veem, including NAB, in the future.”

The deal is NAB Ventures third investment, following announcement of a stake in Sydney startup Data Republic last year, along with seed investment in health tech Medipass Solution in February.

See Veem’s media announcement here: https://veem.com

US Banks Launch Payment App

From Bloomberg.

For years, US banks have watched as their youngest customers split restaurant checks, shared utility bills, and pitched in for parties using third-party payment apps such as Venmo.

Now they’re trying to take back the person-to-person payments business by launching an app of their own.

Nineteen banks, including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, are teaming up to start Zelle, a website and app that will let users send and request money much as Venmo does. Bank of America says it is the first to incorporate all of Zelle’s capabilities—including the ability to split bills between users—into its own mobile app, starting today. A standalone Zelle payment app should be available to anyone with a debit card, regardless of where he or she banks, by the middle of the year.

Bank of America's upgraded payment app. Source: Bank of America

Zelle has some stiff competition from Venmo and its parent company, PayPal Holdings Inc. Venmo, which started in 2009, processed $17.6 billion in transactions last year, a 135 percent increase from the previous year. In the common vernacular, “to Venmo” means to move money to and from friends and family. That’s a huge advantage, said Michael Moeser, director of payments at Javelin Strategy & Research. When presented with another option, “An avid Venmo user is going to ask, ‘Why do I need something else?'” he said.

Zelle’s not-so-secret weapon is its connection to the big banks where millions of Americans keep their money. Request $40 from a roommate over the Zelle network using BofA’s app, and the money shows up in your account within minutes of when he agrees to send it. On Venmo, that $40 would show up in your Venmo wallet right away, but then it stays there. To get the cash into your hands, you need to log into your Venmo account, cash out your balance, and wait—sometimes days—for the money to show up in your bank account.

Venmo is trying to accelerate that process. PayPal made deals with Mastercard Inc. and Visa Inc. to move money over their debit card networks. By the middle of 2017, it should be possible to cash out a PayPal or Venmo account instantly, according to PayPal Holdings spokesman Josh Criscoe.

Zelle was built by Early Warning, a bank-owned company that also runs the clearXchange payment system. It’s no easy task to build an app that syncs with 19 large banks, four payment processors, and two card networks. Each has its own legacy technology, and many already have person-to-person payment tools, such as Chase’s QuickPay, that are popular with some customers.

To launch the new app without disrupting the old systems, Zelle is being rolled out in phases. In the first, under way now, bank payment apps will incorporate Zelle’s options and basic design without any Zelle branding. Banks can add these features whenever they’re ready.  Later, bank apps will tout Zelle branding, and, sometime in the first half of the year, a standalone app will be launched.

BofA’s person-to-person payments will be free. Although members of the Zelle network will have the option to charge, it’s not clear if any banks will even try to do so when Venmo and other payment apps cost nothing.

The lack of an obvious revenue opportunity may be one reason why it has taken so long for banks to launch a serious competitor to Venmo. Moeser summarized the attitude of banks until recently: “Do I really care about two 18-year-olds sending $20 to each other? Maybe not.”

But the people designing Zelle imply their goal is much bigger than just helping college students split a pizza bill.

“This is a great time for us to move [person-to-person payments] from millennials to mainstream,” said Lou Anne Alexander, Early Warning’s group president for payments. The use of mobile banking apps is expanding exponentially, creating many more opportunities for people of all ages to send and request money. “Any place we see checks and cash, that’s our target,” she said.

Because Zelle is sponsored by and connected to their banks, Alexander said users should feel more comfortable using it for larger transactions and for a broader array of uses, from paying a contractor to collecting money for a school dance team. Zelle may also be used for business-to-consumer payments, such as insurance companies paying out claims.

Anything that promotes the use of digital payments is ultimately good for Venmo, said PayPal’s Criscoe. “The common enemy is cash.”

Zelle and Venmo have a lot in common with one major exception. Venmo is also a social app, where users can and do choose to make their transactions, along with any associated emoji-filled messages, public. Criscoe said the average user checks Venmo two to three times a week just to see what his or her friends are up to.

Zelle users won’t have the option to spy on their friends’ payment activity. The idea was tested on consumers but fell flat with Zelle’s intended audience, Alexander said. “While appealing to some ages, it’s not really appealing to all.”

Australian Banks Tell Apple – It’s About Access to NFC

The group of Australian banks applying to the Australian Competition and Consumer Commission (ACCC) for permission to jointly negotiate over access to Apple Pay and the Near Field Communication (NFC) function on iPhones, have announced they have narrowed the application to solely focus on open access to the NFC function.

In a joint statement on behalf of Bendigo and Adelaide Bank, the Commonwealth Bank of Australia, National Australia Bank, and Westpac, the banks said:

Open access to the NFC function on iPhone is required to enable real choice and real competition for consumers, and to facilitate innovation and investment in the digital wallets available to Australians.  Without open NFC access on iPhone, no genuine competition in the provision of mobile wallets is possible and Apple will have a stranglehold on this strategically important future market.

The four banks making the application – Bendigo and Adelaide Bank, Commonwealth Bank of Australia, National Australia Bank, and Westpac – have responded to concerns raised in the ACCC’s finely balanced draft determination, and proposed to remove from consideration items the ACCC considered may lead to a public detriment.

In the applicants’ response to the ACCC, the applicants have addressed these concerns by removing collective negotiation on the potential to pass-through the additional fees Apple wishes to impose on the payment system (i.e., the requested collective negotiation will be in relation to NFC access alone), and limiting the authorisation term to 18 months – half the original term sought.

Open NFC access would enable the delivery of substantial public benefits to Australian consumers, not just in payments, but across retailing, loyalty programs, building or member lounge security, and other NFC-use cases.  As a result, the applicants have again been supported by nearly all of Australia’s leading retailers, as well as competitors in the provision of payments services to merchants.

The applicants flatly reject Apple’s unsupported assertions that the application is about an objection to the fees that Apple wishes to impose, rather than NFC access.  Apple’s conspiracy theories about “Trojan horse fees” are similarly dismissed by the applicants as fantasy.

Apple recorded over $US7 billion in services revenue, which includes Apple Pay fees, from their customers in the last 3 months of 2016 alone, and hopes to double that over the next four years.  With their services business set to become the size of a standalone Fortune 100 company this year, Apple is the leading expert on deriving fee revenues from iPhone users, not the applicants.

“The applicants are ready, willing, and able to participate in Apple Pay, alongside being able to offer their customers their own mobile wallet products,” payments specialist and spokesperson on behalf of the applicants, Lance Blockley, said.

“This application has always been about consumer choice, and allowing competition between the makers of mobile wallets to offer the best products and features they can to determine which mobile wallet consumers will use.  The applicants want to put up their digital offerings head to head with Apple Pay, and let the market and individual consumers decide which best suits their needs.

“Open access to the NFC function, as occurs on the world’s most popular and widely installed mobile operating system Android, is important not just to the applicants and mobile payments, but to a range of NFC-powered functions across many sectors and uses.  This has global implications for the use of NFC on smart phones.

“The application seeks permission to jointly negotiate with Apple; this is not an attempt to delay Apple Pay from entering the Australian market.  The applicants expect that Apple Pay would be offered to their customers alongside open access to the NFC function.  Any delay or frustration will be as a result of Apple refusing to negotiate.

“Apple is not a bank or a credit card scheme, and Apple cannot on their own complete a mobile payment.  Nor are the applicants manufacturers of mobile phones – both parties need each other to bring strong mobile payment offerings to the market.”

The applicants look forward to the ACCC’s final decision, and believe their submission further demonstrates the net public benefits of the application, and substantially removes any risk of public detriment.

Apple claims banks want digital wallets as a new revenue source

From Australian Fintech.

Apple says three of the big four banks are pushing to pass the costs of Apple Pay on to their customers as a way to “condition the market” into paying extra fees when using a mobile phone to make a ‘tap and go’ payment.

One of the issues in the long-running battle between Apple and Commonwealth Bank of Australia, National Australia Bank, Westpac Banking Corp and Bendigo and Adelaide Bank is whether the banks can pass through to their customers the fee that Apple will require them to pay to use the iPhone infrastructure.

But Apple has described the argument as a “trojan horse”. In a submission published by the Australian Competition and Consumer Commission on Friday, Apple suggests this issue of fees, rather than the bank’s other demand for access to the iPhone’s communication antenna, is motivating the banks, who are all developing their own digital wallets to compete against Apple’s. Digital wallets allow mobile phones to be used to pay through contactless payment terminals.

“Put simply, the applicant banks have the means, notice and opportunity to disadvantage Apple Pay by pricing Apple Pay transactions above transactions made using their own proprietary issuer digital wallets to dissuade cardholders from using Apple Pay,” Apple said. The banks have an “incentive to charge fees to consumers for using Apple Pay to steer customers towards their proprietary payment apps”.

Once the market became accustomed to being charged for using Apple Pay instead of a card, Apple says the banks would be “setting a precedent for charging for mobile payments on other digital wallets, in the future, including the banks’ own proprietary wallets”. The banks could “tacitly extend the imposition of those fees to any digital wallet transaction as a new revenue source,” Apple added.

ANZ deal

ANZ Banking Group broke ranks with the other banks to offer Apple Pay last year; the fee ANZ is paying to Apple has not been confirmed but is understood to be a few cents per $100 of transactions. But ANZ is prevented by its contract with Apple from charging customers for using the service.

The banks’ final submission to the ACCC will be published this week, ahead of the regulator making a decision on the authorisation request, which is expected next month.

Apple said that if authorisation is granted, it will merely provide “cover” for the banks. “The incentive to compete away these fees at the retail level is reduced or removed if there is an ACCC authorised ability to impose Apple Pay transaction fees which provides shelter for their own fees,” Apple said.

Faster credit decisions with real-time technology

From Fintech Business.
Credit providers will need to embrace newer technologies and real-time data processing in order to meet changing client needs, writes Experian’s Suzanne Steele.

Over the last decade, the digital transformation of the banking sector has accelerated dramatically, and the pace of change is showing no sign of slowing.

Recent research data shows more than 1.2 billion people are banking on their mobile devices today, a number set to increase to over two billion by 2021.

Competition from agile new arrivals to the market, combined with a need to enhance the customer experience, are compelling credit providers to improve their range of services and reduce the time it takes to make credit decisions.

Gone are the days when a discussion with the local bank manager was the only option.

Dissatisfaction with traditional systems that fail to meet the instantaneous needs of the modern-day customer already has some Australians looking to fintech start-ups and alternative lending sources.

Millennials report convenience anywhere, any time as the primary driver for choosing non-traditional finance providers, according to recent Telstra research.

This highlights that many of today’s consumers live in a world of digital banking and expect to be able to have their banking needs met at any time, in any place and on any device.

There are signs consumer pressure is shifting the massive cogs of Australia’s financial services industry, slowly but surely adjusting to the demands of today’s hyper competitive 24/7 global economy.

The National Payments Platform (NPP) rollout in late 2017 will provide Australian businesses and consumers with a faster, more flexible and data-rich way to transfer funds within seconds.

In the NPP world, an Australian credit shopper can receive funds from friends, family or peers almost instantly.

Australian credit providers will have the same ability to almost instantly fulfil a customer’s credit wishes, but they will also need the right tools in place to assess customer risk with the same level of immediacy.

In order for credit providers to meet the evolving demands, real-time automated decision-making must become the new norm across the credit industry, enabled by access to a variety of internal and external databases.

What are the databases and insights credit providers need at their fingertips to make well-informed decisions?

In order to accurately, quickly and confidently make a ‘yes’ decision anytime, anywhere, a credit provider needs to first answer these five fundamental questions:

  1. Is the applicant who he or she purports to be? (ID data)
  2. Will the applicant likely be fraudulent? (fraud data)
  3. Is the applicant too risky? (credit data)
  4. Can the applicant afford to repay the loan? (servicing capacity data)
  5. If the applicant has a property, is it worth what they say it’s worth? (asset value data)

Historically most credit providers have answered each of these questions separately, using disparate and unconnected systems. For example, the bank will access an existing customer’s profile on their CRM database, but will also look at external data provided by a credit bureau or a shared fraud database.

The result is a lengthy process that delays credit decisions and results in a poor customer experience. In an increasingly saturated market, consumers’ ability to access credit seamlessly will likely be a key differentiator.

A one-stop shop

Emerging technologies promise a faster and more customer-friendly alternative to these clunky systems of old, offering access to a wide range of separate databases on demand and as part of a singular process.

As banks up the ante in their adoption of cloud-based services, a more flexible, collaborative technology ecosystem is emerging.

These technologies enrich a bank’s own customer data with third-party credit data, identity information, fraud insights and property data, and make it all available online and in real time.

With integrated workflow and decisioning processes, banks can fast track applications from existing customers and prompt a request for more data from new customers.

This enables credit providers to deliver a credit decision within seconds, reducing the number of customers who drop-off midway through the application process due to the lengthy questions and delays.

However, it also ensures credit offers are more accurate, based on a holistic approach to a customer’s financial situation. For the bank, this reduces risk, streamlines operations, and enables it to offer efficient and competitive products and services.

A digitised approach also addresses an ongoing concern for credit providers.

In 2009, to meet ASIC’s responsible lending guidelines, the onus was put on lenders to request evidence such as pay slips or financial statements, to support credit applications.

This process significantly delays the processing of applications. However, by applying the same principles in data integration, banks can now automatically access bank statements to fast track their evaluation of the ability of a consumer to service a loan.

Developing an effective data hub with real-time decisioning software future-proofs a bank, enabling an agile response to both future regulatory changes and transformations to the market.

Such a capability results in a more positive experience for customers and delivers much improved efficiencies and business performance for credit providers.

Suzanne Steele is the managing director of Experian for Australia and New Zealand.

Lost or stolen cards replaced instantly with ANZ digital wallets

ANZ today announced its customers can continue to use their digital wallets when they report their card as lost or stolen with a new service that automatically updates their replacement card details.

As soon as a customer calls to report their debit or credit card as missing, ANZ puts a stop on the original card and automatically uploads the new virtual card details to the customer’s digital wallet.

ANZ Managing Director Products Australia, Katherine Bray said: “Our customers report about 670,000 cards as lost or stolen each year and we know waiting for a new card to arrive can be a real inconvenience.

“Now our customers can keep using their digital wallet, whether it’s Apple Pay or Android Pay, to make purchases while they wait for the new physical card to arrive in the mail.

“For many customers their smartphone is now the primary way they do their banking, including making purchases, so we’re working hard to keep improving their mobile experience with changes like this.”

ANZ has also made it possible for customers to keep their existing Personal Identification Number (PIN), provided it hasn’t been compromised, meaning less change with the same high level of security.

ANZ is the only major Australian bank to offer both Apple Pay and Android Pay with about 8.3 million transactions made across the bank’s digital wallets last year.

US Payments Landscape Changing Fast

From 2012 to 2015, US credit and debit (including prepaid and non-prepaid) card payments continued to gain ground in the payments landscape, accounting for more than two-thirds of all core noncash payments in the United States, according to a Federal Reserve study of U.S. non-cash payments. Automated clearinghouse (ACH) payments grew modestly over the same period, and check payments declined at a slower rate than in the past.

The 2016 Federal Reserve Payments Study, which presents 2015 payments data, found that the number of domestic core noncash payments totaled an estimated 144 billion–up 5.3 percent annually from 2012. The total value of these transactions increased 3.4 percent over the same period to nearly $178 trillion.

Other key findings:

  • Card payments grew 19.9 billion from 2012 to 2015, led by non-prepaid debit card payments which grew by 12.4 billion, and credit card payments, which grew by 6.9 billion. Prepaid card payments grew by less than 1 billion.
  • Remote card payments, sometimes called card-not-present payments, reached 19 percent of card payments in 2015, an increase of less than 4 percent compared with 2012. Gains in remote cards’ share of total card payments were mitigated by substantial growth of in-person card use.
  • Credit card and non-prepaid debit card payments nearly tied for first place in growth by number from 2012 through 2015, both growing by roughly 8 percent over the period.
  • The number of general-purpose card payments initiated with a chip-based card increased substantially from 2012, growing by more than 230 percent per year, but amounted to only a roughly 2 percent share of total in-person general-purpose card payments in 2015, during a broad industry effort to roll out chip card technology.
  • In 2015, the proportion of general-purpose card fraud attributed to counterfeiting was substantially greater as a share of total card fraud in the United States compared with countries where chip technology has been more completely adopted. Nonetheless, the total share of remote fraud is already substantial (46 percent) compared to its share in total card payments (19 percent).
  • The number of ACH payments is estimated to have grown to 23.5 billion in 2015, with a value of $145.3 trillion. ACH payments grew at an annual rate of 4.9 percent by number and 4 percent by value from 2012 to 2015.
  • Check payments fell at an annual rate of 4.4 percent by number or 0.5 percent by value from 2012 to 2015. For the first time since the descent began in the mid-1990s, check payments posted a slowing in the rate of decline.

“The data collected for the 2016 study was substantially expanded,” said Mary Kepler, senior vice president of the Federal Reserve Bank of Atlanta, which sponsored the study.

“This reflects an increased desire within the payments industry for additional fraud-related information,” she said. “A limited amount of fraud information was ready for release today, and further results will be released in 2017 as the complete data set is more fully reviewed and analyzed.”

Beginning in 2017, some survey data will be collected annually, rather than every three years, to enhance the value of the study, Kepler added.

“Payment industry participation drives the quality of the study’s results,” Kepler said. “The Federal Reserve appreciates the industry’s response in 2016 and looks forward to working with selected participants for the annual data collection getting underway in the first quarter of 2017.”

Apple blocks Samsung pay app for iPhones

From IT Wire.

Apple has refused a Samsung pay app for iOS a place in its App Store, according to a report in the South Korean publication, The Economic Times.

Samsung had planned to introduce the app, Samsung Mini Pay, from January and getting it into the app store was the first step in the process.

Samsung had completed testing of the app with some South Korean credit card companies but when it applied for registering the app it received a notice of rejection, the newspaper reported.

No reason was given for the rejection, but the newspaper speculated that it was possible that the app had not met Apple’s policies on security and regulations.

It said Samsung had now decided not to go ahead with the app, and instead concentrate on the Android market with its Samsung Pay app instead.The paper quoted a Samsung Electronics representative as saying, “After Apple rejected registration of Samsung Pay Mini onto its app store, we have decided to focus on Smartphones with Android OS.”

Apple is apparently thinking of launching its own Apple Pay app in South Korea in the first half of 2017, the paper said, adding that the company’s representatives had not provided any indication if this was so when asked.

Samsung Pay, which was launched in August, has so far been used in nine countries. Samsung Pay Mini has been in development for more than a year.

CBA makes another bid to cut Apple Pay deal

From ITWire.

The Commonwealth Bank has attempted, on its own, to break the impasse with Apple over Apple Pay, by offering to pay the tech firm for use of its payment infrastructure.

However, the CBA is still insisting that Apple should give it access to the near field communications controller so that it can set up payments, a demand that Apple is unlikely to grant.

A report in the Australian Financial Review quoted Matt Comyn, the head of retail banking at CBA, as saying the fee that Apple was asking for use of Apple Pay was not the main hurdle to cutting a deal.

He said: “If we could get access to the NFC antenna and our wallet had the same experience [as Apple Pay] on parity, there is no way the interchange fee, as currently contemplated, would be the stumbling block.”

The CBA is currently using a workaround for its iPhone customers to access its payment app, with a sticker that can be placed on the back of the phone to serve as an antenna.The sticker costs $2.99 and Comyn said 400,000 customers had ordered them but the latest numbers showed 600,000 transactions had been made per month.

The CBA, along with Westpac, the National Australia Bank and Bendigo and Adelaide Bank, have been denied permission by the Australian Competition and Consumer Commission to negotiate as a cartel with Apple over Apple Pay.

Apple has repeatedly said it will not allow direct access to the NFC controller.