Payment Innovation in Europe - World Bank
Transcript of Payment Innovation in Europe - World Bank
Payment Innovation in Europe
CPSS-World Bank Forum on Retail Payments
Miami, 27
February 2012
Francisco Tur HartmannMarket Integration Division
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Payment inventions took off a decade ago
Source: Bourreau, 2011
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… but only a few of them surviven
um
ber
time
INVENTION
INNOVATION
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Why innovation in payments?
As a percentage of the adult population in 2011
Number of Internet Users in Europe is increasing… and so e-commerce
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And Europe?
155.000.000 32.000.000
EDUARDO SAVERINEDUARDO SAVERIN
27.500.000 11.200.000
Selected financing
2011
Sources: Techcrunch, Venturebeat, Forbes, ft.com; Picture sources: companies' websites
Investors are not only focusing on US-solutions anymore
E-SEPA Survey on payment innovation 2010
Selected results
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Limitations of surveys on innovation
•
Definition of innovation –
Something that is regarded new in one country may be commonplace in another country: contactless public transport cards, gift cards, online banking
•
Speed of developments–
Due to the high frequency with which new services are launched it is difficult to include all new services
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Coverage–
Survey was held in Europe, but many innovations are launched in the USA and Asia
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Time–
An innovation may not be recognised as innovation at the time of the launch but only once its embraced by the users at large (e.g. EBPP, contactless cards)
What an innovation is depends more on customer perception than on technological advancement
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E-SEPA Surveys on payment innovations
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ECB, in close cooperation with the national central banks (NCBs), conducted four surveys in 2004, 2005, 2006, and 2010.
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Objectives were
–
to obtain a better understanding of which payment innovations are developed and deployed in Europe
–
how they work,
–
who provides these services and
–
by whom they are used.
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Number of innovations reported per category
0
5
10
15
20
25
30
Internet Card Mobile EBPP Security /Infrastructure
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Number of innovations reported by category and developments phase
25
16
30
2
3
4
0
6
10
8
1
0
2
4
2
0
1
4
3
1
00
5
10
15
20
25
30
35
40
development / pilot early stage growth maturity decline
Internet Card Mobile EBPP Security / Infrastructure
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Share of each type of provider in the various innovations
50%44%
16%
50%
78%
12%
11%
12% 22%
12%
19%
60%
50%
22%
8%
22%
12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Internet payment Card payment Mobile payment EBPP Security /Infrastructure
Banks EMI PI Non-payment service provider Combination/other
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Large involvement of banks in internet payments and security/ infrastructure
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…but banks are also heavily involved in value-added services not related to the payment process itself (EBPP)
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Mobile payment innovations mainly owned by non-banks
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Majority of innovations offered by companies which are not licensed as payment service providers
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…but many of these companies are owned by banks
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Access device and channels used by innovations
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Computer
Mobile phone
Smartcard
Other
Internet
POS
NFC
Text message/ voice
Other
Acce
s de
vice
Acc
es c
hann
el
•
Around 40% of the innovations that use internet also use another service technology (e.g. e-wallet systems for small payments)
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Around two-thirds of the POS innovations are NFC-innovations•
Most innovations which use mobile phone as access device use internet as service technology (e.g. online banking applications)
•
With smart phones hardly any difference between computer and mobile phone
•
Most payment innovations built around internet
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Share of innovations by payment situation
0% 10% 20% 30% 40% 50% 60% 70%
Physical point of sale
Mobile point of sale
Vending point of sale
Online purchase
Mobile purchase
Person-to personpayment
Mail order/telephoneorder
Bill-payment
Pro
xim
ityR
emot
e
•
More than half of the mobile and card payment innovations can be used for online purchases
•
Very few pure mobile payment solutions (e.g. for parking, vending machines)
Many innovations can be used for different payment situations
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Innovations in remote payments clearly outweigh proximity payments
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Several innovations can be used for proximity and remote payments (cards)
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Findings
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Many “innovations” are merely new or improved payment services based on modern, but already existing technologies
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There is a plethora of payment “innovations”, many of which have a similar functioning or purpose
•
Generally, internet-
and EBPP-related innovations are at a more advanced stage of development and implementation than card-
and mobile related innovations
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Among the proximity payment innovations NFC are the most prominent
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Most innovations are designed and developed for the domestic market
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New technologies blur the borders between the various categories of payments
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Findings
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There is a need for user-friendly and secure online means of payment to facilitate the growing cross-border e-
commerce.
•
Open standards and interoperability are needed for many innovations to take off
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We need:–
Cross-border Online Banking e-Payment solutions
–
Open standards for contactless
card and mobile payments
–
Open standards for e-invoicing/EBPP
Our results are quite consistent with the CPSS survey!
European developments and challenges
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European e-commerce is booming…
Nearly
60 %
of internet users in the EU27 shopped
online in 2010 Source: Eurostat
Despite the recent economic crisis,
online retailers saw continued
strong sales
By 2014 European e- commerce is expected
to reach an annual sales volume of
EUR 203bn Source: Forrester
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…but is still largely taking place within national borders
Only 8%
of online shoppers in the EU buy from another country
Online payment
security
concerns
Source: European Commission
Ongoing/Increasing fragmentation of
payment solutions
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Reasons of web merchants not to sell abroad
Source: Accenture European E-Commerce survey, 2011
44%
Potentially higher costs due to higher risk
of fraud or non- payments
38%
Fragmentation of payment systems
(i.e. local cards, online banking systems, etc.)
Payments are among the barriers
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European web merchants request a number of actions
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Improvement of 3D Secure user experience.•
Harmonize the charge back and dispute “processes of credit cards and more clarity on charge back rules concerning wallet systems.
•
International and interoperable OBeP
solutions based on Credit Transfers.
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E-mandate: introduction of e-mandate for Direct Debits and improvement of one off direct debit rules.
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Interoperable pre-paid solutions.•
Cross border cash-on-delivery solutions.
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Payment methods dedicated to phones and tablets, including e- authentication options for ease of use (less input of data on the
device).•
Use e-authentication solutions to fight fraud and improve the buyer experience for credit transfers, direct debit and credit cards, including for the mobile channel.
•
Clarity on the status of online banking overlay services (security versus competition) and required standards..
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What do the consumers want?
35%
Immediate payment confirmation
31%
No surcharge
53%
Protection of personal and payment
data
32%
Payment with online banking
Source: De Nederlandsche Bank, 2011
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E-commerce brings new payment habits
CAGR +107%
CAGR +40%CAGR +70%
CAGR +250%
0
10
20
30
40
50
60
70
80
90
2005 2006 2007 2008 2009 2010
Num
ber o
f ann
ual t
rans
actio
sn (m
illio
ns)
SofortbankingepsgiropayiDEAL
Sources: Currence, giropay, STUZZA; Payment Netw ork AG; CAGR =compound annual grow th rates, base: year of service launch
Services based on online banking show huge growth figures
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Are banks in the driving seat?
Source: Gartner, 2011
We do not see non-traditional
players as a threat
We see non- traditional players
as a trheat
In-depth interviews of payment executives of European banks in 2Q2010.
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But payments are only the starting point for new entrants
Source: Deloitte, 2011
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Access to payment accounts
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Prior information on the availability of funds (for authorisation, guarantees, etc.) is often a key element for business models in payments.
•
Banks have the monopoly of deposits and restrict access to this information. This prevents non-banks from guaranteeing payments, resulting in barriers to entry and the need to cooperate with banks.
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This could unduly hinder the emergence of safe and efficient alternative payment solutions, even if they are subject to prudential requirements.
•
Should action by public authorities be considered?
Source: European Commission Green Paper and related Q&As
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Green Paper of the European Commission
Towards an integrated European market for card, internet and mobile payments
Public consultation
until 11 April 2012
http://ec.europa.eu/internal_market/payments/cim/index_en.htm
Towards an integrated European market for card, internet and mobile payments
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Eurosystem’s
view
Genuine need for payment solutions based on
online bankingBased on
transparent open standards
(ISO20022, BIC, IBAN)Multicurrency
featuresNo unwarranted
barriers should prevent schemes from becoming interoperable
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Eurosystem’s
view
Sensitive customer data
not to be used in messages outside
payments infrastructure
Sound legal basis of payment
instruments
Data protection standards to be
observed
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Everything that can be invented has been invented.
Charles H. Duell, commissioner of the US Patent and Trademark Office in 1899
Source: Wikipedia, Picture source: Wikipedia
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Questions?
Francisco Tur Hartmann