MOBILE BANKING FOR THE UNBANKED · MOBILE BANKING FOR THE UNBANKED. EPI 333.indd 1 26/03/2015 11:30:57. Delivering innovative mobile & online financial services solutions to organisations

•REPORT: THE GATES FOUNDATION

•ANALYSIS: SOUTH AMERICAN M-PAYMENTS

•REVIEW: THE GSMA

•COUNTRY REPORTS: BAHRAIN, BULGARIA & LUXEMBOURG

March 2015 Issue 333 www.electronicpaymentsinternational.com

MOBILE BANKING FOR THEUNBANKED

EPI 333.indd 1 26/03/2015 11:30:57

Delivering innovative mobile & online financial services solutions to organisations that need to provide secure access

To find out more about us please visit: www.intelligentenvironments.com

We are an international provider of innovative mobile and online solutions for financial service organisations. Our mission is to enable our clients always to stay close to their customers.

We do this through Interact®, our single software platform, which enables secure financial applications, engagement, transaction and servicing across all digital channels. Today these are predominantly focused on mobile, PCs & tablets. However Interact® can and will support other form factors, as and when they proliferate (as seen by our work to develop digital banking for the Smartwatch).

We provide a ready alternative to internally developed solutions, enabling our clients with a faster route to market, expertise in managing the complexity of multiple devices and operating systems, and a constantly evolving solution.

IE-Advert-Dec-2014.indd 1 16/12/2014 12:25:21

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COMMENT: EDITOR’S LETTERElectronic Payments International

Can mobile be monitised?

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CONTENTS6 REPORT: THE GATES

FOUNDATION

The financial inclusion mobile banking could bring was one of the key takeaways from the Gates Foundation’s most recent letter, but why so? Patrick Brusnahan reports

8 MARKETING: ONLINE ABANDONMENT

Emma Allen, head of merchant solutions at SIX Payment Services, discusses options to minimise online purchase abandonment

9 ANALYSIS: SOUTH AMERICAN M-PAYMENTS

Despite Brazil being one of the first countries in the world to introduce mobile payment regulations, the market is being outpaced by Colombia and Peru. Robin Arnfield investigates

12 REVIEW: GSMA

The GSMA’s most recent report highlights the potential of mobile money in developing markets, so why aren’t people taking the bait? Patrick Brusnahan writes

13 COUNTRY REPORT: BAHRAIN

As the amount of payment cards in Bahrain has just exceeded one million, we examine the card market in depth

14 COUNTRY REPORT: BULGARIA

The global financial crisis hit Bulgaria hard, but how has the card market recovered?

15 COUNTRY REPORT: LUXEMBOURG

Luxembourg’s credit cards have a larger market share than before. How does this affect debit and mobile payments?

16 COMMENT: DOES AGE MATTER?

Bethan Cowper examines the differences between age groups and their viewpoints towards new and established payment services

It is a topic I have been harping on about for a little time now: the scope in the not too distant future for banks to monetise mobile banking

and mobile payments.Asked for suggested conference and

roundtable suggestions by a couple of spon-sors recently, I proposed debates on how best to monitise digital banking and payments.

At various debates and conferences I have asked for a show of hands asking if the time has now come for banks in certain jurisdic-tions to consider charging for mobile bank-ing and mobile payments.

So I am obliged to the US-headquartered SNL Financial for undertaking a survey ask-ing the key question:

Would you pay $3 a month to use your bank app?

SNL Financial’s Mobile Money survey was conducted in February in the US across a nationwide random sample of adults that included 4,371 smartphone bank app users: one-in-four said that they would pay $3 a month.

Interestingly,the super-rich and those with a low income were least likely of bank app users surveyed to want to pay for their bank app. The most willing to pay $3 per month of the four income groups surveyed was the upper-middle income bracket ($75,000 - $149,999) at 30%.

As SNL suggests, making money from mobile banking apps might take a more nuanced approach than a monthly subscrip-tion fee, for instance, charging a percentage fee per mobile cheque deposit could be a way

to monetise app usage. It will be interesting to see if any banks in

the UK, once mobile cheque deposit takes off, consider charging a nominal fee for the new(to the UK) service.

Meantime, an outstanding report hits the inbox courtesy of the BBA and Accenture: ‘Digital Disruption’

Crucially, the report looks at the oppor-tunities created by digitisation. These are not just cost-saving opportunities but what digital can offer customers in terms of new experiences.

In 2014, 45% of UK customers surveyed by Accenture who had purchased a banking product in the previous twelve months did so through the internet channel, with a further 6% claiming to have done so via a mobile device.

This trend will accelerate to the extent that within a few short years, we will see the majority of all consumer purchases of bank-ing products taking place through digital channels.

One simple example from the report will suffice as regards the opportunities created by digitisation. Step forward Nationwide and take a bow: In June 2014 Nationwide launched two innovative new features for its app, Quick Balance and Impulse Saver.

Both features have proved to be incredibly popular with a third of active users opting in to Quick Balance and on average using the service six times a week. <

Douglas [email protected]

EPI 333.indd 1 26/03/2015 11:30:59

Electronic Payments International

2 y March 2015 www.electronicpaymentsinternational.com

COMMENT: APPLE AND GOOGLE

Will Apple Watch dominate the UK market?Douglas Blakey looks at the prospects of the incoming Apple Watch in the United Kingdom. Will it be as popular as everyone is expecting, despite the steep price point? And what will be the repercussions for banks?

I am obliged to Intelligent Environments (founders of The Digital Banking Club) for commissioning research into the sales prospects for the eagerly awaited and much hyped Apple Watch.

According the Intelligent Environments survey, 12% of UK consumers expect to buy an Apple Watch as soon as it goes on sale,

The figure is certainly headline-grabbing and at first glance seems to the writer to be quite astonishing.

Consider some quick stats.Of the UK population of 64 million,

roughly 50 million are aged 18 or over: 12% of this figure is 6 million.

As of November 2014, Apple accounted for roughly 25% of smartphones in the UK.

Admittedly, the soar-away success of the iPhone 6 resulted in Apple winning its highest ever share of new smartphone sales in the last quarter of 2014, roughly 40% of all sales.

But as things stand, if my understand-ing of the figures is correct, around 1-in-4 smartphone owners currently have an Apple handset.

So call it about 12.5 million adults.Now go back to the Intelligent Envi-

ronemnts survey: 12% of UK consumers will buy an Apple Watch so roughly six million.

As the Apple Watch is only of any use of Apple phone users – the aforementioned 12.5 million – that means that almost one-

half of Apple mobile users are set to shell out £300-£400 for a watch?

I do agree with Intelligent Environments’ Clayton Locke that wearable technology is becoming more integrated into consumers’ lives.

I also get the fact – a tad reluctantly as a committed Android user – that the Apple brand has phenomenal appeal.

But are one half of them going to rush out to buy an Apple Watch?

If they do, banks big and small, estab-lished and new challenger brands, are going to have no option but to offer com-pelling wearable tech banking apps.

With launch on 10 April, it will be fasci-nating to watch and learn. <

Google to launch US mobile networkSimon Cadbury examines Google’s most recent foray into the payments sector and what this will mean for banksSundar Pichai, the search Google’s vice pres-ident of Android and Chrome announced Google would rent network capacity and launch a condumer-facing network to show what’s possible.

In February, the search engine announced a payments service which will allow cus-tomers to settle debts and transfer funds via Gmail by simply clicking on a “£” icon in the email and entering the amount. Then, just this week, the internet giant launched its free mortgage calculator enabling con-sumers to compare mortgages from different finance firms on the Google browser.

These are just the latest in a string of financial tools developed by Google since its launch of Google Checkout in 2006. So what does its future hold in this sector? Is it realistic to talk about a Google Bank?

For a number of years now, surveys have consistently shown that decision makers in banks feel web companies, such as Google, pose the biggest threat to their business. More recently, in an interview this month, Ana Botin, chairwoman of Banco Santander

explained the bank is closely monitoring tech companies such as Google and is focused on beating off competition from these compa-nies “intent on invading its territory”.

However, rather than a competitor, Goog-le should be seen by banks as an enabler in the industry.

In a report published last year titled “Why Google Bank Won’t Happen”, analyst firm Forrester explained that due to costs, strict regulation and the important ad revenue from banks, internet firms are better placed to take on a support role in financial services than to become a provider. These firms can improve the relationship between banks and their customers by offering payment services, financial advice, and product comparisons.

Our own research showed significant consumer appetite for a Google payments service before plans were announced by the firm. The survey revealed Google is the brand consumers would most like to use as a payments service, beating the likes of Face-book and Twitter, with 23% of respondents voting for it. Of those who chose Google,

40% said it was because they trusted the brand.

It’s clear consumers respect Google as a creator of financial tools. Google therefore has an important role to play in the industry. The firm can build on this trust and use its prominent position as one of the most dis-ruptive and innovative brands in the world to improve customer service in the industry. By pushing the boundaries of innovation, Google will encourage banks to do the same or to partner with it on future developments. Moreover, by offering new tools, Google will help to push banks to up their game in terms of the digital products and services they provide.

Banks should not fear Google, but embrace it. Rather, as Forrester analyst Oliwia Berdak put it, they should “observe Google’s next moves, learn from its best practices and consider any partnership”. <

Simon Cadbury is the Head of Strategy and Innovation at British software provider Intelligent Environments.

EPI 333.indd 2 26/03/2015 11:30:59


NEWS: ROUND-UPElectronic Payments International

DIGITAL

Deutsche Bank veteran launches Brazil-based bitcoin exchangeDeutsche Bank veteran Marcelo Miranda, who created the IXBTC index, Brazil's pri-mary price reference for bitcoin, has publicly launched a new digital currency exchange based in Rio de Janeiro.

The bitcoin exchange FlowBTC, which has been built on Miranda's 15 years of experience in the technology space, will be

powered by AlphaPoint's trading software and will offer individuals and firms access to an enterprise-grade trading experience.

FlowBTC will leverage the AlphaPoint exchange platform to provide clients with a custom-built technology supporting nearly one million transactions per second and lay-ered security architecture for data protection.

The new exchange will be interconnected with 20 digital currency exchanges offering competitive exchange rates and liquidity.

Marcelo Miranda said: "Today, less than 300 Bitcoins change hands in local exchang-es in Brazil each day, due to a lack of reliable local exchanges. With FlowBTC, we expect to multiply this number tenfold.” <

PRODUCTS

Vodafone rolls out money transfer service for Tanzania and KenyaBritish mobile group Vodafone has rolled out a new international mobile transfer service called M-Pesa between Tanzania and Kenya.

With the new service, the M-Pesa custom-ers from the two countries can transfer money using mobile phones in a simple, safe and secure way through an established, combined network of 180,000 agents.

The service will benefit customers from the low-cost of M-Pesa against existing interna-tional remittance services between the two countries.

International money transfer via traditional

channels may be up to 31% of the transaction, said Vodafone.

According to Vodafone, transfer of $50 via M-Pesa across the Tanzania-Kenya border would incur a fee around 1% of the transac-tion plus a foreign exchange fee.

Vodafone director of mobile money Michael Joseph said: "With a substantial unbanked population transacting mainly in cash, the Tanzania-Kenya corridor represents a signifi-cant opportunity for M-Pesa to give people and companies an accessible, low-cost alternative to traditional international remittances." <

INFRASTRUCTURE

EBA Clearing sets up new task force for instant payment processing servicesEBA Clearing, a provider of pan-Euro-pean payment infrastructure, has estab-lished a new Instant Payment TaskForce to support the launch of a pan-Europe-an solution for instant payment process-ing.

Additionally, the company is planning to launch Europe-wide instant payment processing services to payment service providers (PSPs) in the infrastructure layer by 2018.

The task force, which was formed by the EBA Clearing board last month, aims to work on a roadmap and blue-print for the required deliverables.

The task force includes around 20 experts from EBA Clearing user institu-tions.

The move is in response to a call for action by the Euro Retail Payments Board (ERPB), which has expressed a need for at least one pan-European instant payment solution for EUR open to any PSP in the European Union.

Moreover, EBA Clearing aims to pro-vide its users with these initial deliveries in due course to ensure that PSPs can take this planning into consideration during 2016 budget planning.

EBA Clearing chairman Erkki Pou-tiainen said: "After an initial evalu-ation done in summer 2014, we put our instant payment initiative on a fast track in late 2014 following this call for action."Together with interested users, we

have begun to define the roadmap 2015 - 2018 for the delivery of an inter-PSP infrastructure solution at a pan-Europe-an level and we are working on a blue-print setting forth one or more suitable solutions by mid-2015." <

PRODUCTS

McDonald's & MasterCard collaborate for electronic paymentsMasterCard and McDonald's have formed a strategic collaboration to introduce electronic payment solutions at McDonald's restaurants across key markets in the Middle East and Africa.

MasterCard's technology will enable McDonald's customers to use a range of devices including contactless cards, mobile phones, and other NFC-enabled wearable products to pay for purchases at McDonald's restaurants.

MasterCard's digital wallet, MasterPass, will

be available to customers across the region for McDonald's online ordering.

The in-store and online payment technologies will be rolled out in all McDonald's restaurants across the Middle East and Africa.

McDonald's Middle East Development Company vice president Yousif Abdulghani said: "This integration of MasterCard's state-of-the-art smart payment technologies across our restaurants will will add to our customers' convenience and ease of accessibility." <

M&A

PayPal to acquire mobile payment start-up Paydiant

PayPal has agreed to acquire mobile payment start-up Paydiant in a deal expected to close in late March or April 2015 after meeting cus-tomary closing conditions including regulatory approvals.

The acquisition will present Paydiant's mer-chant clients with an open payments platform and global reach into more than 200 markets and 162 million active digital wallets.

The deal will enable Paydiant to offer value added services to merchant customers includ-

ing risk management, 24 hours customer sup-port, loyalty points and private label card acceptance.

Paydiant's team of mobile developers, busi-ness leaders along with its founders Kevin Laracey and Chris Gardner will join PayPal as part of the deal.

Paydiant's platform will let PayPal offer merchant partners their own branded wallets allowing merchants to use the mobile payment technology, including QR codes and NFC. <

EPI 333.indd 3 26/03/2015 11:31:00



NEWS: ROUND-UP

PRODUCTS

Ingenico unveils audio-jack based contactless payments solution

Ingenico Mobile Solutions, a provider of mobile payment acceptance services, has unveiled an audio-jack based contactless mobile card acceptance solution at the 2015 GSMA Mobile World Congress.

The novel solution, named RP170c, will support Apple Pay, MasterCard contactless and Visa payWave while processing pay-ments via magstripe contactless as well as EMV contactless cards.

RP170c, which can be connected to iOS or Android phones via a 3.5mm standard audio jack, will feature an NFC reader and a dual track magnetic stripe reader, audible buzzers and color LEDs to signal transac-

tion completion and an SDK for mobile application integration.

Additionally, the device will include EMV Level 1 contactless certification, certifica-tion for qVSD and MSD (Visa), plus M/Stripe and M/Chip (MasterCard) and an integrated rechargeable battery.

Ingenico Group EVP for smart terminals and mobile solutions Jacques Guerin said:

"Today, we are introducing the only mPOS solution that will be able to process Apple Pay, MasterCard contactless and Visa pay-Wave transactions. With such a solution, we continue to provide merchants with future-proof mPOS solutions." <

DISTRIBUTION

Airtel partners with Visa to bring mobile payments in seven African marketsVisa and Bharti Airtel, a telecommunica-tions services provider across Asia and Africa, have formed a partnership to bring mobile payment services to seven markets in Africa.

The new payments services will be launched in markets including Gabon, Ghana, Kenya, Madagascar, Rwanda, Sey-chelles and Tanzania.

The relationship will build on the existing capabilities of Airtel's Mobile Money ser-vice, allowing subscribers to use their Airtel Money account to pay in stores and online wherever Visa is accepted.

Visa and Airtel will allow customers

to withdraw money and make payments from their Airtel Money account via Airtel Money Visa companion card besides per-mitting micro-payments, fund transfers, airtime purchase and pre-paid electricity.

Visa vice president of MNO Partner-ships Vish Sowani said: "Mobile payments can transform the lives of people through-out Africa who commonly have access to a mobile phone, but not a bank."For most new subscribers, this will repre-

sent their first payment account and bring some of the latest digital payment advance-ments into the day-to-day experiences of Airtel's customers." <

DIGITAL

Velcro Pay rolls out online invoicing solutionVelcro Pay has launched an online invoicing solution to offer small businesses an efficient way to get paid and keep cash flow moving.

The Velcro Pay online invoicing solution uses the Level 1 PCI compliant Velcro Pay-ment Gateway providing secure transaction for business owners.

The service will provide real time invoice creation and delivery for business owners and will accept full or partial payments besides supporting multiple currencies and tax structures.

Velcro Pay executive vice president Mat-thew Loughran said: "This solution can also be ideal for local freelance businesses as well who are tired of paying high fees with their current invoicing service."We typically say as a rule of thumb if you

are accepting more than $3000 a month in payments with either a mobile swiper or through online invoicing then you should really get an actual merchant account and separate yourself from those aggregators to save on costs. <

STRATEGY

MoneyGram signs agreement with Landbank in PhilippinesMoneyGram, a global money transfer company, has inked a new agreement with Landbank of the Philippines to enable inter-national money transfer services at over 300 Landbank branches in the Philippines.

MoneyGram comprises over 10,000 agent locations across the country, and the new agreement expands its receive locations footprint.

For receiving money in the Philippines, customers will have to go to a MoneyGram agent location, complete a form, give their reference number as well as show a photo identification to receive their remittances.

Following this process, the funds can be collected in minutes upon sending, subject to agent availability, hours of operation and local laws and regulations.

MoneyGram's executive vice president, business development Grant Lines said:

"MoneyGram and Landbank are both focused on innovation which makes us natu-ral collaborators to deliver financial services across the Philippines."Adding Landbank to our network in the

Philippines enables us to expand our reach in the country." <

PRODUCTS

Evolve Money expands payment choices with MasterCard, Visa and DiscoverEvolve Money, the bill payment app for mobile and desktop devices, has added MasterCard, Visa and Discover credit cards as new options for bill payment.

Users of the app will now be able to add virtually any Visa, MasterCard or Discover credit or debit card to their profile to make bill-payments to any of the 12,000 service providers supported by the app.

Evolve Money, owned and operated by PreCash, also enables users to pay with cash using Evolve Pay Bucks and RELoadit packs, apart from Visa, MasterCard and Discover credit and debit cards.

PreCash CEO Steve Taylor said: "Our goal is to provide services that enable our end-users the ability to make payments whenever, wherever and however they like."By expanding available payment options,

Evolve Money is further meeting consumer demand created by market shifts and chang-es. Not all billers accept credit payments through their sites, so this really opens it up for consumers, and gives them more flexibil-ity to pay their bills." <

EPI 333.indd 4 26/03/2015 11:31:00


NEWS: ROUND-UPElectronic Payments International

DIGITAL

Barclays to enable payments through Twitter

In a UK first, Barclays is set to launch a new service which will allow individuals and small businesses make payments instantly by using their Twitter handle.

The service, which will be powered by Pingit, will be available on Android phones as well as iOS devices from 10 March.

For signing up to the service, users will just have to link their Twitter handle to their Pingit profile under the app menu.

Once users sign up, they need to log into Pingit, enter the Twitter handle or select a payee from the contact list, and complete payments instantly.

Barclays Mobile Banking and Pingit director Darren Foulds said: "We are always on the lookout for new and exciting ways to make people's lives easier and cus-tomer feedback plays a big part in how we choose to further develop our apps."Adding the ability to pay people or a

small business using just a Twitter handle brings together a social and digital experi-ence to create a new step forward for mobile payments in the UK."

The new service will be offered to all Pin-git customers, regardless of whether they bank with Barclays or not. <

STRATEGY

Line partners with CyberSource for mobile payments servicesLine Corporation, a Japanese internet ser-vices and mobile applications company, has formed a strategic partnership with Cyber-Source, a Visa company that provides eCom-merce payment management services.

Through the partnership, Line will lever-age CyberSource's payment management platform to provide customers with pay-ment security for its mobile payment service LINE Pay.

CyberSource's global payment gateway will facilitate Line to process online pay-ments from multiple card brands and issu-ers along with certain alternative payment methods.

Line will also utilise CyberSource Deci-sion Manager, the fraud management tool which features fraud detection radar to pin-point fraud accurately and with less manual intervention.

Line Corporation COO Takeshi Idezawa said: "With our entry into the mobile pay-ments market, we are now able to empower our customers with more flexibility and choice in online payments."On top of that, we are also able to protect

their interests with CyberSource's payment security expertise. We strongly believe this will be pivotal in helping us accelerate our global growth." <

STRATEGY

ParkHub.com & American Airlines Centre partner for credit card payment in parking lotsAmerican Airlines Center, an event centre in the US, has forged a partnership with Dallas-based technology company ParkHub.com to enable credit card payments in all their park-ing lots.

Utilizing ParkHub.com's software and hardware solution, American Airlines Center will roll out a new mobile point-of-sale pro-gram, Prime, that accepts all major credit cards.

The new solution by ParkHub.com will enable attendants to validate all pre-pur-chased parking and season ticket holders' passes via Ticketmaster.

American Airlines Center executive vice president and CFO Craig Courson said that he, "look[s] forward to exploring other ver-tical marketing opportunities that ParkHub.com's platform supports in an effort to maxi-mize the system and our revenue potential." <

News in BriefSamsung works with MasterCard and Visa for new mobile wallet serviceSamsung Electronics has partnered with major payment networks MasterCard and Visa to launch new mobile payment services, Samsung Pay, in summer 2015.

Samsung Pay will leverage both Near Field Communication (NFC) and Magnetic Secure Transmission (MST) technologies to enable consumers to utilise their mobile devices to pay at existing point-of-sale terminals.

Visa will support Samsung Pay with its token service technology that Visa replaces sensitive payment account information on plastic cards with a unique series of numbers that can be used

to authorise payment without exposing actual account details.

Samsung will also forge partnerships with key financial partners globally, including American Express, Bank of America, Citi, JPMorgan Chase, and US Bank to provide flexibility, access, and choice for customers while enabling secure payment experience.

Samsung Pay will initially be available in the US and Korea and expand to other regions, including Europe and China with Samsung Galaxy S6 and Galaxy S6 edge.

Samsung Electronics executive vice president Injong Rhee said: "Using Samsung's KNOX security platform and fingerprint authentication, Samsung Pay will deliver a truly revolutionary and

secure payment experience to Samsung Galaxy users."

Visa partners with financial institutions worldwide for mobile payment services Visa has partnered with several financial institutions around the world to offer new mobile payment services.

With the partnership, BBVA and Cuscal has launched new issuer-branded mobile payment applications for Android operating system and Banco do Brazil, PNC Bank and US Bank will launch similar capabilities in the future.

Visa Digital Solutions, a comprehensive suite secure payments offerings across a range of internet-connected devices and

wearables, will enable customers of participating financial institutions to pay in-store with their Visa accounts by waving their Android mobile phone in front of a contactless reader, following a one-time enrollment process.

Visa senior vice president of digital solutions Sam Shrauger said:

“2015 is the year in which fast and safe mobile payments based on Visa technology will proliferate across the world.“We are very proud that Visa’s

Digital Solution is now accessible to the broader market to be used across multiple devices and form factors - enabling secure, fast and engaging commerce experiences in any environment.” <

EPI 333.indd 5 26/03/2015 11:31:00



REPORT: THE GATES FOUNDATION

While the letter is usually a very bold read, this year has taken that a step further. The letter stated that ‘the lives of people in poor countries

will improve faster in the next 15 years than at any other time in history’. No pressure.

In terms of mobile banking, the Founda-tion predicts that ‘by 2030, two billion peo-ple who don’t have a bank account today will be storing money and making payments with their phones. And by then, mobile money providers will be offering the full range of financial services, from interest-bearing savings accounts to insurance to credit’.

The main issue stated in the latter is that current financial services for the poor are incredibly inefficient. People would rather save money by hiding cash around the house or buying commodities that quickly lose their value. Exchanging money between friends or relatives takes a day of delivering the cash themselves. Not having access to easy financial services keeps people poor and can even make them poorer.

Mobile phones are set to change this. The foundation predicts that by 2030, two bil-lion people who do not have an account today will be storing money and making payments with their phones.

Usage of mobile phones is booming in the developing world. Financial Inclusion Insights found that, in 2014, 86.4% of peo-ple in Bangladesh, India, Kenya, Nigeria, Pakistan, Uganda and Tanzania have access to a mobile phone with 54.8% of respond-ents owning a mobile phone. The problem was with awareness as 71.4% of people in these countries were not aware of mobile money.

When he spoke to EPI, Rodger Voorhies, director of the financial services for the poor

at the Gates Foundation, believed mobile money to be crucial for development. He said: “In the previous five years, a couple of things had changed. One is overall net-work coverage in lower income markets. Cellphone coverage had grown up to 90% in most markets. “We’re getting to a tipping point where

mobile payments are going to become ubiq-uitous in particular markets and then, sec-ondarily, these platforms are going to grow and be able to create environments for sav-ings, insurance and credit. The economics and the technology have changed and the evidence base is now thicker in order to push into this market.”

With the increased adoption of mobile technology, it appears to be the perfect time to raise awareness of mobile payments. According to Financial Inclusion Insights, countries such as Nigeria, Kenya and Tanza-nia have high levels of mobile phone penetra-tion with 90%, 74% and 67% of the popu-lation, respectively, owning a mobile phone. On the other hand, only 38%, 27% and 10% respectively own a bank account. In Uganda, 14% of the country own, or have access to, a bank account, but less than 10% of the country uses this service actively. There is a wide gap between the number of people with access to a bank account and access to a mobile phone. Therefore, it makes sense that people would be more likely to use their mobile phone for financial services than go through a bank.

This, unfortunately, is not the case. In Nigeria, only 0.3% of the population has used mobile money. The figure is the same for India, a country with over seven times the population, and only 0.2% of the pop-ulation being a registered mobile money user and half of that number being active.

It does not have to be this way though. In Kenya, 76% of the population has used mobile money, largely due to the success of M-Pesa, with 68% of the population being active users (having used it in the previous 90 days). So there is a massive opportunity to be utilised.

As a matter of fact, the Gates Foundation has been working on this issue for quite some time. Voorhies said: “The foundation has worked in this space for probably close to ten years. It started out by looking at tra-ditional microfinance. Then, based on the empirical evidence about what really mat-tered to low income households, we really saw that savings had a really big impact. So the foundation really doubled down on get-ting small savings to poor people.“As we began to look at the evidence in

what it would take to scale this, we kept running into a transaction cost problem. It didn’t really matter how great the service was if every time you served a poor person, you lost money.”

So what steps needs to be taken to increase mobile banking adoption? One major hur-dle is regulation. Voorhies said: “Regula-tions were designed, in many ways, to reach middle class people. They had requirements around identification, which most poor peo-ple didn’t have. Some locations had require-ments around minimum balances or visiting a branch to go through a lot of paperwork. In some countries, it was taking over 35 days to open an account because everyone would review the paperwork. “There were just a bunch of regulatory bar-

riers that needed to change. It’s to make sure that regulatory environment creates a level playing field for new entrants in the market to create disruption. We think an economy that includes everyone benefits everyone.”

The Gates Foundation turns to mobile banking as a solution to povertyIn its annual letter, the Bill and Melinda Gates Foundation states its latest views on how to help those in the world that need it most. This can range from increasing education to improving agriculture. This year, they have set their sights on mobile banking. Patrick Brusnahan reports

n ACCOUNTS IN DEVELOPING COUNTRIES

Kenya India Pakistan Bangladesh Nigeria Uganda Tanzania

Own bank account 27% 47% 7.40% 18% 38% 12% 10%

Own or have access to a bank account 29% 48% 8.60% 20% 44% 14% 11%

Active bank account user (past 90 days) 21% 25% 6.40% 12% 35% 9.90% 7.60%

Source: Financial Inclusion Insights

EPI 333.indd 6 26/03/2015 11:31:01


REPORT: THE GATES FOUNDATIONElectronic Payments International

The foundation has seen some of its work succeed. It founded the Alliance for Finan-cial Inclusion in 2008 and it now holds over 100 financial institutions as members. All of the members of the alliance have also signed the Maya Declaration; a statement of com-mon principles regarding the development of financial inclusion policy. However, making waves in the regulatory space is a different struggle altogether.

Voorhies added: “Regulators have this balances that they need to keep. They are responsible for the financial stability of the entire sector. What we would argue is that with 2.5bn people left out, that system is not enough to stay stable. They have to figure out how to bring the other half of the world in and stabilise that. We think that bring-ing this group in actually increases financial transparency and financial accountability. Let’s actually have proportional standards so we can bring people in and then control by monitoring behaviour on those systems.“We have, in some cases, for example, Tan-

zania, 90% of the population is unbanked and they couldn’t meet Western standards. We thought about how we could actually think about the needs in those countries and how we could support them to move for-ward. The changes in guidelines have to be powerful enough to give poor countries the flexibility to apply them to the local context.”

It is not only the Bill and Melinda Gates Foundation which sees the potential in this area. Sameet Gupte, Senior Vice President and Managing Director Europe for Virtusa, commented: “We can already see that in many emerging and developing economies, in particular in Africa, that consumers have

leap-frogged internet banking and gone straight to mobile mostly due to the fact many do not have laptops and PCs or fixed line connections. “Mobile offers communication at a lower

price point of entry, and now that phones are much more capable, they are having an even bigger impact. According to a report from the World Bank in 2012, about 75% of adults earning less than $2 a day don’t have a bank account, more than 2.5 billion people around the world don’t have a bank account, with the poor facing bureaucratic, travel dis-tance and cost barriers. Mobile banking can help to bridge this gap, and I expect that we will start to see mobile only banks in these regions.”

Where opinion may differ is if mobile banking is actually a top priority for devel-oping countries. With many other crises in play, such as hunger and war, mobile money could be the least of people’s priorities with emerging economies a better place to push this form of banking. Gupte said: “We need to consider people’s priorities within many of these regions. Would a person living in a war torn country with limited access to food and water be worrying right now about mobile banking? Probably not. Bearing this in mind, banks are probably best positioned to focus on emerging economies first. “Currently half the world’s population lives

in China and India, yet there is still limited uptake of mobile banking. For banks, these are the economies to watch in the short-term as there is phenomenal potential for penetra-tion through mobile, particularly now that many rural areas are becoming more con-nected. Banks should therefore be acting

now to determine how they can capture these unbanked people now, and mobile will be the most efficient and low-cost point of entry to do so.”

When asked if he felt similarly, Voorhies recognised this issue and, slightly, agreed. He said: “In some ways, I think you’re right. It’s straight forward to the average person to say ‘Let’s eradicate malaria because we know it matters.’ Yet, financial services are a strange thing because we all have them and they work for us. They feel invisible. “The person [Nachiket Mor, president of

the ICICI Foundation for Inclusive Growth] who led the committee to change the finance regulation in India said that financial ser-vices work like noise cancelling headphones where there’s a lot of technology built into them, a lot of value that has driven them, but when you put them on, they seem easy and nobody notices all the work that has been put into them. I think we have that problem in our own lives.“Poor people have none of this so they have

to cobble together their own tools, which take a huge amount of cognitive bandwidth. So communicating that is one of the reasons Bill and Melinda put it into their annual let-ter that by 2030, they want to get two billion more people in the system.”

Voorhies concluded: “In the next fifteen years, these breakthroughs are going to cut poverty dramatically, as we’ve seen in the last decade. Those drivers are going to not just be a ghettoised one-off approach where poor people live in a system separate to the rest of us.” <

Mobile money services in the developing worldbKash: Launched in 2011, bKash is responsible for over 80% of transactions in Bangladesh with over 2.2m registered users. As of December 2013, the average transaction volume per month through bKash is $680m.

M-Pesa: With over 19m registered users, 12.2m of whom are active, and 81,000 agent outlets, Safaricom’s M-PESA has drastically altered the financial sector in Kenya. Over half of the adult

population of Kenya now uses M-PESA and over

sex million transactions a day are carried out

over the service. In addition, as of May 2013,

M-PESA in Tanzania has over 5m subscribers.

MTN Mobile Money: MTN Mobile Money in

Uganda holds over 6.7m customers and 18,000

agents in the country with approximately 70% of

the entire market share.

n MOBILE MONEY USAGE IN DEVELOPING COUNTRIES

Kenya India Pakistan Bangladesh Nigeria Uganda Tanzania

Own mobile phone 74% 50% 59% 58% 90% 62% 67%

Have ever used mobile money 76% 0.30% 11% 22% 0.30% 43% 48%

Active mobile money user (past 90 days) 68% 0.20% 8.80% 18% 0% 37% 41%

Registered mobile money user 68% 0.20% 0.40% 3.40% 0.10% 29% 44%

Registered active mobile money user 62% 0.10% 0.40% 2.20% 0.10% 26% 38%

Source: Financial Inclusion Insights

n MOBILE MONEY IN THE DEVELOPING WORLD

Country Active accounts per 1000 people (2013)

Kenya 1018

Tanzania 418

Botswana 385

Zimbabwe 325

Cameroon 117

Philippines 85

Bangladesh 42

Source: IMF

EPI 333.indd 7 26/03/2015 11:31:01



MARKETING: ONLINE ABANDONMENT

The golden rule to minimise aban-donment is to know your customer.There are some straightforward steps that all merchants can take to mini-

mise abandonment. First of all, ensure that delivery charges are reasonable and avoid levying unexpected extra charges on pay-ments, such as taxes or hidden ‘processing fees’. This is considered bad practice and a major cause of abandonment. It is much better to be upfront about all fees at an early stage. Recent European legislation will stop some surcharges, and merchants should cer-tainly avoid ‘springing’ them on customers, late in a process.

Simplicity is key, both in terms of the num-ber of pages and questions, and the amount of information that customers are expected to provide. With a growing percentage of e-commerce taking place on mobile devices including smartphones, tablets and hybrids, it is impractical to expect people to enter non-essential text into online forms. It’s about making a positive and streamlined experience on these devices.

The ideal is a minimal number of boxes to tick or buttons to click, so that the process is suitable for small screen devices and is intui-tive, quick and straightforward. Some say you should be able to get through a payment process using one hand, while on a bus.

Experts advise merchants to avoid making customers register for a site. Whilst this may seem tempting in terms of potential future marketing opportunities, this requirement annoys customers and slows down the pur-chasing process. So even though it provides helpful, potentially lucrative information for a merchant, it is a significant obstacle to good payment practice.

Equally, website designers need to con-centrate on quick-loading and functioning pages. Slow load times are another major cause of payment abandonment. A help-ful rule here is to design sites for the least advanced technology that customers are likely to use.

Too often, designers themselves are using the latest, highest powered devices, which load pages instantly. But only a minority of their customers have such mega machines.

The processing power needed to run such systems can lead to frustrating delays and abandonment.

Speed is also a key factor in keeping a customer’s interest in the purchase. Given too long to reflect or be distracted, they may abandon the purchase simply out of bore-dom. People say to themselves: “Yes, I want this, let’s transact.” The quicker you can perform the transaction, the less time you give consumers to drop out. The goal here is

‘one touch’ payment.Beyond understanding customers, under-

standing different European countries is also crucial to merchants’ efforts to reduce abandonment. Especially in international e-commerce, merchants need to understand their target audience’s expectations in vari-ous countries, so they can meet them, in order to retain them. The important thing is to offer the preferred payment method: you have to offer what’s expected.

Different geographies have developed dif-ferently in terms of their preferred payment methods. Credit and debit card payments are the most common means of payment in the UK, France, Spain and Italy.

However in Germany, for example, cus-tomers are used to receiving an invoice via bank transfer. This habit, huge return rates included, is down to the large catalogue mer-chants that became so popular in the ‘70s and ‘80s.

Increasingly popular and more merchant-friendly, from a fee and a risk point-of-view, is SEPA direct debit i.e. charging the bank account through an interface with the cus-tomer’s e-banking. On average, German online merchants offer a choice of five and a half different payment methods, and a study has shown that the greater the variety, the lower the abandonment rates.

In Eastern Europe we see another phe-nomenon: while the credit card population soars and usage increases in urban areas, there is still a considerable share of legacy practices including cash payment on delivery.

As far as the underlying technology goes, card providers routinely use ‘tokenised’ information, where a random number is used to replace a customer’s actual card

number. This has the security advantage of being useless to a would-be hacker. Used with thumbprint identification, which can now be used to authenticate the card holder, it has the potential to speed up payments, cutting down the number of stages needed to perform a secure transaction.

These kind of ‘one-touch’ payment sys-tems are becoming ever more widespread, as their popularity and ease of use is broadly recognised. The introduction of univer-sally accepted ‘ewallet’ platforms will help address abandonment and improve loyalty.

Other ways in which technology can assist include identifying abnormal purchase behaviour which could be fraudulent, such as multiple email or delivery addresses relat-ing to the same card. This will prompt more scrutiny of payments.

By the same token, ‘normal’ payment behaviour can lead to speeded up processes, which helps reduce abandonment. The bet-ter merchants and banks understand and know their customers, the faster they can process payments, to everyone’s satisfaction.

People shop more in places where they feel comfortable. It’s partly about product range and pricing, but also about ease of payment. Certainly, many customers prefer to shop on large, well-known and reputed e-commerce sites which reassure them on security con-cerns. And pricing is absolutely a key reason for many, perhaps the majority, of abandon-ments. According to a survey of the most frequent reasons for dropping out of online purchases, Sitepoint.com identified custom-ers comparison shopping as a major reason.

Another potentially overlooked issue is that of coupon codes and promotional offers: if a customer sees these options on a site, they commonly abandon the process and go off in search of the code, only return-ing if they have found it. Similarly, consum-ers expect to be able to use vouchers and loyalty schemes in all channels.

Together with the need to offer a suitable choice of payment methods, these are the kind of details that merchants need to pick up on, as they get to know their customers and make all that e-commerce effort and investment worthwhile. <

Minimise online abandonment: know your customerFor online merchants, high abandonment rates are a nightmare. So much effort has gone into the design and usability of the website and into back-end technology, only for customers to have a last minute change of heart and click away. Emma Allen, head of Merchant Solutions at SIX Payment Services, comments

EPI 333.indd 8 26/03/2015 11:31:01


ANALYSIS: SOUTH AMERICAN M-PAYMENTSElectronic Payments International

Brazil certainly has the infrastruc-ture in place for m-payments to take off. Its 199 million inhabit-ants have over 270 million mobile

phones, of which around 100 million use 3G or 4G networks.

Camilo Tellez-Merchan, a financial sec-tor specialist with Washington, DC-based CGAP (Consultative Group to Assist the Poor) says: “Brazil is one of the fastest-growing smartphone markets in Latin America.”

According to IDC, Brazilian smartphone sales rose by 49% year-on-year in the third quarter of 2014, and 55 million smart-phones were sold in Brazil during 2014. GSMA Intelligence estimates that in Q3 2014, smartphones accounted for 32.4% of all mobile phones in use in Brazil.

Mobile banking has proved very popu-lar with affluent consumers. Bradesco, one of Brazil’s largest banks, says the number of its Bradesco Celular m-banking clients rose from three million in January 2014 to six million in December 2014. M-banking transactions represented 26% of Bradesco’s total transactions in December 2014. Itaú, another leading bank, had over 3 million business and consumer users of its mobile apps in May 2014.

Around 1.5 million Brazilian POS ter-minals are currently NFC-enabled, and MasterCard and Visa have been promot-ing NFC payments in the country through pilots and service launches.

SMS and USSDWhile the largest Brazilian banks are devel-oping NFC payment offerings aimed at their affluent smartphone-owning cardholders, they also provide SMS- and USSD (Unstruc-tured Supplementary Service Data) based payment services to unbanked and underbanked consumers. These services involve general-purpose reloadable Visa- or MasterCard-branded prepaid cards being linked to mobile phones for m-payments at the point of sale, airtime top-up and P2P transfers.

Brazil is a world leader in branchless banking, with over 400,000 banking

correspondent agents in December 2013, according to Banco Central do Brasil (BCB), the Central Bank. These agents, who are mostly small convenience stores, provide cash deposits and withdrawals from bank accounts, as well as bill payments. They can also provide cash-in and cash-out services for prepaid cards and m-wallets.

RegulationsIn October 2013, Brazilian President Dilma Rousseff approved Law number 12,865 which regulates m-payment services pro-viders such as banks, digital wallet provid-ers, telcos and acquirers, and outlines the government’s long-term objective of encour-aging interoperability between rival m-pay-ment platforms. Its primary purpose is to facilitate financial inclusion among Brazil’s unbanked and underbanked consumers and to reduce the amount of cash in circulation.

In November 2013, the BCB and Brazil-ian financial regulator Conselho Monetário Nacional (National Monetary Council/CMN) published rules for m-payment ser-vices based on Law 12,865.

The Law introduced a new non-bank legal entity known as a "payments institu-tion," regulated by the BCB and the MCN and permitted to offer m-payment services and e-money accounts with cash-in and cash-out facilities to low-income consumers.

Non-bank entities which obtain pay-ments institution licenses must have "non-discriminatory access to the necessary ser-vices and infrastructure for the functioning of the payments schemes" including domes-tic processing systems and the BCB’s domes-tic clearing and settlement system, the Law says.

Payment institutions have fewer capital restrictions than traditional financial insti-tutions. They are required to hold BRL2m ($703,000) in minimum capital and mini-mum equity of 2% of the average monthly value of transactions they have handled in the last 12 months.

PositiveGuilherme Lima, of Brazilian consultancy Ponto Futuro Consultoria Estratégica, says:

“The broad view is that the BCB’s regulation was positive for the market’s development, as the oversight, parameters and processes it creates should decrease both individual and systemic risks, and allow for a safer invest-ment environment. However, there are con-cerns about the BCB’s capacity to enforce and process all of its demands, as it has manpower constraints, and about the entry barriers arising from compliance costs.“As of now, the BCB’s main regula-

tory concern is to foster competition in the acquiring market, and to encourage a decrease in acceptance costs, rather than accelerate the deployment of any specific technology.”

Previously, only payment instruments issued by financial institutions were subject to regulation by the BCB and the MCN. By removing the legal uncertainty about non-bank m-payment services which previously hadn’t been regulated, the Law has allowed non-banks such as mobile operators and digital wallet providers to enter the market with confidence.

After the draft version of the Law was published in May 2013, three m-payment schemes involving mobile operators and tar-geting unbanked and underbanked consum-ers were launched:

• Zuum, offered by Mobile Financial Services (MFS), a Brazilian joint ven-ture between MasterCard and Spain’s Telefónica, which owns Brazilian mobile operator Vivo;

• Oi Carteira (Oi Wallet), a partnership between Banco do Brasil, card acquir-er Cielo and Brazilian mobile operator Oi, and

• Mobile operator Claro and Bradesco’s Meu Dinheiro Claro (my Claro money).

TIM, the fourth major mobile operator, has announced plans to launch an m-wal-let in partnership with the government-owned bank Caixa Econômica Federal and MasterCard.

Collaboration“I believe the main Brazilian banks – Banco do Brasil, Bradesco and Itaú – will continue to dominate the payments industry, and

Brazil lagging behind Colombia, Peru in m-paymentsBrazil is one of the first countries in the world to introduce mobile payment regulations, and its government encourages m-payment providers to ensure the interoperability of their services. Yet the Brazilian m-payments market is proving slow to get off the ground and is being outpaced by Colombia and Peru. Robin Arnfield writes

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ANALYSIS: SOUTH AMERICAN M-PAYMENTS Electronic Payments International

that includes the coming acceleration in m-payments,” Lima says. “The Brazilian retail finance industry is a very powerful oligopoly, and my view is that any new com-petitor, regardless of how big they are, will eventually associate with the big banks at some level. This is happening right now in the prepaid card arena, as market pioneers are starting to be acquired by the larger banks.”“I see some consolidation in the near

future among the smaller m-payments pro-viders which had already entered the mar-ket,” says Bruno Balduccini, a partner at Brazilian law firm Pinheiro Neto Advoga-dos. “They will find that the cost of invest-ing in the systems and controls to comply with the new regulations may render their business not viable.”“For the m-payments start-ups in Brazil,

especially in the mPOS segment, the dream exit strategy for most of them is an acquisi-tion by a big bank,” says Lima. “The lack of access to capital for SMEs and innovative companies will cement this trend.“The major banks will keep m-payments

as a top priority in the years to come, as this is one of the key growth paths they have available, as the traditional credit card mar-ket matures, due to a saturation of the tradi-tional distribution model.” “After 15 years of consistent 15 plus per

cent growth, credit card volumes have been slowing down, and should grow in mid-sin-gle digits, allowing for inflation, this year.”

E-money issuersBrazil’s regulations are similar to those introduced in Peru in October 2013 for e-money issuers (Entidades Emisoras de Dinero Electrónico) by Peru’s banking regulator Superintendencia de Banca, Seg-uros y AFP (Superintendency of Banking, Insurance and Pension Funds). These regu-lations are based on the Electronic Money Law (Ley de Dinero Electrónico), which was passed by Peru’s Congress in January 2013 and which calls for interoperability between m-payment schemes.

Both the Brazilian and Peruvian regula-tions state that e-money accounts issued

by licensed non-banks aren’t bank depos-its, and so aren’t covered by deposit insur-ance and can’t accrue interest. Low-value e-money accounts are subject to simplified KYC procedures.“[Brazilian and Peruvian e-money] licen-

sees must set up a trust account equal in value to the amount of money issued elec-tronically, and non-bank e-money issuers are not allowed to intermediate funds,” Mireya Almazan, manager for the GSMA’s Mobile Money for the Unbanked program, wrote in a GSMA blog.

InteroperabilityTellez-Merchan, in a blog, wrote: "Inter-operability will not be mandated [in Bra-zil], but is signaled as a goal further down the road, and any new [m-payment] service which receives a license will be required to have a clear roadmap of how it will eventu-ally interoperate with the wider [Brazilian] financial ecosystem."“The impact of Brazil’s regulations is that

every m-payment service provider is on an equal playing field,” Tristan Hugo-Webb, associate director of U.S.-based Merca-tor Advisory Group’s International Advi-sory Service, says. “Also, as the regulation encourages interoperability, consumers will be the ultimate winners, as interoperability brings down prices by increasing competi-tion. Brazil could benefit greatly from the emergence of m-payments, as Brazilians’ use of mobile phones exceeds that of pay-ment cards. M-payments could be a possible

solution to bringing Brazil’s large unbanked and underbanked population into the main-stream electronic payment ecosystem.”

However, m-payments interoperability will be a challenge in Brazil, due to the fact that voice and text message communica-tions between different Brazilian mobile operators don’t work all that well, Eliza-beth McQuerry, a consultant with U.S.-based Glenbrook Partners, wrote: “Every telco, bank or other payment provider will need to be able to quickly and efficiently exchange payments with each other,”

McQuerry wrote in a separate blog: “Brazil does have a faster payments system

operated by the bank consortium Câmara Interbancária de Pagamento (Interbank payments chamber) that could potentially be utilized for transacting mobile payments but the Law doesn’t require it be used…Bra-zil is a complex business environment that will need to figure out how to retrofit poten-tially tens of millions of mobile payments into the payment system.”

Colombia and Peru“Colombia and Peru are really outpacing Brazil in mobile payments,” Tellez-Mer-chan says. “It’s early days for m-payments in Brazil, and another year will be needed for consumers to understand how m-wallets work. The Brazilian m-payment market is moving very slowly, as is Mexico’s.”

One key advantage Peru has over Brazil is that ASBANC, the Association of Peru-vian Banks, has developed an interoperable mobile payments platform. “This platform can be used by any company applying for an e-money licence, not just banks,” Tellez-Merchan says.

According to a blog on the Better than Cash Alliance website, the main Peruvian banks, Banco de Crédito del Perú (BCP), Interbank, BBVA Continental, Scotiabank Peru and Banco de la Nación, as well as several non-banking formal financial insti-tutions and telcos including Movistar and Claro have joined ASBANC’s platform.“Colombia is home to the most success-

ful m-wallet in Latin America, DaviPla-ta, which is issued by Colombia’s Banco Davivienda and has 2 million users, many of whom receive the government’s Familias en Acción (families in action) subsidies in their m-wallet,” Tellez-Merchan says. “The Colombian government wants to pay subsi-dies to victims of the country’s recent civil war as well as various rural subsidies via m-wallets.”

Linking government welfare subsidies to m-wallet accounts is key to gaining con-sumer adoption of mobile wallets. “Brazil’s CEF could potentially be transformational in the Brazilian m-payment market,” says Tellez-Merchan. “This is because the Brazil-ian government pays 12 million families the Bolsa Familia (family allowance) subsidy every month, and CEF, being government-owned, has the only franchise to receive these payments. So, once CEF launches is m-wallet, it could have a big impact.”

In August 2014, Colombia’s Parliament passed a Law allowing non-banks such as telcos and postal service providers to apply for mobile money licences. “There could be 10-12 providers, known as Sociedades Espe-cializadas en Depósitos y Pagos Electrónic-os (companies specialising in electronic pay-

“Brazil is among the first countries in the world to pass specific m-payment regulations. It’s also at the forefront of the argument for interoperability, meaning that all mobile payment services have to work across all platforms.”Tristan Hugo-Webb, associate director of Mercator Advisory Group’s International Advisory Service.

EPI 333.indd 10 26/03/2015 11:31:02


ANALYSIS: SOUTH AMERICAN M-PAYMENTSElectronic Payments International

ments and deposits), getting mobile money licences, once the Colombian Law comes into effect,” Tellez-Merchan says. “I expect telcos to go into partnership with banks in Colombia.”

BrazilTellez-Merchan cites several factors for the slow take-off of Brazilian m-payments.

“Brazil has been in recession, and there was a general election in October 2014, which led to a lot of firms staying in a holding pat-tern and not making major investments,” he says. “For example, CEF, being gov-ernment-controlled, has been very slow to develop its m-payment service and has yet to launch.”

Tellez-Merchan says Brazilian m-pay-ment providers haven’t been in tune with the realities of the market. “For example, there’ve been a lot of issues with the mar-keting of mobile wallets,” he says. “The lesson we learnt from M-Pesa in Africa is that you have to market mobile wallets in a way that consumers can relate to. When I was in Brazil in 2014, I saw ads for Meu Dinheiro Claro which were urban and aspi-rational. This is OK for São Paulo, but not for the North-East of Brazil, which has a large concentration of low-income people. The reality is that to succeed, mobile wallets have to target the North-East.”

Another factor is the use of USSD for mobile payments. “USSD is clumsy and you need to punch a lot of buttons,” Tellez-Mer-chan says. “Also, USSD payments take too long. What will make m-payments attrac-tive to young people is m-wallet apps they can download onto their smartphone.”

ZuumTellez-Merchan says Zuum is the most suc-cessful of the m-payment services launched so far in Brazil.

In May 2013, MFS and Telefónica’s Vivo launched a pilot of Zuum in five cities in São Paulo State and in Belo Horizonte, capi-tal of Minas Gerais State. MFS is a separate initiative to Wanda, MasterCard and Tel-efónica’s joint venture which is developing m-payment services in 12 Latin American countries excluding Brazil.

Vivo’s customers can access their Zuum m-wallet using USSD. In addition, custom-ers can download a smartphone app ena-bling them to access their Zuum m-wallet on the Vivo network or any other Brazilian mobile operator’s network.

Zuum users can transfer money to other Zuum subscribers, buy prepaid airtime from their mobile operator, view account balances, and pay bills. They can also obtain a prepaid MasterCard that is linked to their account. Customers of Banco do Brasil, HSBC, Itaú, Bradesco and Banrisul can transfer funds to their Zuum account using their bank’s online service.

Marcos Etchegoyen, Zuum’s president, said in a news release that the service had 320,000 subscribers in October 2014 and that he predicts 1.2 million users by the end of 2015. Zuum is currently available in six states, Sergipe, Minas Gerais, Bahia, São Paulo, Santa Catarina, and Rio Grande do Sul, but MFS plans to roll it out to addi-tional states during 2015.

Meu Dinheiro Claro is linked to a pre-paid card and allows cash withdrawals and deposits at Bradesco ATMs as well as P2P transfers, airtime top-ups, bill payments, and SMS- and USSD-based payments at POS terminals connected to Cielo's net-work. “The problem with Meu Dinheiro Claro is that Bradesco has taken a second-ary role to Claro, and the two companies’ partnership isn’t in sync,” says Tellez-Mer-chan. “So Meu Dinheiro Claro isn’t going too well.”

Oi Carteira consists of a prepaid card linked to an m-wallet account, enabling customers to make purchases at merchants who are Cielo clients, top up their airtime, and transfer money to other Oi Carteira users. “Oi predominantly offers its m-wallet in the North-East, and it’s now marketing in Rio de Janeiro,” says Tellez-Merchan.

NFCAs in other countries, it’s still early days for NFC payments in Brazil.

However, Frost & Sullivan ICT analyst Carina Gonçalves predicted in a webcast that NFC payments will become the domi-nant payment method in Brazil, winning

over SMS and USSD due to the rapid growth in smartphone adoption.“I believe that Brazil will become one of

the accelerators for NFC payments, due to its high penetration of NFC-ready POS terminals,” says Lima. “Both Apple Pay, rumours of whose market entry have been growing ever more intensively in the past month, and, even more so, Samsung Pay will find a fertile ground in Brazil, once the consumer mobile device installed base renews.”

Brazilian newspaper Epoca Negocios reported in February 2015 that Bradesco and Itaú are negotiating with Apple to bring its Apple Pay NFC payment system to Bra-zil. Other reports suggest Banco do Brasil is also holding negotiations with Apple.

In March 2014, Bradesco and Claro announced the B.pay NFC-based payment service which could reach over 85 mil-lion customers once rolled out nationwide, according to Mercator’s Hugo-Webb.

B.pay, which was initially available only in São Paulo State, uses NFC-enabled SIM cards, Claro-branded mobile wallets and TSM (Trusted Service Manager) technol-ogy from Giesecke & Devrient, and during 2014 was rolled out to 200,000 NFC-ena-bled POS.

Separately, in July 2014, Bradesco launched the B.wallet m-wallet which allows its credit and debit cardholders to make point-of-sale purchases from their Claro, Vivo and TIM smartphones. To make a B.wallet payment, Bradesco cardholders give the merchant their mobile number. They then receive a text message requesting that they authorize the transac-tion on their smartphone.

In June 2014, Oi, Banco do Brasil and Visa launched an NFC payments service for holders of Banco do Brasil’s Ourocard Visa credit card using NFC-based SIM cards supplied by Oberthur.

Itaú launched a pilot of an NFC payment service with TIM, acquirer Rede (formerly called Redecard), and Gemalto in February 2013 in the cities of São Paulo and Rio de Janeiro. TIM also launched an NFC pilot with Bradesco and Gemalto in June 2013 in Rio de Janeiro and São Paulo. <

n CLASSIFICATION OF BRAZILIAN PAYMENT INSTITUTIONS

The BCB and the CMN have established three categories of payment institution, based on the payment services they provide:

1.Electronic money issuers: payments institutions such as prepaid card issuers and m-payments providers which manage consumers’ prepaid payment accounts, provide payment transactions based on the funds contained in these accounts, and offer cash-in and cash-out facilities. E-money is defined as funds denominated in Brazilian currency (the Real) and stored in an electronic device or system. Prepaid funds must be deposited by the payments institution at the BCB or held in government bonds;

2. Issuers of postpaid payment instruments such as credit cards.

3. Acquirers which interface with payees for acceptance of payment orders issued by a payment institution.

Source: Pinheiro Neto Advogados.

EPI 333.indd 11 26/03/2015 11:31:02


REVIEW: GSMA

The GSM Association (GSMA) has launched its 2014 State of the Indus-try: Mobile Financial Services for the Unbanked report with some interest-

ing insight into the 2.5 billion people cur-rently unbanked in developing countries. This section of society has to rely on cash transactions or informal financial services, which are usually expensive and unsafe. Traditional banking infrastructure has yet to adapt their business model to work to serve low-income customers and many do not make the effort.

The silver lining, however, is that over two fifths of the unbanked have access to a mobile phone, which can extend the reach of financial services such as payments, transfers, insurance, savings and credit. Now estab-lished in the majority of emerging economies, mobile has become a maturing industry serv-ing new business areas and enabling a wider range of digital payments.

The report highlighted a number of key trends concerning the mobile financial ser-vices industry in 2014:

• 255 mobile money services are now available across 89 countries. This is set to increase as smartphone penetra-tion rises;

• Competition is tight in markets where mobile money is available but a grow-ing number of mobile network opera-tors (MNOs) are becoming interested in interoperable solutions. In 2014, MNOs interconnected their services in Pakistan, Sri Lanka and Tanzania. This follows the work of MNOs in Indone-sia which has had interoperability since 2013;

• Regulators are beginning to recognise the importance of non-bank providers of mobile money services in fostering financial inclusion. As a consequence, more are establishing more enabling regulatory frameworks for the provi-sion of mobile money services. Reforms have been passed in Colombia, India, Kenya and Liberia in 2014. Currently, 47 out of 89 markers where mobile money is available, regulation allows both banks and non-banks to provide

mobile money services sustainably;• Providers have begun to expand into

adjacent markets for mobile financial services, leveraging their strengths in mobile money to provide mobile insur-ance, mobile savings and mobile credit to customers who previously never had access to formal financial services;

• The number of registered mobile money accounts globally grew to reach near-ly 300m in 2014. While this is steady growth, there is still much room for further increases as these accounts only represent 8% of mobile connections in the markets where mobile money services are available. 2014 saw seven new markets join the ranks of countries where mobile money accounts outnum-bered bank account. The number of markets with this status is now 16, and

• Active mobile accounts stand at 103 million and an increasing number of services are reaching scale. 21 servic-es now have over one million active accounts.

For those invested in the financial sec-tor, these signs of growth are encouraging. Investment in improving and expanding mobile money services is continuing. Provid-ers are strengthening their capability in han-dling a rapidly increasing number of users and transactions through platform migra-tions and extension of application program-ming interfaces (APIs) to third party users.

2014, additionally, recorded a steep increase in the number of international remittances via mobile money. The GSMA attributed this rise to the introduction of a new model; using mobile money as both the sending and the receiving channel. In turn, mobile money is reducing the costs of international remittances for consum-ers. Respondents to the survey said that the median cost of send $100 was $4, less than half of the average cost to send money glob-ally via the traditional money transfer chan-nels.

Despite the progress made in 2014, the mobile money industry still has hurdles it needs to overcome. Regulatory barriers, low levels of investment and lack of industry col-

laboration are hindering mobile money from reaching scale.

54 developing countries do not have a live mobile money service. 70% of these countries have a population of less than 10 million. Due to the relatively smaller popula-tion size, it is harder to build a business case for investment in mobile money. It becomes harder for a mobile money service provider to achieve scale and actually make a profit. This severely reduces the desire of operators and banks to invest in new mobile money launches.

However, 13 of the 54 developing markets without mobile money services have a popu-lation of over ten million. 14 launches are planned in these 13 markets, proving that the interest is still there for new launches. The barrier now is regulation.

Without regulators creating an open field for mobile money services, market uptake and customer adoption is hindered. Even in markets that contain an enabling licensing or authorisation framework for non-banks, there are barriers. Respondents highlighted three key regulatory priorities:

1. Transaction/balance limits too low and/or onerous customer identification requirements;

2. Not allowed to earn interest on pooled funds or to utilise interest earned, and

3. Restrictions on international remittance business.

While obstacles remain, the mobile money industry continues to progress. In order for mobile financial services to reach more peo-ple and achieve the scale it needs, the indus-try will need to continue strengthening the foundations for mobile money services and instil best practices in order to continually improve quality of service. Mobile financial service providers have to engage with regu-lators and standard setting bodies to create more enabling regulatory environments to foster sustainable investment in the service that will, eventually, underpin a balanced strong digital financial ecosystem. <

The developing world’s unbanked turn to mobileAs mobile phone penetration grows in the developing world, so does the opportunity for mobile money vendors. With mobile financial services now available in 60% of developing countries, it is an exciting time for the market according to the GSMA’s new report. Patrick Brusnahan writes


EPI 333.indd 12 26/03/2015 11:31:02


Bahrain has a diversified economy with well-developed infrastruc-tural facilities, and is home to large number of multinational

companies in the Middle-East and North Africa (MENA). The government has encouraged investment in the financial service and tourism sectors as part of its economic diversification plans, with spe-cial emphasis on Islamic banking. The country has the region’s highest density of Islamic financial institutions, includ-ing 24 dedicated banks. As the need for, and awareness levels of, sophisticated banking products and service offerings increase, banks operating in the coun-try are launching new products to retain market share. Consequently, Bahrain’s cards and payments industry recorded healthy growth during the review period (2009–2013).

Credit transfers and cheque payments were the preferred payment instruments, having a combined industry share of 99.4% in 2013 in terms of transaction value. The share of payment cards increased from 0.4% in 2009 to 0.6% in 2013, as the government and banks are taking initiatives to increase benefits and awareness levels among con-sumers and merchants.

In terms of the number of cards in circu-lation, Bahrain’s payment cards – including debit and credit cards – registered posi-tive growth during the period 2009–2013, recording a compound annual growth rate (CAGR) of 5.49%, increasing from 830,360 cards in 2009 to one million in 2013. In terms of transaction value, payment cards reached BHD1.1bn ($3bn) in 2013, after registering a CAGR of 17.37%. Similarly in terms of transaction volume, payment cards registered a CAGR of 17.69%, reaching 16.1 million in 2013.

The average transaction value (ATV) in Bahrain was $185.3 in 2013, which was higher than Saudi Arabia with $131.3, but lower than other peer countries such as Kuwait, Oman and the UAE. Kuwait recorded the highest ATV with $319.6, fol-lowed by the UAE with $263.1 and Oman with $207.4.

In terms of card penetration, Bahrain recorded 0.80 cards per inhabitant in 2013, while the UAE, Kuwait, Oman and Saudi Arabia recorded 1.96, 1.32, 1.03 and 0.69 respectively. In terms of frequency of use, Bahrain recorded 15.6 transactions per card in 2013, while Saudi Arabia recorded 95.3, Kuwait recorded 47.7, the UAE recorded 43.1 and Oman recorded 13.4.

Strong demand for Sharia-compliant banking products and servicesIslamic banking has grown significantly in Middle Eastern countries such as Bahrain, Saudi Arabia, Kuwait, Oman and the UAE. From the first launch of the Sharia-compli-ant credit card by Kuwait Finance House – Bahrain in November 2007, in association with Visa, banks in Bahrain have come a long way to introduce these cards for their consumers.

Ithmaar Bank offers the Sharia-compli-ant Al-Rubban credit card, which also has all the features of a conventional credit card. The bank does not charge any inter-est on outstanding balance, however, but earns income through card maintenance fees. Furthermore in January 2014, Ithmaar Bank launched a full suite of new Sharia-compliant MasterCard credit cards, while in May 2014 CrediMax launched a Sharia-compliant credit card, Tayseer. A growing number of banks are expected to launch

Sharia-compliant cards over the forecast period 2014-2018.

Growth prospects in the prepaid cards marketBahrain’s prepaid cards market grew during the period 2009–2013, in terms of both the volume of cards in circulation and trans-action value. The increasing preference for Islamic banking provides high growth potential for prepaid cards, as they are com-pliant with Sharia law with no riba (interest).

Banks are targeting specific segments to increase prepaid card penetration. MasterCard launched the first multi-cur-rency prepaid travel card, My Card, in col-laboration with Al Baraka Islamic Bank and Nonoo Exchange Company in December 2012. In December 2013, BMI Bank and MasterCard launched a generic multi-pur-pose prepaid card and an internet prepaid card.

Mobile payments offer growth prospectsThe Bahraini government launched the eGo-vernment project in May 2007 to promote electronic payments among consumers with a focus on mobile payments from May 2009.

In July 2011, the government launched the eGovernment Mobile Portal, promoting a wide range of e-payment services, such as for health check-ups, traffic fines and driv-ing license renewal, among others. <

COUNTRY REPORT: BAHRAINElectronic Payments International

n BAHRAIN CARD TRANSACTION VALUE BY CHANNEL (BHD MILLION), 2009–2018

20092010

20132015

0

500

1,000

1,500

2,000

20182016

20142012

BHD m

20172019

ATM

POS

Source: Central Bank of Bahrain and Timetric

Country Report: BahrainIn January 2013, the amount of payment cards in Bahrain burst through the one million mark. In addition the total transaction of payment cards was worth $3bn. Now debit cards and prepaid cards are seeing a boost in usage

EPI 333.indd 13 26/03/2015 11:31:03


The global economic crisis in 2009–2010 had a severe effect on the Bul-garian economy, with gross domestic product (GDP) contracting by 5.5%

in 2009. The Bulgarian government and World Bank entered into a memorandum of understanding (MoU) in January 2012 in response. This represented an important step taken by the country’s government to draw on the World Bank’s expertise in developing and implementing strategies and programmes to revive the country’s econ-omy. GDP grew by 0.9% in 2013, and is anticipated to rise to 3.0% in 2018, which will be beneficial for Bulgaria’s cards and payments industry over the forecast period (2014–2018).

Bulgarian payment cards (including debit and credit cards) registered positive growth during the review period (2009–2013), recording a compound annual growth rate (CAGR) of 2.08%, and increasing from 7.7 million cards in circulation in 2009 to 8.5 million in 2013. In terms of transaction value, payment cards valued BGN15.1bn ($10.7bn) in 2013, after registering a CAGR between 2009 and 2013 of 7.33%.

In 2013, the average transaction value (ATV) in Bulgaria was $85.5, which ranked fifteenth in the overall European region. Greece recorded the highest ATV, with $227.6, while Estonia recorded the lowest with $37.3.

Bulgaria ranked twenty-first in terms of card penetration, with 1.2 cards per inhab-itant, while Luxembourg recorded the high-est rate with 4.4 and Romania recorded the lowest with 0.6. Bulgaria ranked the lowest among other European countries in terms of frequency of use, with 18.7 transactions per card, while Finland recorded the highest frequency with 172.8.

Prepaid card to create scope for growth in payment cardsPrepaid cards recorded a CAGR of 24.99% during the period 2009–2013, increasing from 461,513 cards in 2009 to 1.1 million in 2013. These cards are more beneficial to the country’s unbanked population, as they do not require a bank account to use.

Central Cooperative issues virtual pre-paid cards that do not require an individual to have a physical card. This card is created online, and can be used for the payment of goods and services. This removes the requirement for customers to visit a bank to collect the card. The bank also issues Pre-paid Gift Cards to customers, which can be personalised and can be used to give gifts on different occasions. With the increasing number of prepaid cards being distributed in the country, this segment is anticipated to undergo positive growth, with 2.1 million cards estimated to be distributed by the end of 2018.

Mobile payment offers growth prospects for card transactions

M-payments are also gaining popular-ity in Bulgaria, and are being offered by banks, private companies and technology providers. In December 2012, the m-pay-ment service provider Cellum Group and the telecommunications provider Vivavom together launched an m-payment service called ‘CellumPay’.

This service will enable consumers to purchase subway tickets using their mobile phones. The company offers a mobile app, through which users can register their Visa, MasterCard or American Express cards. Apart from purchasing subway tickets, the service can be used for the top-up of pre-paid phone cards, the payment of utility bills and purchasing goods over the internet.

The growing scope for m-payments ena-bled new operators to enter the market. In July 2013, Borica, a company owned by the central bank and 27 of the country’s com-mercial banks, in partnership with seven other banks, launched an m-payment ser-vice called ‘MOBB’.

E-commerce offers growth prospects for cards and payments industryE-commerce recorded significant growth during the period 2009–2013, due to ris-ing online and mobile penetration, and an increase in the presence of online payment gateways and online stores in the coun-try. The value of e-commerce grew from BGN141.9m in 2009 to BGN358.3m in 2013, at a CAGR of 26.06%. This is expect-ed to record a CAGR of 23.36% between 2014 and 2018, to reach BGN1bn in 2018. The increasing young and urban popula-tion has a strong inclination for mobile and media devices, providing strong growth opportunities for e-commerce companies.

Offering virtual cards for the payment of online transactions is one of the reasons behind Bulgaria’s growth in e-commerce activity. These cards enable users to shop online and carry out secure e-transactions. DSK Bank is offering such cards to the seg-ment of customers who prefer to make regu-lar online purchases. <

COUNTRY REPORT: BULGARIA Electronic Payments International

n BULGARIA CARD TRANSACTION VALUE BY CHANNEL (BGN BILLION), 2009–2018

20092010

20132015

0

5

10

15

20

25

20182016

20142012

BGN bn

20172019

ATM

POS

Source: European Central Bank and Timetric

Country Report: BulgariaThe global financial crisis hit Bulgaria hard. Only now are we beginning to see the signs of a recovery in an economy which contracted, but how is the card market, now with 8.5 million payment cards in circulation, boosting this recovery?

EPI 333.indd 14 26/03/2015 11:31:03


Like other EU countries, Luxem-bourg’s economy was damaged by the 2009 global economic crisis. Following strong economic growth

from 2004 onwards, Luxembourg's eco-nomic growth contracted by 5.6% in 2009, but recovered gradually from 2010 onwards. Economic turmoil in the global financial markets and lower demand dur-ing the peak of the recession prompted the government to inject capital into the financial services sector and implement stimulus measures to boost the economy.

A favourable tax regime coupled with bank privacy legislation enabled the finan-cial services sector, especially the banking and insurance sectors, to become the growth leader. Consequently, Luxembourg’s cards and payments industry thrived during the review period (2009–2013), which is antici-pated to continue over the forecast period (2014–2018).

In 2013, credit transfer was the preferred payment instrument, having a substantial industry share of 98.1%, in terms of trans-action value, while payment cards account-ed for just a 0.5% share. The use of cash is continuously decreasing due to a growing preference for electronic payment methods, resulting in cash’s share being halved during the period 2009–2013, down from 1.5% in 2009 to 0.7% in 2013.

In terms of the number of cards in circula-tion, Luxembourg’s payment cards (includ-ing debit and credit cards) registered a posi-tive growth during the period 2009–2013, recording a significant compound annual growth rate (CAGR) of 23.14%, increasing from 992,348 cards in 2009 to 2.3 million in 2013. In terms of transaction value, payment cards valued €10.2bn ($13.5bn) in 2013, after registering a CAGR during 2009–2013 of 10.60%.

In 2013, the average transaction value (ATV) in Luxembourg was $121.0, which was the fifth highest in the European region. Greece recorded the highest ATV, with $227.6, followed by Switzerland ($156.6), Italy ($141.2) and Germany ($131.5). How-ever, Luxembourg recorded the region’s highest card penetration of 4.43 cards per

inhabitant in 2013, followed by Norway (2.73), the UK (2.48), Sweden (2.38) and Belgium (2.04).

Debit cards market share is gradually decreasingPrior to the eurozone crisis, consumers used debit cards more frequently at POS termi-nals. However, with uncertain economic conditions and increases in unemployment from 2009 onwards, consumers moved to use credit cards more frequently to benefit from the interest-free credit period offered by the banks.

In terms of the number of cards in cir-culation, transaction volume and value, debit cards decreased during the period 2009–2013, which is anticipated to con-tinue over the period 2014–2018. In terms of the number of cards in circulation, debit cards accounted for 51.2% in 2009, which reduced to 27.1% in 2013. In terms of trans-action volume, its share decreased from 65.9% to 57.2%, while in terms of transac-tion value its share decreased from 61.3% to 51.6%, during the same period.

Credit cards continue to dominate the marketInstead of solely depending upon their sala-ries, consumers moved to credit card pay-ments in times of higher need, paying it back when they have funds. During the period

2009–2013, the use of credit cards increased significantly both in volume and value terms at CAGRs of 19.05% and 17.00% respec-tively. Between 2014–2018it is projected to grow at respective CAGRs of 5.11% and 4.48% in terms of volume and value.

Credit cards have strong growth poten-tial via online and offline retailing as well as m-commerce. Growth in the market will be supported by the adoption of chip-and-PIN technology, along with the 3D Secure Code service which facilitates secure offline and online transactions. Mobile commerce, gifts, entertainment, online purchases and travel display positive growth potential, which is expected to further drive the credit cards market.

Adoption of secured payment technologies to drive card-based transactionsSeveral banks in the country offer enhanced security features on their cards to increase the number of safe transactions. The major-ity of banks discontinued Bancomat, the national debit card scheme, in 2011 and adopted V PAY debit cards with the inclu-sion of chip-and-PIN technology. Banks started offering the 3D Secure Code service to credit cardholders from 2012 onwards to increase security in online transactions. With the adoption of advanced security features, the use of debit and credit cards is expected to rise over the period 2014–2018. <

COUNTRY REPORT: LUXEMBOURGElectronic Payments International

n LUXEMBOURG’S CARD TRANSACTION VALUE BY CHANNEL (€ BILLION), 2009–2018

20092010

20132015

0

2

4

6

8

10

20182016

20142012

EUR bn

20172019

ATM

POS

Source: State Bank of Pakistan and Timetric

Country Report: LuxembourgPost-financial crisis, the credit card market in Luxembourg saw a sharp rise in market share as consumers could no longer rely on their salaries. With the debit card market seeing its market share take a hit, can mobile payments provide some competition?

EPI 333.indd 15 26/03/2015 11:31:03



COMMENT: BETHAN COWPER

Why age isn’t just a number in paymentsBethan Cowper, Head of Marketing & PR at Compass Plus, examines how trends in the payments market can differ depending on the age of the consumer and how financial institutions need to react to these trends. Is it all about inclusivity or customisation?

Talks around payments have a tendency to focus on the new and exciting, from mobile applications to the rise of the millennials. As customer behaviours

change, financial institutions must be pre-pared to adapt their products and services to reflect these changes. However, not all behav-ioural changes are created equal and as such, different age groups have different require-ments that need to be met to truly drive loy-alty in the payments space.

A recent survey from Compass Plus, the global payments software provider, took to the streets to question over 650 members of the public, of all ages, from London, Welling-borough, Nottingham and Sheffield. All respondents were randomly approached on the street and asked about their payment and banking behaviours. The aim of the survey was to get a clear cross section of opinions from all ages, from different sized cities inside and outside of the London commuter belt.

Whilst the results provided plenty of food for thought and confirmed a lot of what we already know (cash is still very popular; there is an element of distrust around mobile pay-ments, etc.), it was the difference of opinion by age group that illustrated the most varia-tion. The results showed that with the prolif-eration of digital payments, the gap between those who are willing to use new payment technology and those who aren’t, is funda-mentally linked to age.

Surprisingly, the high street was the most popular place to shop overall (61.5%), and this trend carried across all age groups from the over 60s (94%) scaling more or less pro-portionally downwards to the under 21s (56%). The only exception to this rule was the 22-29 age bracket where Internet shop-ping just pipped the high street to the post (49% and 47% respectively). The mobile device was the least popular way to pay across the board at 0% for the over 60s up to its highest result of 7% with the under 21s. It would be reasonable to expect to these fig-ures to maintain a sliding scale throughout the age groups in the under 21s favour, as mobile continues to gain more momentum in the marketplace.

When it comes to banking behaviours

things begin to shift. Despite the high street coming top for shopping, Internet banking was the clear overall winner for banking (54%), although the branch remained popu-lar coming in second (26%), with mobile banking beating telephone banking by six percent (15% and 9% respectively).

When these results are broken down by age, patterns begin to emerge. Internet banking was the most popular method of banking for 45-year-olds and under (73.1%).

However, for respondents over 45, the branch was still the most popular place to carry out their banking activities at 44% for the 46-59s and 66% for the over 60s. For the 46-59s, this was very closely followed by Internet banking at 43%, however, the over 60s second choice was telephone banking at 20%. The mobile came in second for the under 29s at 26%, however for respondents in the 30-45 category the branch just won over the mobile device by 1.4%.

It is clear from the results that these chang-ing patterns of behaviour are driven by habit as the respondents in each group had a dis-tinct tendency to favour the banking channels that had been most dominant during their banking career to date. As such the over 60s were much less inclined to use mobile bank-ing (1.4%), whilst the under 21s were the least interested in telephone banking (0.8%).

The idea of consumers sticking to what they know was only cemented further by the predominance of cash usage across all age groups (95.8% had withdrawn cash in the last month) and the use of bank cards on the high street (84% in the last month). Regard-less of industry predictions of a future cash-less, mobile paying society, for the moment the majority of Britons would be loathe to leave home without their wallet: and in this wallet you would find cash and at least one card.

When we delve into newer technologies like contactless cards and mobile payments, things start to change significantly. Of the 128 people that had used a contactless card in the last month 68% were 29-years-old or younger and only 13% were 46 or older. Of the 59 people that had paid using their mobile phone over the last month, only 2%

were aged 46 and over, whilst the majority of mobile payments had been made by the col-lective 45 and under age group at 80%. This boils down to trust.

Overall, mobile was the least trusted pay-ment method (71%) followed by contactless cards (47%). However, this is where use and trust differ though the age groups. The older respondents were less likely to use a payment method they didn’t trust with 67% of the over 46 year olds saying they would never make a mobile payment and 55% say-ing they won’t use mobile banking. However, although mobile was cited as the least secure way to pay across all age groups, of those interviewed under 45, 83% thought that mobile payments would be mainstream in 1-2 years and a whopping 90% would use mobile banking.

Drilling down further and looking just at the under 21s, 55% thought mobile was the least secure however, 56% had used their mobile to pay for something over the last month. Whereas 90% of the over 60s thought mobile was the least secure payment method and only 1% of them had paid using this method. This discrepancy offers hope to all emerging innovative players in the pay-ments industry; trust is hard to come by but the younger age groups are willing to use new payment methods regardless.

The takeaways from the survey are clear, FIs need to cater for all age groups and install a multichannel plan in their long term strat-egy; favouring one channel over all others will only cause frustration amongst certain age groups. Banking customers are starting to distribute their assets across multiple insti-tutions more often and are quick to close their account and move on if their experience has been less than satisfactory. In this increasingly customer-centric industry FIs need to main-tain inclusivity for all age groups.

Whilst still a significant barrier, trust in new payment types can be overcome and the future for mobile technology looks bright. 76% of respondents predicted that payments with these devices will be mainstream in the next four years with the younger generations leading the way. <

Bethan Cowper, Compass Plus

EPI 333.indd 16 26/03/2015 11:31:03

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