As 2015 draws ever nearer, CI has asked industry experts to give their forecasts on how 2015 will play out for the card payment sector. Will mobile payments, boosted by Apple Pay, become mainstream? How will NFC adoption change? Seven industry experts share their predictions
Tobias Schreyer, Co-Founder of the PPRO GroupHow will the online payments industry develop in 2015?I believe that 2015 will continue our descent into a cashless society, with a further decline on conventional retail banking. Digital services such as e-money accounts with linked debit and prepaid cards are quickly emerging as popular traditional banking alternatives, not just in the UK, but around Europe and the rest of the world.
The knock-on effect from this will result in a major shift in 2015 from current favoured online payment methods like debit/credit cards and PayPal, to a broader set of online and mobile payment options that not only accommodate changes in the UK banking market, but also accommodates payment preferences from consumers beyond UK shores looking to purchase goods from British e-tailers.With consumers constantly looking for increased speed and ease of use, they will gradually turn to e-money accounts, which offer the benefits of a traditional bank account with the addition of increased privacy, reduced charges, faster responses and improved consumer interfaces.
As the payment landscape continues to heat up, e-money accounts with linked prepaid cards have evolved and will continue to encapsulate a new market of prospective users. Prepaid cards are becoming an important asset to the average consumer, proving to be a useful alternative to traditional credit / debit cards. For some, they ensure their money is budgeted more wisely and for others, businesses and consumers alike, it has become a secure alternative for making wage transfers and for allocating employees with company cards.
This signals change for traditional banking methods, as consumers increasingly move to online funds management; the need for personal interaction has been removed, thus proving the decline in bank branches. Conventional banking methods will in turn become redundant, with e-money accounts and prepaid cards shaping the payment market place of the future.
John Sharman, CEO Tuxedo Money SolutionsNew Payment Technology Could Save Travel Businesses Costs and Time
In 2013, it was estimated that two out of five travel agencies had adopted virtual payments, according to MasterCard Worldwide. This is a great reflection of the progressive nature of the sector and its willingness to embrace new technology. However, the majority of supply chain payments continue to take place utilising more traditional mechanisms such as BACS, Swift, Credit and Prepaid cards and indeed e-wallets such as PayPal. This mix of payment channels can become an administrative burden and adds an additional level of financial complexity, with the cost of payments changing by channel and supplier.
"Whilst there is undoubtedly increasing noise around crypto currencies such as BitCoin, we don’t believe that this will become a mainstream payment vehicle in the near future. At Tuxedo, we believe that rather than looking to new payment channels, the most significant short term opportunity for the travel industry is to use technology to consolidate the existing channels and processes to drive efficiency and cost savings.
At Tuxedo, we are currently working to develop and implement a web based portal that will enable travel businesses to carry out supplier payments across existing channels from a single point. This will mean that organisations will no longer need to log into different systems to make bank payments, card payments, virtual payments etc. They will be able to log into one platform and make the payment using the most appropriate channel for them.
As well as offering clients a much more streamlined process, we believe that we will also be able to offer businesses an opportunity to bring down the real cost of payments as well. Using a mix of our own prepaid and virtual payment solutions, alongside leading third party payment channels, we anticipate we may be able to bring real costs down for many organisations by as much as a quarter, as a result of the volume of payments being processed driving cost/price efficiencies.
According to responsibletravel.com, in 2013 over 143m transactions were generated by agents and The World Travel and Tourism Council anticipates that travel and tourism will reach a global value of $10.8tn by 2018 , As such, this level of saving, both in real terms and administrative costs would be significant in an industry that is seeing increasing downward pressure on margin.
The travel sector has already demonstrated a forward thinking approach through its adoption of virtual payments, and so the emerging path toward one streamlined payment portal will be a natural, progressive step for the industry."
Howard Berg, Senior Vice President, GemaltoForecast- NFC
According to a recent forecast from Juniper research, users of NFC mobile payment services are estimated to reach 516 million by the end of 2019 – up from 101m this year. This is more than a 400% increase, which shows a staggering amount of growth taking place in this area.
What’s more interesting, however, is when you contrast this with figures from the latest YouGov report, only 35 per cent of young adults are actually aware of NFC payments, indicating that the potential for further growth is huge; and further supported by more recent research from InfoScout of more than 400 iPhone 6 and 6+ users that showed that over 95 per cent of them who could have paid with Apple Pay on Black Friday, didn’t.
However, although the opportunity for growth is clear, the YouGov research highlighted that concerns still remain around the security of NFC mobile payment services, with 53 per cent citing the risk of financial exposure being areas of worry should a phone be lost or stolen.
With this in mind, it’s clear that the industry still has a lot to do to help address these concerns and put consumers at ease with new payment methods that are soon to become the norm.
While NFC is growing in popularity, the YouGov stats serve as a good reminder that consumer knowledge around NFC is still extremely limited. However, the recent Apple Pay announcement is expected to change this and has been welcomed by NFC industry players as the catalyst needed to increase both awareness and adoption of NFC among consumers.
And as consumer interest grows so too does appetite from various industries with automotive, finance and transport being prime examples of those looking at new ways to integrate their service offerings and deliver them through new NFC capabilities coming to market.
NFC has reached a critical juncture in its development and is on the verge of the flashpoint needed for mass consumer adoption. Before this can happen though, businesses need to ensure consumer concerns around security are addressed before it can progress further.
Security is paramount when introducing any payment device to market, and while secure and efficient technologies are already in place to safeguard the integrity of NFC transactions and ensure safe roll-out across interested industries, consumers are yet to be convinced.
The convenience offered by NFC payments is one thing, but before consumers are willing to take that final leap, they want to know that the technology is secure and that their personal credit card and personal banking details are protected.
Only when this has been achieved will consumers fully buy-in to NFC and adopt the technology.
EMV is reaching a truly universal status
With the US market adopting EMV next year and China also pursuing migration to it, the standard for interoperability and security of in-store transactions launched 15 years ago, is now becoming globally recognised.
This universal adoption across a massive installed based sitting right at the heart of the banks payment offering means it’s their most valuable asset in this battle of payments – a position that will continue strengthen as adoption increases in 2015.
The contactless wave will accelerate
Most of the cards issued in China this year and next year are dual interface cards, and in many countries, these now outnumber traditional ‘contact only’ cards.
This massive deployment and adoption of contactless technology has paved the way for other ‘form factors’ (including the mobile hosted payment applications) and the emergence of payment through wearable technologies. As NFC continues to become more mainstream and new wearable devices come to market 2015 will be the year that more payments start to be made in this way.
In addition, we also expect more new initiatives will be revealed that will start to merge in-store payments and online cloud-based payments delivering a more consistent customer experience.
Furthermore, tokenisation, biometrics, diverse secure elements and trusted environments will be combined to offer the best trade-off between usability and security of sensitive data.
Bernardo Nicoletti, Director, TranSigma Partners, Continental Europe and the Middle East and author of Mobile Banking, published by Palgrave-MacMilland UK, 2014
Mobile Payments in 2015: Another Growth Year
Mobile Payments will grow in a faster way in 2015, essentially for three reasons:
- The launch of mobile wallets (which will act on the "what");
- The spreading of the NFC technology and the launch of wearable devices (which will act on the "How");
- The diffusion of P2P (Person to Person) payments solution (which will act on the "Who").
The Mobey Forum defines a Mobile Wallet as a functionality on a mobile device that can securely interact with digitized valuables, Often it is understood as a means for micropayments, an equivalent of prepaid card. A mobile wallet can contain, generate, and facilitate multiple functions:
- Financial, such as Financial transaction options (money send/transfer, bill payment, cash-in or cash-out, wealth management, stock exchange investments);
- Identity, such as Access control (physical or digital) via log-on credentials;
- Mobile Commerce or m-Commerce: Mobile commerce is any transaction, involving the transfer of ownership or rights to use goods and services, which is initiated and/or completed by using mobile devices.
We expect that in 2015 there will be many launches of mobile wallets, often in a partnership business model. For instance in Dubai, UAE, the Bank Association will launch in 2005 a Mobile Wallet in common with all the Dubai banks. SIA-SSB will do something similar in cooperation with a number of Italian banks.
Contactless technology will receive a big boost in 2015
Mainly thanks to the launch of the iPhone 6 and Apple Pay, Near Field Communication technology, NFC will take off. This mobile payment service lets certain Apple mobile devices make payments at retail and online checkout. It aims to digitize and replace the credit or debit magnetic stripe card transaction at card terminals. These Apple service and devices, let the latter wirelessly communicate with point of sale systems using NFC and a "dedicated chip that stores encrypted payment information" (known as the Secure Element), and Apple’s Touch ID and Passbook.
Another interesting development in 2015 will be the launch of wearable mobile payments devices, for instance smart watches. For examples, users with some iPhone models can use Apple Pay through an Apple Watch, though the watch lacks the added Touch ID security. For added security, the watch’s sensors can ensure that it is still being worn by its owner. If the watch is removed at any point, then Apple Pay is disabled.
P2P Payments will be another big hit for 2015. Person-to-person payments are an online technology that allows customers to transfer funds from their bank account or credit card to another individual’s account via the Internet or a mobile phone. The most successful case in the past has been M-Pesa. Launched by Safaricom in Kenya, it has since expanded to Afghanistan, South Africa, India, and in 2014, to Eastern Europe. M-Pesa allows users with a national ID card or passport to deposit, withdraw, and transfer money easily with a mobile device. Now P2P is gaining a foothold in West Europe too. Barclays launched a very successful Pingit P2P solution, which allows also some international payments. Paym is a similar program that will expand substantially in 2015 thanks to the support of a large number of banks, with HSBC among them.
Richard Moulds, VP Strategy at Thales e-Security
Biometric technology opens up a host of new possibilities – unlike passwords, biometric credentials can’t be easily guessed or shared among users and the technology generally offers a better user experience. Users hate remembering passwords and carrying tokens around – anything that is more convenient has a big advantage. Traditional hardware authentication devices such as one-time-password (OTP) tokens and smartcards tend to be very costly for organisations and are hard to manage, whereas biometrics are tantalisingly close to being usable features on the user’s own smart phone, making it a much cheaper option in the corporate setting.
However, with biometrics you have a finite number of ‘tokens’ – you only have ten fingerprints! Whilst this finite number might be sufficient for personal use, in the workplace IDs and credentials are constantly changing as systems and personnel come and go and security requirements change. Every time you revoke a biometric ‘token’ the user has fewer ‘tokens’ left. The other snag is that biometrics are analogue. Sometimes matching can be a bit hit and miss, creating a grey area of false positives and negatives. This means there is always a need for a fall-back system otherwise users will be locked out of their own accounts. In most cases, this means there is still a password based back door – which some would argue defeats the whole purpose of biometrics.
The advent of consumer technology such as TouchID on the iPhone and its role in Apple Pay could be the technology which takes biometrics to the mass market – it’s not very common for consumer security to drive corporate IT strategies but phone based biometrics might just be the exception.
The ubiquitous ‘buy’ button and the journey of authentication
It seems that everyone wants to be a payment processor or at least a payment initiator. Social media sites such as Facebook and Twitter have trailed ‘buy’ buttons embedded directly in ads that they host. The idea is that that consumers will favour impulse purchases that don’t require you to leave your friends, even for a second. Advertisers like it because it links social media campaigning directly to revenue rather than just ‘likes’ and followers. But there’s an obvious security and trust issue here. Even if we accept that these types of web sites have sufficient security to protect stored credit cards, which might be a stretch given their track record in protecting passwords, there is the even bigger issue of authentication. Let’s be honest, people check social media sites very often – maybe hundreds of time a day. Passwords and credentials are nearly always cached, are frequently federated to other sites and are often as ‘skinny’ as users can get away with – who types in a complex 16 digital code to access their wall? Yet these same credentials might now enable a payment – that’s quite scary. Predicting the death of the password is a perennial favourite that will probably never happen. What seems more likely is that the password will become the start of the ‘authentication journey’ rather than a definitive go/no-go.
Risk-based authentication or adaptive authentication ratchets up as the user seeks to do more ‘risky’ things, like make a payment. The site will use a host of other information to decide whether to approve users to go to the next level of trust. Authentication will move from being an event to being a process – a dynamic, multi-stage activity. Web sites, and social media sites in particular have a wealth of behavioural data, they know how you browse what interests you and who you interact with. They also have a good idea of where in the world you are. All of this data coupled with other challenge/response questions provides a way to ratchet up trust. Of course the risk is that this opens up a whole new world of ID theft where hackers don’t just try to steal your passwords, but they try to mimic your lifestyle or shopping habits – which is perhaps even more scary. Should we all start modifying our behaviour in order to give ourselves the best possible behavioural profile, try to do things the same every day so as not to upset the analytics machine, worry about doing something out of the ordinary in fear of being mistaken for an attacker and having our accounts suspended? Time will tell if this approach can work at scale or whether once again convenience will trump security and the password’s lease of life will be extended yet further.