Advancements in digital technology continued to shape the payments industry in 2015 as mobile,

 Digital Payments Report 2016

online and other digital forms of payments moved into the mainstream.

From mass transit to gas stations and supermarkets, businesses of all sizes, across all the regions surveyed, now accept various types of digital payment, making paying for goods and services quicker, but above all, easier for the consumer.

While this seems very encouraging, what does the landscape look like beyond 2016?

The Digital Payments Report set out to survey and evaluate all the Payment industry stakeholders from the three major payments markets in the world: Americas, Europe and Asia Pacific. The industry survey respondents were largely senior executives from Card Issuers and Acquirers, Retail Banks, Financial Institutions, Payment Networks, Mobile Network Providers and FinTech suppliers.

The responses across the regions offer a unique insight into how the Payments industry is evolving in 2016 and beyond.

Download the REPORT HERE

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Emerging Asian countries are driving the growth in non-cash, particularly China which is expected to move into fourth place behind the US, Europe and Brazil in terms of non-cash payments. The rising penetration of mobile phones in smaller Chinese towns and cities is resulting in increased mobile payments — 4.5 billion in 2014, up 170%. Steps taken by the Chinese regulatory authorities to accelerate the deployment of point-of-sale equipment to merchants and to open the domestic card payments to competition have also increased non-cash payments.

Number of non-cash transactions (billion) by region, 2009-2013 Sources: World Payments Report 2015, Capgemini/Royal Bank of Scotland. Accenture.

Growth occurred in all non-cash payment methods globally, except cheques which declined 10.9 percent. The share of non-cash transactions made via cards grew to 62.8% in 2013, up from 60.9% in 2012. Although growth in debit card payments globally slowed in 2013, this payment method still remains the most used of all non-cash methods. Debit card usage in the US bucked the trend by increasing by 8.3% in 2013. A total of 61 billion debit card transactions were made in the US, dwarfing Europe, the second largest market, with 34 billion payments.

The growth rate of credit cards remained steady at 9.6%, despite a decline in growth in Latin America from 18.2% in 2012 to 10% in 2013. There were 69 billion credit card payments in 2013, and these are expected to grow in the US and Europe as their respective economies recover.

On an individual consumer basis, Finland again led the way in terms of the number of non-cash transactions per inhabitant. Each Finn made an average of 451 transactions in 2013. Following Finland was the US, where inhabitants made an average of 390 non-cash transactions.

Payments processed through non-bank systems, which the report refers to as ‘hidden payments’, were estimated to have reached 24-40 billion in 2014. This would make them around 10% of non-cash payments, at the upper end of this range. ‘Hidden payments’ include those made through closed loop cards, mobile apps, digital wallets, mobile money and virtual currencies. The growing level of ‘hidden payments’ is a disintermediation threat for banks and those within the financial services industry. There are also wider implications for regulators and consumers around some elements of these payment methods. This includes dispute resolution, consumer protection, information security, privacy, fraud and anti-money laundering provisions.

Despite the rise of challengers and new market entrants, the report feels that banks are perhaps better positioned than their rivals to offer holistic solutions. Banks are able to operate across various payment methods and channels to offer customer-centric innovations. This makes them a consolidated provider for consumers and businesses, as opposed to customers having separate relationships with multiple parties depending on the payment scenario. Banks are also strongly placed to develop innovative offerings based on existing infrastructure, such as immediate payments, to differentiate themselves from other PSPs.

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These are the findings of a survey published today by Mobey Forum, exploring the current attitudes to biometrics within the banking industry, the key use cases, industry drivers and obstacles standing in the way of progress.

Of the 235 respondents from across the world, it is clear that biometric services are a priority. 22% of banks already offer biometrics to their customers and 65% are planning to offer services in the near future. More than half plan to launch fingerprint biometrics for their end users, with an additional 21% focusing on voice recognition.

Do you offer biometric
authentication for mobile
financial services

Authenticating the user during the login process and during payment or transaction confirmation was cited by 70% as the most important use case for biometrics in financial services.

A number of key drivers for the use of biometrics are explored in the study, with nearly half of respondents stating that it is the convenience for their customers, together with the desire to be viewed as an innovative and advanced bank, which makes biometrics appealing. There are, however, a number of obstacles that need to be overcome. One in five highlighted dependence on technology providers as an issue. In addition, the customer concerns relating to privacy are seen as a barrier.

What kind of technology are you planning to use?

“Biometrics in financial services still face challenges,” comments Sirpa Nordlund, Executive Director of Mobey Forum. “It is clear, however, that progress is being made and there are well defined use cases and benefits to moving forward. We believe that inter-bank collaboration will expedite the development of this technology and 42% of the market agrees with us. Successful financial solutions need to be easy and convenient; a collaborative approach will ensure consumers are presented with stable and consistent services, driving adoption.

“We will continue our discussions around biometrics both within our own working group and in our collaborative discussions with the Natural Security Alliance and the Biometrics Institute. We look forward to releasing further analysis in the coming months.”

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According to Telstra’s “Mobile Identity – The Fusion of Financial Services, Mobile and Identity” report, with smartphones now the primary channel used by Gen X and Gen Y to access and manage their finances, expectations around how financial institutions manage mobile identity are being transformed.

Willingness to Share Personal Information with Financial Services Institution

“For the last six months, we’ve spoken to consumers and banks all over the world, in an effort to understand how our relationship with our smartphone is affecting our relationship with our financial institutions,” said Rocky Scopelliti, Global Industry Executive for Banking, Finance & Insurance, Telstra.

“What we uncovered is that when it comes to mobile banking applications, consumers no longer believe in just the safety of passwords and usernames.

“Instead, two-thirds of UK consumers think that using biometrics – such as voice, fingerprint, iris and facial recognition – would be more secure and help reduce the risks of fraud.

Willingness to Share Personal Information with Financial Services Institution (by Net Worth $ (Total Investments & Assets – Debt))

“In fact, one in four UK consumers would even consider sharing their DNA with their financial institution, if it meant it would make authentication easier and their financial and personal information more secure,” he said.

According to the research, while factors such as interest rates and ease of accessing funds used to be the most important considerations when selecting a financial institution, today, more than half of UK consumers cite the security of their finances and personal information their top priority, together with their institutions’ reputation for security.

Despite this, the report found that only a third of UK consumers were ‘very satisfied’ with their institutions’ authentication methods, with one third willing to pay an extra £11 GBP per annum for more sophisticated mobile security measures.

Identity Theft (Global)

“Our research shows consumers are using their mobile banking applications in some really cutting edge ways, so they’re expecting much more than ever before from their financial services providers in terms of security, innovation and functionality.

“In fact, Gen X and Gen Y has become so dependent on their smartphones to access their financial services, that it’s led to a behavioral state we are calling ‘no-finapp-phobia’ – the fear of being without financial applications,” he said.

In the UK, Nationwide and NatWest customers are the most satisfied with the identity and authentication methods offered and are accordingly, the most likely to recommend them.

“With our consumption of financial services intrinsically linked with the mobile device, our mobile identity is the key to unlock trust with our service provider.

“For ‘no-finapp-phobic’ Gen X and Gen Y consumers it’s time to create mobile identity solutions that instantly recognise them for who they are,” Mr Scopelliti concluded.

For more information on Telstra’s Mobile Identity – The Fusion of Financial Services, Mobile and Identity whitepaper click here.

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The paper, entitled ‘The Global Adoption of Real-Time Retail Payments Systems’ highlights two key interlinked themes; the variety of different adoption speeds and the relationship with core drivers which are leading to the adoption of such systems:

RT-RPS growth is strong, but countries are adopting a variety of approaches which affects the rate of progress

• Numerous countries have undergone rapid adoption, typically as a result of the lead role that regulators have played in encouraging the market to migrate, coupled with the use of relatively new technology and supplemented with attractive pricing or incentives;
• Other countries are on a slower adoption path, typically where the regulator did not play a prominent role and/or the banking community showed little appetite; and
• The remaining systems are on a ‘typical’ adoption path, between the two extremes, usually characterised by active regulatory participation but where the systems were launched more than a decade ago and use older technology.

Real time retail payments system market landscape (Source SWIFT)

Regulatory initiatives are proving to be the key driver behind the increased adoption of RT-RPS

• The results show that the primary driver (73%) for RT-RPS adoption is the impact of regulatory reform. This comprised a number of factors, such as consumer protection, reduced credit risk, transparency, financial inclusion, fostering of competition, and wider macroeconomic impacts.
• The secondary driver (27%) for RT-RPS adoption is the impact of the banks’ commercial needs – both in responding to customers’ expectations, and/or responding to competitive threats from new entrants.

Drivers of real time retail payments systems (Source SWIFT)

“The emergence of real-time payment services is having a transformational impact on underlying payment systems,” says Juliette Kennel, Head of Market Infrastructures at SWIFT.

“Real-time is a growing trend led by consumer expectations, supported by regulatory reform. Different countries have implemented real-time retail payment systems in different ways, ranging from simply adapting current legacy infrastructures to deal with real time, up to building brand new innovative systems, as we are seeing in Australia. Legacy and new models will need to co-exist both at a domestic and cross-border level, so, for banks, interoperability will be key. The industry is going to have to come up with ways to enable banks to offer real-time capabilities while keeping costs in check. Collaboration and innovation is going to be key.”

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