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What are the options for retail banks to prepare for their future?

8 Sep

Fintech network

Disruption, innovation, Uberisation, disintermediation, Fintechisation, regulation… all of these words are

Media and experts are fond of predicting that all services still part of the current core business of banks will be provided by new players from outside the banking sector. This transformation will be based on disruptive technologies, with the help of regulators who have – at last! – ended the banking status quo and fostered competition for the benefits of consumers – writes Fabrice Denèle, Head of payments, BPCE Group – in this article which first appeared in the EPC Newsletter.nowadays perceived as challenges for the retail banks and their business.

The reality is that, whether banks like it or not, the way customers will use their services in the future has little to do with today’s traditional banking processes. Banks are urged to adapt. And this new landscape requires a new deal for banks.

Regulators have designed a new integrated market Europe-wide, a decision that has been welcomed as removing barriers within Europe for consumers and enterprises. But while banks are facing new, less regulated and more agile players, they have to comply with an even more restrictive risks mitigation policy, an outcome of the seismic financial crisis of 2008, which means more competition, and lower fees but restrictive ratios for banks to address systemic risk. Not exactly a level playing field, especially with the additional effect of low to negative interest rates.

What is more, the four party model created by banks to bring easy, secure and universal means of payment to consumers is now suspected to be anticompetitive. Interchange fees, the fuel of the ecosystem, are dramatically reduced when not banned without any real impact assessment.

Regulators intend to replace this regime with a new one; many services rendered by banks are to be commoditised (cards and mass payments railways, customer accounts), and new players granted to use them thanks to the regulation, sometimes for free and without a contract*. Last but not least, banks will become liable in case of failure between a new third party provider and a customer, although it is not part of any contract.

In this context, how do banks adapt? What relevant transformation has to be done? In/from which area to invest/divest? Here is the challenge for banks. Increasing uncertainty is not only on banks shoulders, all players are concerned. Although there is room for everyone in the market, no one can really predict who the winners will be. But, to a large extent, banks will have to think outside the box. Here are some thoughts on what banks should consider to open themselves up to this challenge.

Customer centricity: A new criterion in the decision making process

As traditional established players, banks have to change their culture and move from products and services centricity to customer centricity. You may feel this is obvious and partly already done, with the introduction of digital channels and mobile banking apps, among other initiatives, but this is only the beginning of a new customer’s behaviour. All businesses will have to adapt to the new generation of customers – Millennials – who are digital natives, and always ‘switched on’.

This changes a lot of things as they will have less loyalty to one service provider, and more opportunities to switch to another one, thanks to digital. Increasing expectations and user experience will drive their choices. A service perceived as outdated has no chance of survival. This creates new mandatory criteria in decision making processes: ultimately customers decide whether they use the service or not, based on whether they like it or not. This is a major shift in bank’s culture, historically more used to user than customer relationships.

Become an active player in R&D, innovation and new technologies

Hearing that regulations have opened up the market to innovative entrants, yet banks are reluctant to innovate, is very frustrating since banks are already used to investing a lot to transform many business lines. Perhaps this is not due to a lack of investment, but more because banks may be perceived as not joining the trendy path paved by Fintech start-ups.

Certainly banks cannot talk about so called disruptive services as the ultimate solutions as many niche players do, whatever their success is. But at the same time, current drivers of innovation need to be changed. As an example, investing in R&D is not compatible with a request for return on investment (ROI) and a date for breaking even planned from day one.

Banks also need to anticipate new technologies. In general they were clearly late regarding mobile services and have left that area wide open to non-bank aggregators. When it comes to access to, and usage of, customer data, banks remain very cautious as the compatibility of their role of trusted third parties is not obvious, even though banks comply with dedicated regulation, such as that surrounding data privacy.

But banks have already demonstrated that they act the right way: for example banks reacted to the growing potentiality of Distributed Ledger Technology in less than one year after it was first introduced in the payment environment. Collectively, they are perhaps the main investor in exploring this new technology.

On top of that, banks may have to change their organisational structure and often need to remove internal barriers between powerful silos. As an example, it would not be appropriate to argue that secured web services and Application Program Interfaces (APIs) cannot be generalised for banking services because of risk mitigation or IT culture or capabilities, while in the meantime the whole market is moving forward. This may create competitive disadvantages and may prevent seamless user experience. Again, this might be a revolutionary approach for many people within banks.

Leverage own assets

As a matter of fact banks do not have the same skills as Fintechs or pure players, but they have assets others do not. Although the financial crisis has damaged banks’ reputation, current customers still trust their bank when it comes to their own money, payments, and banking services. Mixed with the market share and the scale of access to customers it brings, banks have a unique combination of assets: customer base, trust and reputation, risk mitigation expertise, and customer data.

Obviously these assets won’t be enough by themselves to resolve the whole challenge, and they are at risk, but this is an interesting pillar to serve as foundation. Fintechs are certainly much more agile and suffer from fewer constraints, but one of their weaknesses is a lack of access to customers and visibility. And each of them still has to build its own reputation of reliability in this rapidly changing digital world.

Evaluate ‘make or buy’ and consider new partnerships

One of the peculiarities of banks, compared to Fintechs, is that banks have to build and deliver services at scale, for their vast community and diverse range of customers, with the right level of security and compliance with layers of regulation and risk mitigation. It is harder for banks to act as a niche player creating value added services for targeted users. Potential customers are not always numerous and cost structures of banks may harm economic sustainability.

To resolve this equation and find their own place in the new competition, banks may have to switch from services often fully built and processed in-house, to partnering with pure players at least on a certain part of the value chain. This is not easy as banks do not have a tradition of sharing businesses. All kind of partnerships could be contemplated: such as white label, co-branding, commercial agreements, equity stakes, and many more. In a nutshell, consider ‘make or buy’ as a basic rule for any innovative business. Not only is this a matter of regulation, but it is also necessary as confidence is part of the DNA of banks in their customer relationship.

Apart from the competition provided by Fintechs, GAFAAs’ (Google-Apple-Facebook-Amazon-Alibaba) growing appetite, telcos or IT companies are often opposed to banks as new disruptive competitors. And this is the new reality. But only a few of these players have decided to create their own bank or buy one, as most of them realise of how heavily regulated retail banking is. Most of them prefer to partner with banks, and this should be seriously considered, especially as GAFAAs are part of the daily life of every consumer.

Rejuvenating interbank cooperation

In some countries, banks have a very long tradition of interbank cooperation in the field of payments**: cost sharing of domestic interbank processing capabilities, domestic cards schemes, standardisation, and so on. Obviously this has always taken the form of a ‘coopetition’, as competitive matters are never shared nor discussed collectively.

There is no chance that these interbank bodies could escape the impact of the new world, and indeed they have not: their domestic footprint in a European integrated market, their domestic scale in a growing merging world, the decision making bodies at the European level, the big cross-border players in a more than ever competitive landscape, these are all symptoms of the transformation of the sector. Banks should refrain from applying old interbank recipes, and instead create new ones. New forms of cooperation should be invented that are more agile, and more business and customer orientated.

* Payment Services Directive 2.

** The tradition of interbank cooperation is particularly strong in France but also exists in other forms in many countries.


The Continued Rise of the Mobile Point of Sale System

28 Jan

Some operators believe the crowded, and often contentious, point of sale market could be on the move—literally. Software Advice, a Gartner company that reviews and researches mobile point of sale software, found in a study that 63 percent of restaurants still don’t deploy a POS system, citing cost as the main deterrent. On the same note, the company says 72 percent are seeking a mobile alternative, either through an iPad or some other digital solution. The entire study can be found on the company’s website.

Anthony Tse, the owner of Jack’s Sliders and Sushi in New York City, notes mobile POS systems can help accelerate and simplify the process for some owners. “I believe so,” Tse says about restaurants eventually making the mobile switch. “It only make sense with wireless technology becoming more common and mobile payments, and so on.”

There will always be traditionalists, and both models have their benefits. But perhaps the biggest difference can be measured by the bottom line. Typically, legacy systems have a much larger upfront cost, although some present pay-per-month options that don’t have the same sticker-shock value. The actual numbers vary, but it comes down to a couple of factors. A traditional model will charge a license fee plus equipment cost, as well as monthly maintenance. Mobile POS systems ask for a subscription fee in addition to the hardware—an iPad or compatible tablet. The user-friendly nature doesn’t hurt either, Tse says. “I taught myself how to set up both software and hardware within two days,” Tse says of his TouchBistro mPOS. “And I thought my server how to use it within five hours.”

Another difference is space. The countertop model, naturally, stays rooted to a certain area of the restaurant. “… The mobile POS take less space and it doesn’t require me to setup a station for it,” Tse adds. “Second, it saves lot of time. Rather than writing on a pad and transferring the info into the POS, now it can all be done by tableside. Therefore, it cuts down time for serving and turning tables, which also allows us to cut cost on floor staff.”

There are additional capabilities as well. Mobile POS systems can offer customer-facing functionality, such as displaying a receipt, menu viewing, and quicker forms of payment. Servers don’t have to pick up a check and run back to the payment station, as diners can slide and sign from the table. Tse also says he likes the ability to update the software and communicate with the company on possible changes.

“As compared to traditional POS, the functionality is limited to what they created 10 years ago, with a very minimum update to adapt what’s new in the market, or you have pay for the new modules in order to adapt,” Tse says. “With TouchBistro, they take my input seriously and use it as a part for their improvement, even though there might be some technical issues here and there between updates. But overall, I am happier with the functionality way more than what I used to before.”

One of the unique—sometimes positive and sometimes negative—traits of a mobile POS is the Internet reliability, although there are some models that support offline modes. The Cloud-based system, also know as SaaS or software as a service, stores data on remote servers. That allows for integrated systems, where restaurants can multi-task on the device—everything from financial tracking to back-of-the-house ordering. Loyalty programs and marketing options also exist. It also means operators can manage the restaurant’s logistics off-site.

“It’s just a matter of time until there will be more competition and the price will start to come down,” Tse says. “Then, it will become even more accessible for all restaurants.”


A mobile point of sale system can be an attractive alternative for some operators.

Mobile payments – the good the bad and the ugly

13 Oct

Mobile Bootcamp

There has been a lot of press about mobile payments and NFC, and we have all been waiting patiently for the various players in the payment space to get their act together and provide a good universal solution.  NFC in particular has been very slow to market.  I thought it would be good to review the top players in the space and see what the future holds.

mobile payment

There are a number of ways to make and accept mobile payments these include; contactless, mobile apps, SMS, web browser-based transactions.  Added to these are the current slew of mobile registers using Square like technology to turn mobile devices into terminals.  With no clear winners and a fractured market what is the current state of play? Lets examine the types of mobile payments and then look at who the players are and where we might be heading.

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P2P’s Dead, Long Live MP2P

13 Oct

Mobile Payment infographic

27 Sep

MyRetailCloud Blog

In May Sapient Nitro posted a great Infographic on Mobile Payments – The Future of Money and Mobile Payments here.  With all of the talk recently on Mobile Payments with the launch of the iPhone 5, I thought it was worth posting again here.


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MasterCard and Everything Everywhere finally sign off on 5 year deal for mobile payments

28 Aug

Contactless Intelligence

MasterCard has finalised a five-year deal with Everything Everywhere (the joint venture between France Telecom’s Orange and T-Mobile) to develop mobile payment solutions, with a “co-branded, prepaid solution for mobile devices” enabling contactless NFC payments.

Further plans for the co-operation include loyalty rewards, money transfers and other as yet unspecified elements. This deal follows on the heels of the MasterCard / Deutsche Telekom deal that was made a few months back (read more here) covering Germany and Eastern Europe.

“Our vision is of a world beyond cash and the phone is a key tool to driving this step-change. As the sophistication of smartphones continues to evolve, and the mobile payments ecosystem starts to open up, I believe that people will use their mobile phones in lieu of a traditional wallet and start making higher-end purchases, such as white goods or even cars, all through their phones,”said Marion King, president…

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NFC Mobile Payments Launch in the Czech Republic

24 Aug

Contactless Intelligence

Visa Europe, Komerční banka, Telefónica and Samsung are bringing mobile payments to the Czech Republic. As of today the first 2,000 owners of a Samsung Galaxy SIII, who show up at 19 specialised O2 Guru stores across the Czech Republic, can simply swap their existing SIM card with a special payment SIM card. These SIM cards are available for free, with a pre-charged credit of 250CZK from Komercni banka; enabling users to pay for goods and services with their mobile phones.

This launch builds upon the success of the pilot project carried out last year which, sources say, proved that the market was ready for this payments innovation. The limited number of 2,000 special payment SIM cards will be available to customers for free on their Samsung Galaxy SIII phones from August 23rd.

Miloslav Kozler, the regional manager of Visa Europe for contactless and mobile projects in the Czech Republic and Slovakia 

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Big retailers team up on mobile payments plan

16 Aug

A group of big retailers that includes Wal-Mart Stores Inc, Target Corp and Japan’s 7-Eleven is developing a mobile payment network, adding to the proliferation of options that let consumers pay with smartphones.

The system, known as Merchant Customer Exchange, is a retailer-led initiative that would match similar services from Google Inc, which began operating its own system last year on its Android devices.

The group of retailers, which account for about $1 trillion in annual sales, wants to make sure it has a say in the development of standards for mobile payments, Terry Scully, Target’s president of financial and retail services, said on Wednesday.

“What we are looking for is a broad, seamless experience across all retail formats,” Scully said.

Mobile payments are expected to rise nearly four-fold to more than $1.3 trillion annually by 2017, a report from Juniper Research said on Wednesday.

The group is in discussions with financial institutions, technology companies and telecommunications providers to set up a backbone for the payment system, Scully said, but he could not forecast when the system would be in stores.

“While speed to market is important, we really are focused on doing it right,” Scully said.

The retailer group is joining a crowded field.

Earlier this month Starbucks Corp took on the mobile payments model, employing Square Inc to process payments at its U.S. coffee shops.

In May, eBay Inc’s PayPal unit announced deals with 15 retailers to use its system for mobile payments.

“These big retailers are doing this because they are not happy with the solutions being pushed on them by the market,” said Rick Oglesby, a payments expert at consulting firm Aite Group.

If these merchants can agree on a common standard for mobile payments, the venture could grow very quickly, he added.

“This creates a big opportunity,” Oglesby said. “A system designed by merchants for merchants could have a big leg up over the competition.”

The Merchant Customer Exchange is working on offering merchants such as retailers, gas stations and restaurants a way to integrate their promotions into the payment plan, which it said would be available through virtually any smartphone.

The swift rise of mobile payment processing tools in recent years has led some observers to forecast a future in which wallets are left at home. That could transform retailing, but also create security issues, particularly if mobile devices are lost or stolen.

About a decade after they were dreamed up by engineers and marketers, mobile wallets are still far from commonplace in the United States, stymied by industry infighting, consumer tastes and regulatory hurdles.

That has not stopped banks, phone makers and technology companies — fearful of being left behind — from trumpeting the concept and pushing the argument that any solution can succeed if it speeds up checkout times, is secure and easy to use.

Shoppers abroad, especially in Asia, can already wave cellphones at the check-out counter to pay for everything from groceries to gasoline.

Now, a growing number of mobile operators, banks, technology companies and card processing networks like Visa Inc, MasterCard and America Express are vying to gain a foothold in the still-small but high-potential U.S. mobile payments market.

Most mobile payments services, like those offered by Square and PayPal, sit on top of the payment networks run by Visa, MasterCard and American Express.

But these processing giants are working on their own mobile payment services because they do not want to lose contact with the consumer, Oglesby explained.

“Payments players use the term disintermediation – someone is stepping in between them and the customer and adding value,” he said. “Visa, MasterCard and Amex are worried that they may become the raw materials that to go into the finished product – and right now the finished product is looking like PayPal and Square.”

Three of the top U.S. mobile carriers – AT&T Inc, Verizon Wireless and T-Mobile USA – are also looking for bank and network partners to make their Isis mobile payments venture grow.

Currently, credit card companies charge merchants transaction fees – and mobile payment players like Square and PayPal have to exact such fees too.

Other companies, such as AT&T and phone makers from Research In Motion to Apple Inc, are likely to demand a cut of sales. This puts U.S. retailers in the uncomfortable position of possibly surrendering more margin.

Companies involved in MCX along with Wal-Mart, Target and Seven & I Holdings Co Ltd’s 7-Eleven include Alon Brands, Best Buy Co Inc, CVS Caremark Corp, Darden Restaurants Inc, HMSHost, Hy-Vee Inc, Lowe’s Cos Inc, Publix Super Markets Inc, Sears Holdings Corp, Shell Oil Products US and Sunoco Inc.

The group said it planned to announce more members in the coming months.

The MCX system was reported late on Tuesday by the Wall Street Journal.


Want to Do Mobile Payments? Here’s a Free Tablet

7 Aug

A number of start-ups are trying hard to convince the world that the ability to pay for things with a phone is something we actually need. The latest example is GoPago, a company in San Francisco that is trying to lure merchants with free tablets.

The pitch goes something like this: Merchants, especially restaurant owners, often resist new payment technologies because they don’t want to put up with the fuss of hiring a tech person to set things up or trouble-shoot. And they’re too busy to deal with it themselves.

To get over this hump, GoPago is offering its package free: an Android tablet, the Verizon Internet connection, a cash box, a receipt printer, the company’s app for handling transactions and inventory tracking, and setup and support of the service.

To place an order at a participating restaurant, a person would use the GoPago mobile app to pay, and then she’d be able to walk in to pick up the food.

As is often the case, free isn’t exactly free for the businesses. GoPago charges a 2.85 percent fee for each transaction, which is split between the credit card company, GoPago and Chase Paymentech, which is the processor. But Leo Rocco, the chief executive of GoPago, said this model would lower the barrier to entry by allowing businesses to embrace a new payment technology without having to pay the upfront cost. So far, 600 merchants in San Francisco and 500 merchants in Dallas are using GoPago; 52,000 people are using the app to make purchases in San Francisco, the company says.

The free-gear offer is just one of the tricks that start-ups are experimenting with to push their mobile payment services. Scvngr, the start-up that offers a mobile payment service called LevelUp, recently eliminated its transaction fee and is instead bringing in revenue through special campaigns for merchants. Square, another San Francisco start-up working on mobile payments, offers a free credit card swiping accessory that plugs into a smartphone.

Still, mobile payments aren’t big yet in the United States. Forrester, the research firm, predicts that the domestic market is three to five years from reaching critical mass. Denee Carrington, a Forrester analyst who recently wrote a report on mobile payments, said that companies needed to make the process convenient and compelling, and have it make sense to consumers to pay with a phone as opposed to a credit card or cash.

No one has really nailed the sweet spot yet, Ms. Carrington said. But she said that new business models coming from start-ups would continue to put pressure on the payments market and potentially reshape it.

 Source: – August 7, 2012, 7:00 am By BRIAN X. CHEN

Telefónica Digital goes ‘beyond connectivity’

11 Jul

Telefónica Digital boss Matthew Key presents details of his company’s plans, including the mobile Firefox OS, at this year’s media and analysts’ day in London. Guy Daniels reports.

Telefónica Digital announced today that it expects to drive annual revenues of approximately €5 billion for its parent company Telefónica by 2015 with an annual revenue growth rate of 20 per cent.

 The company also announced global agreements with Facebook, Google, Microsoft and RIM to use Telefónica’s billing relationships so customers can pay for mobile content such as apps, games or in-app purchases. The direct to bill payment has started to be rolled out in Europe and will be live in 14 of Telefónica’s operating businesses globally by the end of this year. 400,000 customers in Germany are already paying for digital goods via their mobile phone bills.

Much of the interest at its Media and Analysts’ day in London was focused on the Firefox OS announcement. Head of Telefónica Digital, Matthew Key, revealed some additional detail about the Firefox OS handset and Telefónica’s involvement:

“We’re talking to at least another 3 or 4 to get onboard. It’s important because of scale. We also want more operators to get involved. The first handset cost will be sub $100 when it launches in Brazil. We can produce the same experience as an Android handset at a lower price, or a better experience at the same price.”

 He adds that strategically, for any business to be reliant on any one supplier is not a good thing. Telefonica in Latin America is very reliant on Android.

 “Strategically it’s really important for us to do it. But we don’t under-estimate the size of the task.

Although Telefónica Digital, launched in 2011, it arguably started three years ago in November 2009, when Telefónica created a vertical market organisation with the launch of GiffGaff and O2 More, and the purchase of US OTT company Jajah.

Key says he doesn’t want Telefonica Digital to be a Google or Facebook, he’s not interested in hardware (not even around Firefox OS), and doesn’t want to just be an investor in digital companies – any investment has to help Telefonica’s core business of 300 million customers:

“If we think we can produce differentiated products on our own platforms ourselves, we will. But if we can’t, that’s fine. We’re very open to partnerships. And if we can’t find a partner, we’ll buy or invest in a company, such as Joyent.”


The ‘TU me’ service is one of the company’s latest, and will be joined by ‘TU go’ very soon. With just £200,000 of advertising, to launch the service, Key says it’s an example of the type of innovative viral service that he wants to see  Telefónica Digital associated with: 

“Whether we like it or not, products like WhatsApp were gaining customer traction. We developed ‘TU me’ in 100 days, that’s not the traditional telco product cycle. ‘TU me’ will help us retain great relationships with our customers. The more products our customers use, the lower the churn.”

Telefonica also announced this week that it will make a multi-million euro investment (exact figure not revealed) to kick-start the mobile advertising market in Brazil, using its UK O2 Media model as a template. Mobile advertising is expected to be worth €300 million by 2015. Adding work in eHealth and security to its advertising services, Key says: 

“We think the digital society can fundamentally transform Latin America.”

 Telefónica Digital additionally announced an agreement with Etisalat to jointly develop business opportunities, license products and share knowledge across a range of digital services. They will develop business opportunities in M2M, financial services, device procurement, cloud computing, video services, digital advertising, eHealth and OTT communications. Both telcos are also supporting Mozilla’s new mobile Firefox OS.

Posted By TelecomTV One , 06 July 2012


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