DAY 2 Innovation Project: Who’s powering the New Payment Rails?

DAY 2 Innovation Project: Who’s powering the New Payment Rails?


Read more from our PayX analysts from Day 2 of Innovation Project 2016


Fireside chat with Charlie Scharf – CEO – Visa

• The kinds of services they’ve delivered for many years to Issuers, they now need to direct their attention to merchants and do a better job by working with these one by one. The Visa Commerce Network is a more targeted direct way for customers to have a better experience
• In terms of the future for Faster Payments, Payments systems are slow and clunky, Visa doesn’t believe they should be doing all the payments processing and competition is good and drives the correct level of change

Who’s powering the new payment rails at the Edge?

Panel Discussion with:
Hikmet Ersek – CEO – The Western Union Company
David Evans – Chairman – Global Economics Group
Adrienne Harris – SA to the President for Economic Policy – National Economic Council – The White House
Steve Kirsch – CEO – Token
Peter Loop – Head of Innovation and Disruptive Technologies – Infosys Finacle
Mike Massaro – CEO – Flywire
Hannah Nixon – Managing Director – Payment Systems Regulator
Russ Waterhouse – EVP, Product Development and Strategy – The Clearing House

• Traditionally, ACH, Cheque and Wire are the funds transfer mechanisms in the US and are currently all consumer ‘push’ mechanisms whereby the consumer/corporate needs to initiate the transaction rather than the transaction being ‘pulled’ from the recipient. New technologies now create a benefit that you can’t live without but these would need to be on new rails without touching existing rails. Money movement has very complex integration primarily due to the forex requirements and in the US they tend to try to use the existing in country rails to provide cross border transactions which is not overly effective. So, why don’t we blow up the old rails when we build the new rails? In the UK, we are introducing a new cheque model which is digital and cleaning up the previous rails with low customer impact
• Security is key and If we can match the authentication of the phone, such as fingerprint recognition, to the authentication required for payments, we would have secure payments initiated purely by thumbprints etc. But, building the level of security on the existing insecure rails would be a complex task and promotes the need for new rails, with new technology
• Financial inclusion is an important factor and within the rural areas of many countries, they don’t have the infrastructure that can support the electronic transfer of payments so local conditions need to be understood in order to ascertain the needs of the money moving market
• In the UK it’s much quicker for new entrants to enter the faster payments market and the rails have been defined and built. This enables innovation and start-ups to see what they can bring to the consumer coupled with the appropriate balance of security and regulation with the central bank
• Belief that the drive to open frameworks should not necessarily need to be driven by regulation such as PSDII in Europe but, the panel was divided on whether the large banks would voluntarily open their systems to the API development community and therefore would a collaboration method truly work?
• Clearing House is investing $6bn in the US to create the faster payments infrastructure in a similar way to the environment within the UK currently and working with the banks to create a digital capability for consumers
• Blockchain – Distributed ledgers are shared databases rather than individual databases with a read once basis and the transaction in the chain can have logic instead of the application. They create a place of ‘truth’ that confirms the transaction really occurred

Survey on adoption and usage of Apple Pay, Android Pay and Samsung Pay

• The survey studied transactions initiated by consumers on the set of phones supporting the various payment methods and the primary observations in the US are that the amount of signage at devices on the use of these products has increased over the past year and for the first time now, Apple Pay has exceeded the Starbucks app within use at Starbucks
• 46% of Apple Pay users are still satisfied with their current payment method. 22% still worried about security and 26% are still not sure how it works
• The number one reason they didn’t use it at checkout was that they forgot (21%) and secondly, they didn’t know if the store accepted it (16%)
• Other payments types used instead were 39% credit card, 40% debit card, 21% cash. Of the card payments, 79% were swipe versus 21% EMV but this included a good number of merchants that were not yet EMV enabled so perhaps slightly skewed
• Mobile payments, across all the devices, account for only 3% of eligible transactions and repeat usage is dropping so the massive hype of these payment types has not yet hit home to the consumer markets although those surveyed that do regularly use the product, love the experience

Panel discussion on mobile payments/wallet adoption with:

Konstantin Antsiferov – CEO – Special Electronic System Ltd Russia, CEO – Themis Electronic Systems Bv, The Netherlands
Dr. Soner Canko – BKM – CEO of InterBank Card Center – Turkey
Daniel Eckert – Senior Vice President – Walmart Services
Joanna Lambert – VP Global Consumer Product & Engineering – PayPal
Jared Schrieber – CEO – InfoScout
Conrad Sheehan – Strategic Alliances and Loyalty Solutions Executive – Chase
Will Wang Graylin – Global Co-GM – Samsung Pay, Inc.
Karen Webster – CEO –

• Samsung users are not necessarily being used at the larger retailers who are not yet NFC enabled such as Walmart. Samsung payment is more of a by-product and the key product is around a ‘digital container’ which becomes a channel for merchants to interact with
• PayPal saw a 45% growth last year on payments conducted by phone and Mobile is becoming a ubiquitous tool and the key is to understand how the phone becomes a shopping ‘tool’ with the payment being an end product. They are looking to the technology to eliminate the friction of the payment and introduce a seamless experience without even the need to enter authentication credentials. The payment is not the important piece
• Turkey have adopted an effective mobile payments solution and attempting to see the same user experience in the US has been both challenging and disappointing to the Turkish based panellist
• What’s so hard about making the mobile experience more than just the payment? At Walmart, the strategy is to improve the shopping experience and they’ve started with the checkout experience and the time taken to utilise EMV chip & dip processing (6-8 minutes quoted by Walmart SVP). So they are looking at the ultimate of ‘the best payment experience is a non payment’ and working on solutions to identify the customer at or before the start of the shopping experience and enabling the payment as a transparent function post the fact, aka Uber’esque processing
• A good point was made by a panellist whereby the feeling is that the solution should be agnostic and the consumer should be free to be a customer of anyone anywhere rather than the closed loop locked in approach proposed by the likes of Chase Pay, Walmart, PayPal etc. Samsung is taking this open approach but the US vendors seem to be focussed on lock-in on customers
• The key seems to be to adapt to existing infrastructure and layer the mobile solution on this rather than requesting retailers and banks to modify their POS and host software to cater for the specific payment solutions. Successful wallets depend partly on the technology but primarily on the marketing so long as the substance is there and the solution is widely accepted and most importantly, customer value is provided

Fireside chat with Frank Bisignano, Chairman & CEO First Data

• Known as the fixer who comes into organisations to correct and turn them around and stated that it is easier to fix something in a growing industry rather than a shrinking industry
• Clover, their primary product, has been successfully deployed in the US and the belief is that there is more to come on the success of this product. As a business owner you’ll be able to monitor all the transactions and change prices from mobile at home. It is primarily based in the US but First Data have presence in 35 countries and have 40k merchants are already up and running in Brazil
• They came to realise that they were not making use of any of the data they were processing and were effectively throwing it away. Clover now enables this data for the merchants and provides MI and analytics inclusive of competitor stats

Thinkathon debate – Has the time come for a universal, financial ID?

Those arguing for
o We should live in a world where consumers have access to all their financial data and not only by approval of a Bank Executive. By issuing a token to the account, this can enable numerous providers of solutions
o EMV did not solve the problem for the consumer and porting phone numbers is a good example of how a universal ID can provide a common account number
Those arguing against
o It is missing a consumer mandate and will be a political nightmare to deploy. Given that EMV has taken 20 years to implement in the US, building a solution of this complexity with standardised account numbers would be a bridge too far
o Trying to standardise on an account number across multiple institutions would be impossible but, utilising technology such as Facebook Connect would enable the porting of your information across the web which could be a technique to consider
o The idea is great, like teleportation, but trying to make it happen through so many complex systems would need some level of central authority/dictator to drive this

Thinkathon debate – Will technology make a dent in financial inclusion in 2016 and if not, why and what, if anything, should be done about it?

Those arguing for
o The enablers have been set around the world where the number of cell phone subscriptions almost outnumbers the number of people. Increased transparency will enable
Those arguing against
o A payment is an exchange of value and you cannot separate human behaviour from the transaction. Applied forces of order, trust, sovereignty and human behaviours such uniqueness, purpose and hope are not taken into account in technology
o Using big data on a variety of sources would enable scoring of more candidates that would traditionally be excluded from financial services but within 2016, this would not be possible to deliver at scale

Implications of Exponential Tech – Innovation, Disruption & Opportunities

• Human development around thinking has been local and linear over the past 150k years and is now an exponential trend to technological developments where it is virtually impossible to keep up. Kodak went bust because they didn’t understand the exponential thinking whereas Instagram did
• Every industry gets disrupted but the ones that succeed are based on the exponential technology and thinking that goes with it. We need to take exponential steps, not linear steps whereby we double every step
• Moore’s law is driving exponential growth whereby the number of transistors doubled every year – 100 billion fold improvement in 40 years
• AI will be transforming every industry especially the financial industry by utilising the power of big data

Round table session on Exponential Tech with:

Peter Diamandis – Chairman/CEO – The X Prize Foundation – Singularity University – Entrepreneur, Innovator & Futurist
Douglas Brown – Senior Vice President & General Manager – FIS Mobile
Janet Estep – President and CEO – NACHA— The Electronic Payments Association
Don Frieden – Founder and CEO – P97 Networks
Mark Heimbouch – Chief Operating and Financial Officer – Vantiv
Julie Loeger – EVP, Chief Marketing Officer – Discover Financial Services
Niki Manby – COO – Citi Ventures

• It’s about innovating at scale and changing the game to match the changing ecosystem and run faster than the competition
• Experimentation is not something confined to specific cells and pockets within the organisation but needs to be embedded within the whole organisation
• Regulation is often used as a blocker to innovation whereas start-ups don’t appear to experience the same constraints
• The trend is that half of innovation is through organic build out and the balance is from partnering with start-ups/fintechs
• We are heading to a point where the payment is invisible
• The focus is now on data and how to make it more valuable and exposing that data to the clients to attract more customers
• Moving to personalisation of the payment experience and taking the card out of the equation
• Machine learning and customer driven AI needs to drive ease and convenience but more importantly using data to help customers and not hurt customers
• Question – would you be prepared to open up the channels to data for use by the customer and/or 3rd party – after debate, with agreement from the customer and the purpose of usage then potentially they would consider

Fireside chat – Sridhar Ramaswamy, SVP Ads & Commerce, Google

• Their goal is to help people find things they are looking for and this is what drives him and his team and this is genuinely about enabling commerce but they have no intention of becoming a retailer themselves since they have a duty to the customer to show all available options and cannot be aligned to specific merchants or drive the customer to a specific deal
• There needs to be a ‘spark’ within the payments industry and specifically the mobile solutions that makes it exciting to utilise and becomes a community experience similar to Waze, the community based traffic reporting
• Gmail has a billion users and the intent is to use Gmail to process payments and they’re aim is to look at new value opportunities and business models
• It’s about creating experiences using existing technologies such as beacons NFC etc. that redefine the customer experience and check-out type processes

To read more about Innovation Project 2016, visit the website here

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