Sample Issue www.vrl-financial-news.com
We know where you spend
Government benefit prepaid card
programmes increasingly being
used to track and control spending
● Strategy: HSBC Merchant Services goes transparent
● Conference report: Cards & Payments Europe
● Analysis: mobile payments
● Country survey: Norway
Cards International comment
contents from tHe editor
02-03 news analysis
04-05 Us delinqUencies falling
Analysis, insight, intelligence
s delinquencies continue to
fall. We report on the latest
trend in collections Thank you for downloading this sample
issue of Cards International magazine. The
06 strategy: HsBc mercHant
services goes transparent content is a compilation of articles that have
ransparency in interchange
T appeared in the publication over the past six
fees is a delicate topic. HSBC months.
Merchant Services, a division
of Global Payments, has begun
We have tried to give you an idea of the
detailing the various charges on breadth of topics we cover – from merchant
the bills acquiring strategy through to mobile pay-
07 german prepaid ments consumer trends – and the depth in
erman regulators resist new
G which we cover them.
payment technologies and
declare war on e-money
saving the best…
08-09 regUlation: intercHange I am confident you will find the material in
in tHe Us this publication useful. But that said, please
The delay in the Federal bear in mind we keep the best material for
Reserve’s debit interchange
rules may indicate it is feeling our paying subscribers. Our country surveys contain a unique level
the heat from its opponents. They are truly at the heart of what we of insight into specific cards and payments
Charles Davies investigates
deliver. As journalists, we do not answer to markets, with the latest data informing seri-
10-11 analysis: moBile payments advertisers or sponsor, just our readers. ous analysis by our highly experienced edito-
new report seeks to identify
A We see our subscribers as investors – rial team.
the mobile payments adoption stakeholders – and we pride ourselves on
barriers and opportunities
delivering excellent value, and a healthy find out more
12-13 news analysis: emv in return on that investment. If you have a serious interest in subscribing
In a world where news and opinion are to Cards International, we would be very
he roll out of EMV chip free, and anyone with an email address can happy to talk you through our plans for the
technology in the US has been
a long time coming, but Visa’s call themselves a publisher, we have recog- coming months, so you can be confident you
recent announcement finally put nised that value lies in analysis, insight, infor- will see a return on your investment in us.
forward a timeline for migration mation and data gathering. I look forward to speaking to you soon.
14-15 cards & payments eUrope We don’t simply print the news, we take it
2011 apart, analyse it, develop the stories and talk James Ratcliff
e look back at the highlights to the people whose opinions really count. email@example.com
from this year’s European
16-18 coUntry sUrvey: norway
Total card spending in
Norway has grown at
a compaund rate of
10.4% over the past
five years, placing it
among the fastest-
growing cards markets
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www.vrl-financial-news.com 2011 y 1
news Cards International
Equifax, FICO in joint analytics development deal
Equifax and FICO sign agreement for the UK banking market to enhance consumers’ reliability to pay back debt
In the first step of the joint strategy, the conditions. in line with changes in marketing condi-
analytics tool will assess consumers’ ability It will be an addition to Equifax’s RN4 tions”.
to handle credit, analyse individual circum- suite of risk scores, and FICO, meanwhile, The utilisation of credit cards is going back
stances and subsequent changes in a con- will further develop its own suits (FICO up, he said, and there is a credit gap – between
sumer’s risk profile under different macr- Credit Capacity Index and FICO Economic how much the individual consumer is demand-
oeconomic conditions. Impact Index). ing and what the bank is willing to supply.
According to FICO, the core goal of the The deal is expected to spur what FICO Consumers are unable to take out secure
alliance is to enable banks using the analyt- described as “healthy lending growth”. loans, so they end up leveraging their credit
ics software to understand the risks of cus- FICO forecasted a “breakthrough for card limits, he explained.
tomer acquisition, retention and customer the UK, facilitating responsible lending “Many of the banks have been working
relationship management strategies. and helping lenders to sustain profitable to reduce those limits appropriately, but the
The new suite of analytics solutions will growth”. gap still appears. The demand is not neces-
assess consumers’ ability to handle credit Mike Gordon, FICO vice-president and sarily going down.”
and analyse individual circumstances and managing director for EMEA, said that Gordon says that the current volatile
subsequent changes in a consumer’s risk recent data has found a slight increase in economy has “put additional pressure” on
profile under different macroeconomic credit card risk, which he said “might be consumers to pay back their debt. <
Dynamic executes cardholders to send funds to Mario Shiliashki, senior
volume agreements card members or charity organi- vice-president and group head
sations in real time anywhere of US emerging payments at
Card processor Dynamics has in the world by using Veritec’s MasterCard Worldwide, said:
completed multiple volume mobile banking technology. “Subway’s decision to provide
agreements with card issuers in Veritec said that the technol- PayPass acceptance is a testament
the US for more than 1m units. ogy also ensures security for to the popularity of contactless
The agreements are in order to card members by receiving noti- payments and our shared goal of
unveil its next-generation mag- fication when their card is used providing consumers a faster and
netic stripe products within the in real time and they will be able president, said: “Aligning with more convenient payment experi-
US. Volume production will begin to turn a card on or off via phone PULSE as a network partner ence and a more enjoyable dining
in 2012. or internet. gives our members strong nation- experience.”
Dynamics has introduced a Veritec processes debit, pre- wide PIN POS acceptance, along
series of new products utilising paid and gift card solutions to with expanded ATM access. Barclaycard, Asda
the first programmable magnetic debit card issuers using its mobile “Our arrangement also is launch corporate card
strip including MultiAccount banking software. important as it ensures our mem-
which allows users to select an bers’ debit card programmes are Barclaycard and Walmart’s UK-
account by pressing a button on PULSE and Net signs in compliance with the Durbin subsidiary Asda have launched a
the face of the card. POS and ATM deal Amendment’s prohibition on corporate trade card.
network exclusivity arrange- The Asda trade card links SMEs
Veritec signs deal with Debit and ATM network PULSE ments.” to a single account and offers up
Lifestyle Wireless has signed a long-term accept- to 56 days of interest-free credit,
ance agreement with NETs (Net- MasterCard PayPass Barclaycard’s full online account
Veritec, a developer of mobile Works). provides contactless management systems to track
banking debit card solutions, NetWorks, a electronic funds payments for Subway spending in real-time, and gives
has signed an agreement with transfer services, will be install- access to VAT reporting for cer-
the mobile marketing agency ing more than 1,400 of its ATMs Sandwich chain Subway is to tain merchants.
Lifestyle Wireless to market in the Midwest to accept PULSE, accept MasterCard PayPass pay- Katie Walley from Asda Finan-
debit cards. Discover and Diners Club Inter- ments across 7,000 US locations. cial Services said SMEs make low
Washington-based Lifestyle national cards. By the end of the first quarter value, high volume purchases, but
Wireless will market Veritec’s NetWorks will also be able to of 2012, consumers will be able lack a method to track spending
on-off debit card to the banked expand ATM acceptance through to pay by tapping a MasterCard and purchasing. She added that
and un-banked population. PULSE’s 380,000 US ATMs. PayPass-enabled card or device at the card would make tracking
The on-off debit card enables Cathy Morrissey, NetWorks the register. spending easier. <
2 y 2011 www.vrl-financial-news.com
Cards International news
n top 5 most read articles tHis montH at www.cardsinternational.com
American banks face the German Banking Industry provided to the merchant. mobile service applications.
antitrust investigation Committee (GBIC) to launch a The app is being trialled with
co-branded card. Recreational Equipment, an Central Bank of
Bank of America and other JCBI will launch the card in outdoor equipment retailer. It is Azerbaijan mulls safer
major banks face an antitrust conjunction with girocard in currently available to iOS users, card infrastructure
investigation following the 2012 in Germany. The GBIC but an Android compatible ver-
introduction of debit card usage consists of five of Germany’s sion will be launched in the near
fees to make up for revenue banking associations includ- future, said developer Venturo. The Central Bank of Azerbaijan
losses due to the impact of the ing the National Association of (CBA) has held a workshop in
Durbin Amendment. German Cooperative Banks; the GlobalPlatform: new association with MasterCard
The investigation was called Association of German Banks; admin protocol for Worldwide on the topic of card
for by five US House Demo- the Association of German remote management fraud in the country.
crats who claim banks worked Public Banks; the German Sav- The CBA said that the Fraud
together improperly to charge ings Banks Association; and the GlobalPlatform has published a in Payment Cards Market work-
their customers monthly fees for Association of German Pfand- single, standardised administra- shop aimed to develop a stable
using their debit cards. brief. tion protocol for mobile service infrastructure within the indus-
Peter Welch, US congressman providers to develop and deploy try and said risk management in
for Vermont, said in a letter to US Bank launches remote management platforms. e-commerce was the key topic.
Attorney General Eric Holder: mobile credit app The protocol helps users man- Prepaid cards in particular are
“The result is that banks, which age apps via secure elements on in high demand in Azerbaijan, as
normally compete, agree not to US Bank has launched a mobile mobile phones. well as in the Ukraine, Armenia,
do so when it comes to swipe fee app that allows users to apply Gil Bernabeu, technical direc- Georgia and Kazakhstan due to
prices and instead accept fees for and receive on-the-spot tor of GlobalPlatform, said: “A a high number of foreign work-
centrally determined by Visa credit for in-store purchases. standardised approach, which ers in Russia who send funds to
and MasterCard.” The user can apply for a vir- enables one administration their families.
tual credit card using the app platform to remotely manage Money transfer companies
JCBI and GBIC release and get an instantaneous deci- applications across all kinds of sent RUB9.9bn ($315m) to the
co-branded card sion. Once approved, the user secure elements, will stimulate above mentioned countries in
receives a virtual credit card via the mass deployment of secure 2010, thus driving demand for
Japan’s JCB International their smartphone which contains elements within mobile phones, secure payment and remittance
(JCBI), has teamed up with account information that can be and subsequently more secure services. <
n otHer news in Brief
earnings income by 32% over the year ago prompted to enter a PIN before 60% of Canadian merchants stat-
AmEx Q3 net income period to $322m. completing a transaction. ed they would adopt an m-pay-
up 13% Y-o-Y There was also a decline in pro- ments solution within the first
visions for loan losses within the tecHnology three months of introduction.
American Express (AmEx) has US Cards Services division, which Moneris launches
reported a net income of $1.23bn almost halved from a year ago to payment app innovation
in the third quarter of fiscal 2011, $143m. ATM P2P payments to
13% higher than the year-ago Canada-based credit and debit be launched in US
quarter. contactless card processor Moneris has
For the nine months to the MasterCard, Etisalat launched an app for merchants A joint venture between PayPal,
end of September, net income launch NFC in UAE to accept credit card payments on S1 Corporation and NCR is to
amounted to $3.74bn, a 25% their smartphones. offer real-time P2P payments via
increase from the corresponding MasterCard Worldwide has The e-Select plus Mobile App ATMs.
period last fiscal year. Net income signed a strategic deal with UAE- allows merchants to obtain real- The service will allow users
from US Card Services in the based telecommunication provid- time authorisation on transactions to transfer money directly from
third quarter rose 23% over the er Etisalat to launch contactless as well as send email receipts and their bank account via an NCR
year-ago period to $733m, while mobile payments in the UAE. generate reports on transaction SelfServ ATM to the recipient’s
third quarter net income from its Etisalat will provide NFC-sup- history. The app is aided by the PayPal account which will be
International Card Services divi- porting smartphones, which will Moneris card reader which can identified by their email address
sion soared by 53% to $221m. enable consumers to use them be plugged into the smartphone’s or mobile phone number. It will
Global Commercial Services as mobile wallets and link their audio port. offer instantaneous payments to
reported a 31% year-on-year MasterCard accounts to their A survey by the Moneris Advi- recipients in over 60 countries.
increase in net income to $197m mobile phone. sory Board found 57% of small NCR expects to launch the
and AmEx’s Global Network But unlike in most other business owners described their service in the first quarter of
and Merchant Services divi- contactless payment cases, con- mobile device as a vital asset in 2012. It will be initially available
sion increased third quarter net sumers using this service will be the running of their business and to consumers in the US. <
www.vrl-financial-news.com 2011 y 3
analysis: credit card delinqUencies Cards International
Credit cards: return to health?
The latest data on credit cards by Equifax shows that delinquencies have fallen, subprime card accounts
have increased and banks are issuing more cards over all. The levels are nowhere near as high as those
before the recession – but are banks returning to old tricks already? duygu tavan reports
quifax’s latest credit card data shows factors. The contraction in credit limits and n card nUmBers
that delinquencies and credit utili- loan values during the recession, combined new credit cards acounts opened in the
sation have fallen, more prime and with a focus away from lower score, higher year-to-august, 2006-2011
subprime credit cards are issued and risk prospects are paying dividends in terms
credit limits have increased in the last year. of reduced delinquency and subsequent pro-
Is this something to worry about – or does visions.
it prove that the industry is returning to “There is a lead time for the effects to
health? emerge and the positive impacts of these
have now emerged,” says Schratz.
delinquencies fall Utilisation rates have remained relatively
Delinquency rates have not stopped declin- flat, between 24-26%. There was a big jump
ing both on a month-on-month and year- in utilisation in 2008 due to credit tighten-
on-year basis since August 2010. The rate ing by the banks and, consequently, utilisa-
of decline slowed down and decreased since tion rates soared.
May (see top chart, p5). After a peak in February 2010, when the
This does not signal a negative trend, utilisation rate surpassed 26%, credit usage
however, it may simply mean that tighter began to fall again.
credit and risk controls by banks are becom-
ing more and more efficient, thus leading to more prime and subprime cards
fewer delinquencies. The number of new credit card accounts
The delinquency rate as of August was opened by the end of 2010 was 2.8%
2.63% and Equifax senior vice-president higher than at the end of the prior year and
Michael Koukounas says this is “near pre- amounted to almost 33m.
recession levels”. This signals the return in confidence Source: Equifax
John Schratz, managing director of Eclipse among banks, as in the 12 months to year-
Enterprise Consulting, agrees. end 2009, the number of credit cards issued to August 2006, but, again, the return to
“This is likely the result of a number of had slumped by 42.3% to just 32m. growth signals further positive metrics.
n credit limit comparison This figure was less than half of that at
year-end 2006. The year-end 2010 figure of return to ‘old tricks’?
difference in credit limits between
33m credit cards is still less than half the These statistics may suggest a ‘return to old
pre-recession/recession years and 2011
amount opened at year-end 2006 – but the tricks’: in light of regulatory changes, have
year-on-year volume growth certainly initi- banks begun to issue more credit cards to
ates an optimism among issuers. discourage the use of debit cards?
The year-to-August figures support this Schratz doubts that.
optimism as the number of cards issued “I don’t think the data specifically points
by August 2010 was 9.7% higher than the to this,” he says.
corresponding period in 2009. The growth “After austerity measures imposed during
trend then accelerated in the 12 months to the recession and the subsequent reduction
August 2011 (see chart, top right). in both delinquency levels and write-offs
Unsurprisingly, the volume of credit cards achieved and card origination during that
issued to subprime borrowers had slumped period, card issuers relaxed underwriting
by 60% to 7.5m accounts in 2009. By year- criteria.
end 2010, this figure had risen by 12.4% “This resulted in growth in new cards
to 8.5m. issued.”
Banks have since tuned their focus on sub- Consultant Paul Lucraft does not see a
prime borrowers again and new subprime direct link between the dramatic increase
credit card accounts opened in the twelve and banks’ anticipation of the effects of
months to August 2011 soared by 64% to new legislation, simply because the increase
5.4m. is coming from a very low base.
This figure is of course a far cry from the Lucraft does not cancel out such a possi-
Source: Equifax 12.6m new accounts opened in the year bility, but emphasises that because the new
4 y 2011 www.vrl-financial-news.com
Cards International analysis: credit card delinqUencies
legislation has not taken effect at the time n 60+ day credit card delinqUency rates
Equifax compiled the data, any possible year-on-year change in delinquency rates august 2010-august 2011
impact it may have on credit card issuing is
unlikely. Rather, he adds, it was the CARD
Act that curbed “irresponsible lending.”
This viewpoint is supported by Koukou-
nas, who says “risk managers are extreme-
ly” conservative nowadays.
“The ways used to drive growth in 2007-
2008 – those would not work anymore due
to the changes in regulatory and risk man-
agement,” he explains.
“What we are seeing instead is a reaction
to the improved performance of consumers
paying off their debt.”
limit for new cards
As of June 2011, the limit for new credit
cards was almost a third higher than the
corresponding period a year ago.
It remains to be seen whether the year-end n card limits n card limits
figure will return to positive metrics, too – it credit card average limit, June 2006-June 2011 subprime card ave. limit, June 2006-June 2011
is not unrealistic to assume so.
While the average credit limit for both
prime and subprime segments is still
nowhere near pre-recession levels, the year
to June 2011 figures confirm a steady return
to those levels is under way.
The credit card limit for subprime bor-
rowers fell dramatically in the 12 months
to year-end 2008 and 2009, by 33.2% to
$27.8bn and 69.7% to a meagre $8.4bn
Between fiscal 2009 and 2010, this
decline slowed down to 3.9% year-on-year
to $8.1bn (see chart, bottom right).
Given the trends obvious in the year-to-
August metrics, however, it is highly likely
that credit limit for subprime borrowers will
increase by the end of 2011. Already, the
limit in the 12 months to August 2011 has
soared by 69% to $5.4bn.
Another key metric to highlight is the n new sUB prime credit card limit n new sUB prime credit card limit
percentage of the average subprime credit year-to-June new credit limits, 2006-2011 year-end new credit limits, 2006-2010
card limit compared to the prime credit card
average credit limit.
The average subprime credit limit in 2006
was 34.5% of the average credit card limit.
In 2007, this metric fell slightly, to 32.3%,
but grew to 34.8% in 2008 (see chart, mid-
This indicates that financial institutions,
at that point in the recession, had not curbed
credit limits to subprime borrowers yet.
They did so in 2009, when subprime aver-
age credit limit was 27.6% of the average
credit card limit. This declined further to
24.8% in 2010.
But here is the interesting metric – and
one to look out for in the months to come.
Average subprime credit limit as of June
2011 was 27% of the average credit card
limit. < Source: Equifax
www.vrl-financial-news.com 2011 y 5
news Cards International
40% of e-tailers reluctant to use 3D Secure
Some UK retailers fear the extra step will lead customers to cancel purchases, writes dursaff ibrahim
The second e-business benchmark report by eliminate fraud for businesses. The pass- n fraUd prevention tools
Sage Pay surveyed over a 1000 businesses word and PIN code for 3D Secure is not which fraud prevention tools do you use?
that run e-business operations and found written anywhere on the card. Therefore, it
that e-tailers were spending £430 ($688) provides greater security than the CV2 Code
each on average in fraud prevention, with because it is not printed on the card. Busi-
63% using 3D Secure as a fraud prevention nesses are slowly but steadily realising the
tool. effectiveness of 3D Secure.
Other figures revealed that 88% of retail- “If there are a lot of steps in the check
ers offering their services online are worried out process it may stand in the way of com-
about internet security. pleting a transaction because there are more
More than a third of e-tailers said they opportunities for something to go wrong,”
had lost revenues in the past. With the con- Black says.
tinuing rise of online sales volume, having a “When 3D secure was introduced it was
simple but efficient payment mechanism is an additional step that popped out in a new
therefore essential. window since then some companies have
This is what 3D Secure, the online managed to embed the stage into the same
authentication that is verified by Visa and checkout.”
MasterCard providing fraud screening, aims
to achieve. 3D Secure, introduced in 2001, simple, efficient check-out process
adds another stage to the payment process, essential
leading merchants to resist implementation Making online sales and purchases simpler Source: Sage Pay, e-business benchmark report
for fear of losing online sales. for customers and more secure for mer-
chants is essential- especially considering done to make it much clearer to the con-
secure, yes, but merchants worry about the value of online purchases has risen by sumer what they need to do next,” Black
sales reduction 14% to £5.2bn in the 12 months to August, argues.
The additional check-out step with 3D according to research by Capgemini. “Depending on what budget you have
Secure may lead to drop-outs because con- Therefore, Black argues, the 37% of got and what your payment provider can
sumers may get distracted and forget what e-tailers that do not use 3D Secure are not offer you, you can fully still integrate the
they were doing when making the purchase, seizing opportunities to improve customer web pages but still outsource your whole
resulting in an uncompleted or cancelled experience – such as making sure the pay- process.”
transaction. ment type are presented clearly and ensuring Fraud is a big issue for many online busi-
According to Simon Black, managing there is a flow from putting goods in your nesses, which explains the emphasis that is
director at Sage Pay, this is the reason why basket to entering your bank details to make placed on security strategies by payment
37% of e-tailers still do not use 3D Secure. the purchase. gateways. With the introductions of the
In fact, 80% of e-tailers said they used CV2 “High-performing businesses do focus on fraud prevention tools, it seems there is yet
as the main tool of preventing fraud. customer experience including the payment to be a single, successful method of provid-
But he argues that 3D Secure can almost pages and that there are things that can be ing a complete protection against fraud. <
Verizon: Most businesses Green Dot joins PCI SSC
yet to comply with PCI DSS
Green Dot, a prepaid financial security officer of Green Dot,
Most businesses that accept cred- that the lack of PCI compliance services company, is the latest said: “Green Dot has always
it or debit cards are still strug- continues to be linked to data member to join PCI Security made security a priority.
gling to comply with PCI DSS, a breaches. Standards Council (PCI SSC). “We see our membership
report by Verizon has found for Wade Baker, director of risk PCI requires the involvement in the PCI Security Standards
the second year in a row. intelligence, Verizon said: “We of merchants and service pro- Council as a way to further
The Verizon Payment Card believe that compliance with viders that process or transmit demonstrate our leadership in
Industry Compliance Report PCI standard will ultimately payment card data to adhere to the industry.
shows only 21% of organisa- improve the security posture information security controls “We are a company fully
tions were fully compliant during of all organisations and, in all and processes that ensure data committed to implementing
the audit. likelihood, lead to much fewer protection. critical information security
The findings also suggests breaches.” < John Coffey, chief information policies.” <
6 y 2011 www.vrl-financial-news.com
Cards International analysis: german prepaid
Legislative threat to prepaid in Germany
The German banking and payments landscape is often described as conservative. While its neighbours and
the emerging markets in Europe are adopting new payment technologies fast and declaring war on cash,
the German regulators resist new payment technologies and declare war on e-money. duygu tavan reports
hen the second e-money directive efforts to reduce bureaucracy, and that the PrePay Solutions, agrees the KYC process
(2EMD) was issued in April, the required role for an AML commission will at the till point makes it a too complex and
German Finance Ministry inter- only increase costs without actually effec- costly business case.
preted its requirements in its own tively fighting money laundering. “AML regulation is being localised across
way and introduced AML legislation that ZDH is, according to a spokesperson, Europe, but there needs to be a common
destroys any opportunities in general pur- against the legislation “in its current for- spirit,” Coccoli says.
pose reloadable prepaid products in Europe’s mat”. The spokesperson argues that, if for “The solution would be no KYC at the till
biggest economy. instance, an independently-run bakery wants point and monitoring buying behaviour. If
Germany’s AML laws make what is a to issue prepaid cards, it will still need to somebody buys 10 cards, that is not normal.
growing and viable business case a complex apply KYC procedures – even when the card If the merchant sells those 10 cards, they will
and costly one: Non-finance institutions, is in a closed-loop system and obviously has be held accountable to prove anti-money
such as estate agents, casinos, solicitors, pet- no high-value stored on the card. laundering actions.
rol stations, bakeries and even supermarkets, So if a drug dealer decides to pay back its “We would have to report the merchant
are just as much affected by them as are non- distributors with a prepaid bakery card, it and they would be called upon by the finan-
bank e-money product and service provid- technically is money laundering. But, what is cial regulator and lose their licence.
ers. the likelihood of such a scenario? “The chances of money laundering are
The local legislation requires prepaid card Michael Mueller, group CEO of paysafe- limited. PrePay Solutions runs a system that
distributors to comply with KYC stand- card.com and member of the Prepaid Forum monitors how many cards are bought at
ards and record and archive the consumer’s Deutschland (PFD), argues that the legisla- once – one would have to have a very clever
information for five years – regardless of the tion “clearly violates” the 2EMD and criti- scheme, such as buy one card a day and top
top-up value. The legislation also requires cises its lack of differentiation between pre- it up to its limit.
companies with more than nine employees paid issuing and distribution. “But if KYC takes place at the till, it is
to appoint an AML commissioner. “The issue is that if an e-money institution impossible to do business with prepaid.”
Germany’s home-grown AML legislation issues a gift card, for instance, it needs to The issue of prepaid clearly goes beyond
restricts prepaid more than the regulations comply with KYC standards,” he says. security – it is an issue of banks versus non-
in other countries. “If a bank issues gift cards, there is no such banks.
The issue is this: If the e-money provider is obligation. Banks are not yet regulated in “Not one bank is a PFD member. They are
not based in Germany, the regulator cannot that way. So e-money institutions are treated pretty happy with the law,” Mueller argues.
control them. But it can put very restrictive differently.” “The real reason behind the law is that a lot
legislation in place. Mueller argues the Finance Ministry “actu- of e-money distribution takes place via non-
It seems to be more a case of political, ally knows very little about prepaid. They do banks. There will be exemption of the law
rather than security issues. One source says not understand it and do not want to”. for the German Geldkarte – so there is clear
the German Finance Ministry has even “The regulator based its arguments on the evidence that the AML legislation has any-
approached its French and Benelux coun- outcome of the FSCS report which found thing to do with AML. It is political.”
terparts to convince them to adopt “a harsh that Germany had to tighten its AML regu- But the ZDH spokesperson believes the
regime” – to no effect. As the popularity of lation,” he adds. “However, the report did problem does not lie directly with the banks.
e-money rises, elsewhere Germany seems to not specifically refer to money laundering via “It lies with the opinion of the Federal
be shooting itself in the foot. e-money products. Criminal Agency and the Law Enforcement
“They argue prepaid cards can be used for Agencies who think that every little e-money
criminal intent crime. But we oppose that. Statistics show value can serve as money laundering” the
Industry stakeholders clashed on 19 Octo- money laundering crime has gone up from spokesperson say.
ber at a public hearing in the Bundestag. At 11,000 to 40,000 in the year to end-2010. Coccoli highlights the relatively low thresh-
the hearing, a Federal Criminal Police rep- “E-payments crime has risen from 64 to 90 old limit for prepaid cards and argues that
resentative described a horrific scenario in and prepaid is a tiny fraction of this. So there the risk of money laundering is relative low.
which prepaid cards appealed to criminals is no evidence for prepaid crime. There might He warns: “If this legislation kills prepaid,
and argued that so far, only a fraction of the be a risk of money laundering, but there no it could weaken the economy. Prepaid replac-
prepaid crime that is possible, has occurred. clear evidence. If there is a risk of cash out es cash securely and is an efficient tool for
The counter argument came by the Ger- and e-money transfers, then there should be fund distribution.”
man Confederation of Skilled Crafts (ZDH), verification when that money is redeemed or But, the ZDH spokesperson highlights, the
which argued that the collection of KYC transferred,” says Mueller. Finance Ministry is not interested in the eco-
data went against the German government’s Gilles Coccoli, managing director of nomic impacts of prepaid. <
www.vrl-financial-news.com 2011 y 7
regUlation: intercHange in tHe Us Cards International
Life after interchange
The delayed release of the Federal Reserve Board’s final debit interchange rules indicate it might be
feeling the political heat. But while this intrigue is far from over, it is not too early to envision what the
US payments landscape might start to look like, says charles davis
egislative efforts to introduce a two- Since banks earn money from each card n cHanges in visa and mastercard
year delay in implementing the Fed’s swipe, increasing card use has meant increas- domestic credit card intercHange fee rates
new regulations have opened a new ing costs for merchants. But it is not just the numbers and average rates – 1991 and 2009
front in the interchange wars. On the card use that has gone up. The cost to mer-
Fed’s radar is TCF Bank’s lawsuit seeking to chants for each card swipe has grown, too. changes in rates from visa mastercard
1991 and 2009
block implementation of the Durbin amend- Exactly how much it costs banks and the
ment as an unconstitutional infringement of card companies to process a debit card pur- Number of interchange 4 4
its right to recoup the costs of providing debit chase varies based on whether a consumer rate categories in 1991
services. uses a PIN-based debit card or a signature- Number of interchange 60 243
Still, the consensus holds that the Fed is tak- based debit card. Since 2000, many PIN debit rate categories in 2009
ing its time to try to find a workable solution cards have adopted a fee that is a percentage Range of interchange 1.25 to 1.30 to
– one sure to infuriate the larger debit issuers of the value of the transaction. rates in 1991 1.91 2.08
in the US but one sturdy enough to withstand Range of interchange 0.95 to 0.90 to
the inevitable wave of litigation to come. are schemes to blame? rates in 2009 2.95 3.25
Under the Fed’s proposal, announced in Critics of interchange blame the competition Percentage of rates that 43 45
December, interchange rates for debit cards between MasterCard and Visa for driving up increased
would be capped at 12 cents per transaction fees, in part because their business interests
Percentage of rates that 45 45
for issuers with more than $10 billion in assets are more aligned with banks than with retail- stayed the same
– a huge drop from the current average of 44 ers, yet banks and the card associations say
Percentage of rates that 12 10
cents. the increases reflect the true cost of mitigating decreased
Retailers welcome the Fed’s proposed risk and switching transactions.
Source: US Government Accountability Office
cap, saying debit fees have forced them to The debit processing fee helps pay for the
raise prices. Consumer advocates say these electronic network that authorises, clears
higher prices are being borne by all custom- and settles each purchase. Banks claim it also rules – an ambit widely seen as the best bet,
ers, whether they pay with plastic or not. And helps defray the costs of fraud, fraud preven- politically speaking.
banks say a cut in fees means they may have tion, data security, customer assistance and
to make up the revenue by taking away free disputes, and debit card production. anti-competitive landscape
checking accounts and other services. The associations have spent most of the TCF argues that the amendment’s exemption
Banks, retailers and consumer advocates past decade fighting off a never-ending legal in the law for banks with less than $10 bil-
have all played outsized roles in the regula- onslaught. The Justice Department and mega- lion in capital creates an unlawful advantage
tory saga, but none play a role in setting the merchants like Walmart won concessions on for smaller banks, which will use their higher
actual processing fees. That is the province of grounds that Visa and MasterCard’s behav- interchange revenue to offer higher rewards
the card associations, whose interchange rules iour has been anti-competitive. and poach customers from the big banks.
are the subject of yet another massive lawsuit The associations agreed in an October 2010 That position seems to undercut the strong-
by dozens of the US’ largest retailers. settlement with the government to stop pro- est argument for a delay, namely that competi-
Retailers and consumer groups are infuri- hibiting merchants from offering discounts to tion will drive debit interchange fees down to
ated by the fees that banks charge retailers customers who use a card that carries lower the nonexempt level. Let market forces work,
for debit transactions, which have risen to interchange fees. argue proponents of a delay, and fees will
that 44-cent average from an average of seven The associations have consistently defended drop to levels that will remove any need for
cents in the past decade, according to Federal themselves by arguing that consumers have price controls.
Reserve Bank statistics. a multitude of payment options from cash, Overwhelmed by more than 11,000 public
Interchange might very well be viewed as a credit and cheques to a host of emerging alter- comment letters and one of the most impres-
victim of the success of debit cards. According native payment methods. The central legal sive lobbying battles in the nation’s history, the
to the Fed, debit card purchases now repre- fight – the lawsuit filed by a consortium of the Fed missed its 21 April deadline to issue a final
sent about half of all consumer purchases in nation’s largest retailers – has been mired in rule on the interchange fee cap. But the Fed
the US, while paper cheques account for 30 pretrial motions since 2005, but has still cost recently said it was committed to completing
percent. Shoppers used debit cards nearly 38 all parties dearly in time and money. the rulemaking before 21 July. Because of the
billion times in 2009, up from about 15 bil- As for the TCF lawsuit, observers said that way the Dodd-Frank law was written, if the
lion times in 2003. With that volume of the it faces long odds and appears to be working Fed does not issue a final rule by that date, its
market, retailers say they have no choice but against the best arguments in favour of those proposal to cap the swipe fee at 12 cents will
to accept debit cards. seeking a delay in implementation of the Fed become law.
8 y 2011 www.vrl-financial-news.com
Cards International regUlation: intercHange in tHe Us
In the meantime, bank lobbyists are racing left will be to shift these costs to consumers or n intercHange
to build bipartisan support for a Senate bill cease providing debit cards, said ABA Presi- estimated components
that would effectively kill the swipe fee cap by dent Frank Keating.
delaying it for at least two years. That would send larger issuers into a fee- Network brand 3% Network processing 4%
The bill, introduced by Democrat Jon Tester hunting frenzy, the broad contours of which
of Montana, is supported by about 55 sena- already can be seen in some of the moves rewards rewards
tors currently – not quite enough to reach made recently by some of the nation’s largest 1% 44%
the 60 votes needed to overcome procedural debit issuers.
objections and move to a floor vote, with
time running out on a Congress eyeing a July first steps to change
recess. ATM fees are a natural pivot point for large
So, with a multitude of optional outcomes issuers seeking to recoup lost interchange rev- processing
still possible, issuers and associations are hedg- enue, a possibility illustrated by JPMorgan 9%
ing their bets on what life will look like after Chase’s recently concluded test of $4 and $5
the Fed’s rules are announced, hoping for the ATM fees for non-customers in some areas.
best – the Tester bill’s two-year delay – while While the bank has decided not to apply these
preparing for the worst. fees nationally, and reverted back to its origi- servicing 4%
In a call with analysts and reporters to dis- nal $3 fees, the trend is catching on. transaction costs &
cuss second-quarter earnings, MasterCard HSBC Bank USA started charging all non- profit margins 35%
president and CEO Ajay Banga said the customers a $3 fee in March for using its Source: Diamond Analysis
industry is unlikely to feel the full impact of ATMs. Previously, about 40 percent of its
the Fed’s rules until at least 2012. ATMs charged either $1.75 or $2.50. Wells Fargo is no longer offering its debit
Issuers “are looking at reducing the reward TD Bank used to let customers use any rewards programme for new customers.
levels on their debit card activity”, Banga said, ATM free of charge, but the bank is now JPMorgan Chase notified existing custom-
adding that many changes issuers are consider- charging $2 for customers who use out-of- ers that their debit rewards programmes will
ing would serve to limit consumers’ debit card network ATMs – unless the customer has a disappear come 19 July. The bank elimi-
use, which certainly would have a deleterious “deeper relationship” with the bank, defined nated debit rewards for new customers in
effect on the association’s bottom line. as carrying a high-minimum balance and pay- February.
“They’re looking at fees on debit cards,” ing a monthly fee of $25. SunTrust Banks also began notifying its cus-
Banga said. “They’re looking at restricting the Late payments may soon automatically trig- tomers that it will stop offering rewards on
manner in which debit cards get used, either ger dramatic interest rate increases – a move purchases with one of its debit cards starting
for large-ticket items because of concerns permitted under the new credit card reforms. 15 April. Customers will have until the end of
around fraud losses or at the bottom end for Bank of America customers who make late the year to redeem earned points.
small-ticket items.” payments on their credit cards may soon see Even smaller debit issuers dislike the inter-
The Fed’s rules are also likely to force rapid their interest rates jump by 30 percent, in the change cap. The 2011 Debit Issuer Study,
adoption of a dual interchange environment, first instance of what may become a standard commissioned by Pulse, concludes that small
with the smaller issuers exempted from the tactic among US banks. debit card issuers, including community banks
rules enjoying higher rates while the larger Beginning June 25, the nation’s largest cred- and credit unions, on average expect a 73 per-
issuers struggle under the lower rates man- it card issuer will charge a penalty interest rate cent decrease in debit interchange revenue as a
dated by the Dodd-Frank law. of up to 29.99 percent on future balances for result of pending interchange fee rules.
Visa has already announced it will support credit card customers who fail to make timely While these issuers with less than $10 bil-
a two-tiered interchange system to accom- payments. Other issuers, including Chase and lion in assets are exempt from the regulations
modate higher interchange rates for smaller Citi, are already charging penalty rates rang- proposed by the Federal Reserve Board, they
financial institutions. MasterCard has not yet ing as high as 29.99 percent. are critical of the interchange cap and skepti-
said whether it would support a two-tiered cal that the exemption will be effective.
rate structure. lowering value “The study results support broad industry
The new Fed rules could also spell the end of consensus that the proposed interchange cap
re-examining incentives debit card purchases greater than $100, or will likely affect even exempt issuers. How-
In a similar conference call discussing earn- even as low as $50. The revenue banks get ever, the impact small issuers say they are
ings, Visa executives said they are likely to from interchange fees helps to offset money expecting is greater than many anticipated,”
re-examine incentive agreements with issuing lost from fraudulent transactions. So with the said Steve Sievert, senior vice-president of
banks after the Fed announces the final inter- Fed’s proposed cap in place, banks argue they Pulse, which has commissioned the study for
change rules. won’t have the money to protect themselves the past six years.
“We will naturally, at our impetus, want to against fraud for larger transactions. Many issuers indicate they will encourage
revisit a number of those contracts to make JPMorgan Chase has said it is considering use of PIN debit instead of signature debit,
sure that the incentives are structured in a way capping debit card transactions at either $50 contrary to what many have done in the past.
that makes sense, given the legal environment or $100, and other larger issuers are sure to After implementation of the proposed rules,
that we will be under post-Durbin,” Byron consider such a move as well. with interchange rates for PIN and signature
Pollitt, Visa’s CFO, said in the call. The most obvious victims of life after an debit transactions likely being the same for
The American Bankers Association said in unregulated interchange market are debit regulated issuers, PIN transactions will have a
April that the Fed’s proposed 70 percent cut rewards programmes – popular among larger better bottom-line contribution for issuers.
in debit processing fees means banks will lose debit issuers quickly going extinct even before As all parties await the Fed’s final rules, one
money on every transaction. The only options the Fed’s rules are finalised. thing is certain: change is inevitable. <
www.vrl-financial-news.com 2011 y 9
report: gloBal moBile payments sUrvey Cards International
Retailers wary of mobile payments
KPMG’s 2011 Mobile Payments Global Survey garnered responses from almost 1,000 executives in
the financial services, technology, telecommunications and retail industries in order to identify the
mobile payments adoption barriers and opportunities. louise naughton reports
ompanies across a diverse range n Kpmg 2011 moBile payments gloBal sUrvey
of industries and regions are care- what are the prospects for this mobile payment method in your country/region?
fully watching the mobile payments
opportunity. While many are already contactless specialist
m-banking carrier billing
heavily invested in mobile payments strate- m-wallet (%)
card systems online
(%) systems (%)
gies, there is still a nagging uncertainty as
to when it will hit the mainstream, and pre- Already mainstream 15 8 39
cisely what form it will take. Will get major traction 24 41 32 28 29
KPMG’s 2011 Mobile Payments Global Early days, not sure 61 40 51 26 51
Survey has gathered research from almost
Unlikely to do well 15 3 10 7 20
1,000 executives in the financial services,
Source: KPMG 2011 Mobile Payments Global Survey
technology, telecommunications and retail
industries in order to identify the adoption
barriers and opportunities that lie in mobile best practices and processes for both retail- While nine% of those companies surveyed
payments. ers and consumers. told KPMG they see no impact from mobile
The majority of companies surveyed by “If retailers do not lead the development payments in the foreseeable future, more
KPMG have a mobile payments strategy in of mobile payments, the initial implemen- than 70% believe mobile payments to be
place – 58% – and outnumber those who tations of the technology will have a rocky very important today or will be important
do not by two-to-one. What is more, half of road to consumer adoption,” Mader says. in the future.
these already have a mobile payments offer- Companies are in agreement the technol-
ing in the market today. retailer support required ogy is in its infancy and three-quarters claim
The report has found telecom providers It is not simply about a retailer’s willingness solutions will hit the mainstream within two
to be the most likely to have a strategy in to break into the mobile space that delays to four years. Less than 10% of respondents
place, followed closely by financial services the tipping point of the technology. say mobile payments are currently main-
companies. Mader says it became evident three years stream – a belief held regardless of country
KPMG believes retailers are being too ago that some mobile payment providers or region.
slow off the mark and urges them to move were not aware of the high security require-
more aggressively to incorporate mobile ment and complexity of integrating payment Banking industry predictions
payments into their customers’ complete processing to retailer POS applications. Financial services companies have come
commerce experience in order to catch up, To order to ease this integration, ARTS out as being more conservative in their time
and capitalise on the rich opportunity they has been working on projects to define the estimates of the mobile payments explosion
are being presented with. data interfaces between payment processes when compared to telecom, retail and tech-
Richard Mader, executive director of the and the devices around it, allowing them to nology companies.
association for retail technology standards communicate in a standard method. Laura Chambers, senior director of PayPal
(ARTS) for the National Retail Federation It is argued an ARTS XML standard – the Mobile, told KPMG m-payments are main-
(NRF), agrees with KPMG and says the first truly global standard covering integra- stream today.
involvement of retailers in the evolvement tion of payment systems into the retail IT “We have seen tremendous growth over
of mobile payments is critical to the technol- landscape – will provide significant benefits the past few years,” Chambers says.
ogy’s success. to retailers. “Three years ago we did about $25m of
“Retailers need to get involved in this The ARTS XML Payments Charter, payment volume via mobile. Two years ago
emerging process to guide the development,” issued in October 2009 says: “By isolating that was $141m and last year it was $750m.
Mader says. payments business logic and technologies This year we expect to do over $3bn.
“I believe alternative mobile payments into separate and more focused subsystems, “That growth is coming from broader
provide retailers with the opportunity to retailers can minimise the ‘system envelope’ adoption in the consumer base and it’s mov-
introduce new conveniences for their cus- that requires extremely high levels of secu- ing very quickly into a mainstream consumer
tomers while creating competition with tra- rity and therefore minimise the impact of audience doing mobile payments.
ditional debit and credit providers that can supporting regulations like PCI-DSS. “Increasing smartphone penetration is one
lower service/interchange charges.” “At the same time, retailers gain flexibility driver but people trying the service out and
Further to that, new payment processors to adapt to the constantly evolving payments becoming familiar and comfortable with the
like BilltoMobile, FaceCash, Isis and PayPal technologies and regulations, while adapting process is key.”
need guidance from retailers to create the POS business logic independently.” Convenience and ease of use are touted
10 y 2011 www.vrl-financial-news.com
Cards International report: gloBal moBile payments sUrvey
as the most compelling attributes of a suc- mobile wallet will magnify both the risks and “less easy” than swiping a payment card as
cessful mobile payments strategy, and opportunities in mobile payments thanks to it requires consumers learning a new pay-
unsurprisingly they came top once again the technology allowing the payment brand- ment behaviour.
in KPMG’s survey with an 81% and 73% ing point to become an interactive process. “NFC is interesting, but in payments the
respective share of the responses. As such, Crone claims mobile wallets will winning solution will need to address the
play a pivotal role in financial services. end-to-end consumer experience and the
consumer concerns However, he warns that, as mobile wal- value across that experience in order to
Consumer concerns surrounding mobile lets can open up more than a singular funded incentivise consumers to change their behav-
payments are very evident from KPMG’s account for payment, financial institutions iour,” says Chambers.
report. Security and privacy are consistently need to aggressively work to define both According to the KPMG report, alter-
said to be of utmost concern for consumers their ‘protect’ and ‘extend’ strategies for native mobile payments solutions such as
and the payments industry when developing mobile wallets and mobile payments in par- PayPal represent a highly disruptive threat
and launching new payment technologies. ticular. to the incumbent financial services players.
There was no doubt among KPMG “If consumers embrace PayPal transac-
respondents as to what the ultimate barrier contactless concerns tions at the point-of-sale via a mobile wallet,
for widespread adoption of mobile pay- Contactless stood out as the least favourable funded directly through a bank account and
ments with 71% agreeing with their peers. mobile payments form factor among retail- transferred via ACH, the result would be
Only 26% of respondents cited the com- ers. disastrous not only for credit card networks
plexity of the m-payments game to be a con- In comparison to the full set of respond- like MasterCard, but also issuers and mer-
cern. KPMG claims this low%age indicates ents, retailers were just as likely to deem chant acquiring banks,” said the report.
overconfidence in the benefits mobile pay- contactless systems as mainstream today “Not only in lost revenue from existing
ments will bring. but were more than 10% less likely to say transactions, but also the revenue these com-
It is KPMG’s view that mobile wallets pro- contactless card solutions will gain traction panies hope to gain in displacing cash.”
vide the most exciting and promising pay- in their respective markets.
ment opportunities within the mobile pay- KPMG puts this down to the cost involved creating a niche
ments arena. with upgrading point-of-sale terminals to Crone says the big issue for financial institu-
“M-wallets provide the momentum to include the technology. This view may be a tions is that new intermediaries are trying to
move beyond payments to participate in simplification of what is a very thorny and “wedge themselves” between them and their
the entire chain of mobile commerce – from complex issue for retailers. As contactless customers.
brand awareness to consideration, followed and NFC technologies are in their infancy As such, he believes, “mobile wallets con-
by after sales, loyalty and care,” said the and haven’t caught on with the mass market trolled by non-bank, third party intermediar-
report. as yet, consumer demand is unknown and ies threaten to supersede the service relation-
However, the majority of survey respond- there is a lot of confusion surrounding the ship with the payment relationship”.
ents (61%) claimed it was still too early to fees for such transactions. Financial institutions have a choice when
predict the success of mobile wallets and Card schemes and banks have to educate evaluating their strategic options for mobile
instead chose to throw their weight behind and communicate further with retailers if wallets: to aggregate or be aggregated.
mobile banking and specialist online sys- they are to change their contactless percep- Crone fears some banks may be too slow
tems as the forms in which mobile payments tions. to mobilise and in doing so be at the risk
would thrive and gain traction in their While PayPal’s Chambers believes there of being aggregated by third party interme-
respective markets. are some “great, seamless payment experi- diaries.
As payment is the most ubiquitous and ences” that NFC can drive, she claims it is “There is a strategic tipping point affect-
powerful way to reinforce a financial institu- fundamentally “just a technology”. ing banks’ mobile platform decision centred
tion’s brand, Richard Crone, founder of con- She argues ‘tapping’ a card or mobile on addressing the ‘control’, ‘time-to-market’,
sultancy firm Crone Consulting, believes the against a contactless reader is seen as being and ‘future-proof’ trifecta of their cross-
channel self-service plans,” says Crone.
“This is not to say that third-party inter-
n Kpmg 2011 moBile payments gloBal sUrvey mediaries won’t also play a role, but the
when will mobile payments become mainstream in your industry/region? savvy banks we have worked with have come
to understand that they will need to control
financial asia- their own mobile payment offering if they are
retail telecom technology americas
all (%) services pacific emea (%)
(%) (%) (%) (%) to preserve and grow their hard-won custom-
Mainstream 9 9 7 10 6 5 6 5
today The complexity of the mobile payments
space means alliances and co-operation
Within 37 40 41 36 41 39 37 37
between financial service companies, opera-
tors, technology companies and retailers
Within 37 34 39 27 39 39 39 40
is a key path to succeed in such a dynamic
Within 13 14 10 13 12 14 15 15 KPMG’s report notes that partnerships
such as the one Google has struck with
More than 4 3 2 3 2 2 2 4 Sprint, Citi, MasterCard and First Data are
10 years emblematic of what it will take to succeed
Source: KPMG 2011 Mobile Payments Global Survey and establish dominance. <
www.vrl-financial-news.com 2011 y 11
news analysis: emv in tHe Us Cards International
Time for a change
The roll out of EMV chip technology in the US has been a long time coming, but Visa’s recent announcement
finally put forward a timeline for migration. louise naughton looks at the detail of the announcement, and
considers the implications for the US industry
isa Inc has announced its intention to n How tHings stand
speed up migration to EMV in the US,
worldwide emv deployment and adoption*
saying it is essential to pave the way
for mobile payments. region emv cards adoption rate emv terminals adoption rate
The lack of a business case, a fragmented Canada, LatAm, & Caribbean 207,715,356 31.2% 3.900,000 76.5%
market and the existence of adequate fraud
Asia-Pacific 336,602,681 27.9% 3,480,000 43%
prevention measures have all been cited as rea-
sons why the US market has not introduced MEA 23,003,747 17.6% 345,000 60.7%
EMV technology to its cards and terminals – Europe Zone 1 645,472,323 73.9% 10,500,000 89%
as reported in CI 457-458, EMV implementa- Europe Zone 2 27,516,286 12.7% 513,600 65.4%
tion: The US case.
total 1,240,310,393 40.1% 18,738,600 71.1%
For some time, the US risked becoming left
* Figures reported in Q1 2011 and represent the latest statistics from American Express, JCB, MasterCard and Visa, as reported by
behind in terms of payments standards and their member financial institutions globally. Source: EMVCo
becoming a hub for payment fraud.
The worrying thought of what the US pay-
ments industry stands to lose by not moving TIP rids merchants of the time consuming This shift is hoped to encourage chip
to EMV rather that what it costs to move, has task of annually validating their PCI Data adoption as chip-on-chip transactions pro-
spurred on development. Security Standard compliance once 75% vide the dynamic authentication data that
The majority of the global payments indus- of a merchant’s transactions originate from helps to better protect all parties.
try considers the implementation of EMV in chip terminals. “Dynamic authentication is the key to
the US as an essential move. For merchants to qualify, their termi- securing payments into the future,” said
However, Seth Eisen, a spokesperson for nals must be able to support both contact Ellen Richey, chief enterprise risk officer for
MasterCard, said that to date, consumer and contactless chip acceptance, including Visa Inc.
demand and market economics have not jus- mobile contactless payments based on NFC “Adding dynamic elements to transac-
tified a migration [to EMV] in the US. technology. tions makes account data less attractive
Visa clearly disagrees and, fed up with the In another push, Visa will also require US to steal and takes more merchant systems
delays in implementation stateside, has made acquirer processors and sub-processor serv- out of harm’s way, shrinking the battlefield
a public declaration of its intention to push the ice providers to be able to support merchant against criminals.
technology forward. The company says that acceptance of chip transactions by 1 April “The migration to chip technology will
migration to EMV contact and contactless 2013. be an important security layer and a criti-
chip technology is essential to prepare the US The card scheme plans to provide addi- cal step in a comprehensive strategy to use
payment infrastructure for the development of tional guidance as part of its bi-annual Busi- dynamic authentication across all markets
NFC-based mobile payments. ness Enhancements Release for acquirer and all channels.”
“By encouraging investments in EMV con- processors to certify that their systems can
tact and contactless chip technology, we will support EMV contact and contactless chip tried and tested
speed up the adoption of mobile payments as transactions. The US holds a key advantage over other
well as improve international interoperability According to Visa, the US is the only markets that have seen the technology rolled
and security,” said Jim McCarthy, global head country in the world that has not committed out in that EMV has already been tried and
of product for Visa Inc. to either a domestic or cross-border liability tested in many other countries around the
“As NFC mobile payments and other chip- shift associated with chip payments. This is globe and has had tremendous success in
based emerging technologies are poised to all set to change as the network will force reducing counterfeit card fraud.
take off in the coming years, we are taking the shift on 1 October 2015. George Peabody, director of consultancy
steps today to create a commercial framework At the moment, the cost of POS counter- firm Mercator Advisory Group’s Emerg-
that will support growth opportunities and feit fraud is largely currently absorbed by ing Technologies Advisory Service, notes
create value for all participants in the pay- card issuers. the potential for counterfeit EMV cards to
ment chain.” In Visa’s proposed liability shift, in those exist.
instances where a consumer presents a con- However, he claims it is currently eco-
implementation plan tact chip card to a merchant that has not nomically impractical, which is enough to
Beginning 1 October 2012, Visa plans to adopted contact chip terminals – at a mini- keep criminals from ‘bothering’ when there
expand its Technology Innovation Pro- mum – the liability for counterfeit fraud are other ‘easier’ ways to profit.
gramme (TIP) to the US. may shift to the merchant’s acquirer. Visa’s carrot and stick method to acceler-
12 y 2011 www.vrl-financial-news.com
Cards International news analysis: emv in tHe Us
n gloBal snapsHot
global emv adoption rates by region, september 2010
65.4% of cards
84.7% of terminals
11.5% of cards
61.2% of terminals
26.4% of cards
55.6% of terminals
13.7% of cards 26.6% of cards
62.5% of terminals 41.5% of terminals
ate EMV adoption in the US shows that the and advisory firm Javelin Strategy and While Van Dyke stops short of explic-
network thinks the US is ready to make the Research, James Van Dyke, is equally itly linking the phrase with Visa’s EMV
switch. impressed by Visa’s “pragmatic, compre- announcement, dangling such a phrase and
Steve Brunswick, strategy manager for hensive and strategic announcement”. in the next breath showering Visa with com-
transaction security at software provider pliments over its incentive-led path could be
Thales, sees the US EMV shift to be a posi- resistance to change seen as potentially confusing and provoca-
tive move for payments security not only for At a time where a new innovative payments tive.
the US but for the rest of the world too. start-up seems to emerge every five minutes, One industry expert said: “It is mind-
He claims Visa’s plans will reduce the the odds are stacked against any one new boggling that the US has been allowed to
instances of criminals stealing payment card payments initiative gaining critical mass – evaded its responsibilities in protecting both
data in one country and creating cloned especially in as developed and saturated a merchants and consumers for so long.
mag-stripe cards which can be used in the market as the US. “Visa is not trying to reinvent the wheel
US. Visa is no different. with this announcement; it is simply trying
Visa’s plans will also serve to focus mer- It faces the same challenge of the resist- to bring the US in line with many other mar-
chants in the US, not only on card fraud ance to change as any other, but Van Dyke kets.”
issues, but also on the currently unlocked credits the scheme for acknowledging it will MasterCard’s EMV strategy in the US is
potential of electronic payment. require specific incentives with major indus- to watch market responses to Visa’s EMV
“While some US merchants like Walmart try constituent groups to potentially change push and reconsider its migration plans
have already taken the bold move to go the industry and setting reasonable targets accordingly. MasterCard’s Eisen refused
it alone and invest in EMV terminals and for such change. to comment on whether its lack of support
infrastructure, the rest have had no clear In his comment on Visa’s announcement, will scupper Visa’s EMV plans, but it seems
vision from the card schemes on whether Van Dyke mentions the phrase “boiling the very unlikely that MasterCard will resist the
to invest in EMV to improve security,” said ocean”, referring to the practice of under- move.
Brunswick. taking an impossible task or project or The question is: how enthusiastically will
“Well, now they have.” to make a task or project unnecessarily they join the push, and whether they will
President and founder of market research difficult. follow Visa’s timelines? <
www.vrl-financial-news.com 2011 y 13
review: cards & payments eUrope 2011 Cards International
Making debit work
Debit card strategy dominated the agenda of this year’s Cards & Payments Europe Conference.
James ratcliff looks back at the days discussions and finds that there are clear ways forward for
banks looking to increase revenues from current accounts
rankfurt – the centre of European have not sufficiently communicated.” n 'casH addicts’ payment BeHavioUr
finance and the spiritual home of And it is communication that’s key here, High atm, low pos usage
the Euro – played host to this year’s particularly in Europe, where EMV implemen-
Cards & Payments Europe confer- tation has seen card fraud levels plummet.
ence. And the town that has been the back- “But if you look at consumer attitudes,
drop for some the banking world’s boldest and read the mainstream media, that is not
moves saw the European payments industry clear,” he said.
gather to discuss the significant changes the The other issue very high on the consum-
industry is undergoing. er’s agenda, when it comes to payments is, of
On the agenda this year were mobile pay- course, the convenience aspect.
ments, e-commerce, and social media listen- Naturally, debit cards create an easy way Average deposits
ing. In addition, speakers looked at how to of accessing bank accounts but a step-change
drive profits from debit as more consumers still needs to be made when it comes to mak-
turn away from credit. ing debit “the new cash”, said Olbrich:
On this subject Luke Olbrich, head of “People want the ubiquity of cash – they
debit for MasterCard Europe, encouraged want to know cards are accepted every-
banks to revisit the way they look at their where. But many merchants still do not offer
portfolios. card payments, when they could.” Time
“We need to look beyond the device, and There are a number of possible reasons
beyond the account,” he said. for this. n 'deBit lovers’ payment BeHavioUr
“Credit, debit, prepaid, deferred debit, “It could be a problem of location: transit low atm, high pos
decoupled debit – the channel to access the systems, for instance, or it could be problems
account needs to be flexible. around speed of through-put. There is also
“We need to offer a more adaptable set of the problem of how to process low-value
platforms that will allow bank customers to payments efficiently.”
choose exactly what it is they want to use.” While those are all problems that mobile
The economic crisis changed the needs of payments and NFC professes to solve for
both banks and consumers. retailers, it is not an easy sell. Retailers still
According to Olbrich, MasterCard remain to be convinced that investment at
responded to this change by commissioning the point of sale will see solid returns. So
a number of consumer surveys that continue what would drive retailers to invest?
to inform their product development work. One answer is customer information –
“When we undertook these consumer marketing and loyalty – the other is con-
insight studies we focused on speaking to sumer demand.
consumers and understanding how their “We do not always have to be led by the
needs have changed – what their attitudes consumer, said Olbrich.
are towards mobile and towards the differ- “We are in a push industry to a great
ent channels,” he said. extent. If someone had asked me 20 years Source: Bluerock Consulting
The results of those studies, he explained, ago if I would be interested in buying good
highlight four areas in which consumers through a television, I would have said ‘no’. encouraging banks to build on their debit
expressed concern. “Now the technology is in place, we are offer. But where are the profits?
able to present the consumer with a mobile Francesco Scanera, director of interna-
consumer concerns payments capability. And the consumer will tional business at Bluerock Consulting, spent
Unsurprisingly, security and fraud was at the start to look at their phones differently.” some time looking at the specific area of
top of the list of consumer concerns. driving profit from debit. While the profit is
“We are not in a remarkably glamorous improving profitability not a clear as it is on credit portfolios, there
industry unfortunately,” Olbrich said. Debit card portfolios is a particular area is still a clear revenue stream.
“When people think about payments – if banks are being encouraged to look at very “You cannot consider income streams
they think about payments at all – they want differently. simply as revenue from product fees and
their money to be safe. Return on investment in debit is hard to interchange alone,” he said.
“This is one area that we as an industry gauge but banks’ credit-wary customers are “When you are looking at profits from
14 y 2011 www.vrl-financial-news.com
Cards International review: cards & payments eUrope 2011
Digital MR; Dr
tor, DZ Bank,
Rocca, head of
cial institutions division, SIA; Gianluigi Rocca; Luke Olbrich, head of debit, MasterCard Europe; Siobhan Moore, senior associate, Salans
debit, you need to consider the fact that it loyalty counts of customer relationship management and
encourages higher customer deposits. Encouraging increased use of debit cards at marketing, and eventually retailers began to
“It has been shown that account balances the point of sale, as opposed to ATM usage agree to funding the cash back scheme.
are generally larger where the account hold- is something that all the morning speakers “We have now developed a network of
er is using debit cards over cash. The other agreed was important to portfolio revenues. 20,000 retailers, all of which were prepared
thing to consider when looking at debit in But achieving this is not easy. to fund the cost of the loyalty programme
comparison to credit is that a debit offering Having already heard that margins on as a way of building their relationship with
targets a bank’s entire base of account hold- debit are small and tricky to define, finding customers.”
ers, unlike credit.” space to add value for customer (thereby The main thing that convinced such a
In addition, even when carefully distributed increasing use) is itself difficult to justify. large number of retailers to join the scheme,
credit has obvious risk and insolvency issues Loyalty programmes are certainly not easy Leoni said, was Banco Posta’s very large cus-
that debit does not. And those factors, while to implement on debit portfolios, but Banco tomer base.
harder to quantify, do add up to real value. Posta, the banking division of the Italian “It was not easy to convince retailers that
Olbrich concurred and added: “We try post office (Poste Italiane), is one organisa- they would see a return on their investment,”
and get banks to invest in debit and we tion that has looked at this area very crea- he said. “But the key was the fact that we
have a business model for banks that clear- tively. brought 13.5m card-holders to the table.
ly shows the average balance on a current Luca Leoni, head of market intelligence “Every loyalty scheme needs a large
account increasing where ATM transactions for Poste Italiane used his afternoon session amount of regular spend to succeed, and
are replaced by POS transactions. to outline the innovative approach to loyalty around 60% of card activity comes from
“The fact is that debit card users’ money that his organisation is implementing across everyday spending.”
stays in the bank longer – and that’s right to both debit and prepaid portfolios. And this brings us back to debit. High
the banks’ bottom lines in terms of interest “We decided that a traditional points- volumes of everyday spend has, Banco Posta
income.” based reward scheme was not showing good has proven, a significant value to retailers.
So the value of debit needs to be judged by results,” he said. Admittedly, there are few banking markets
the bank account’s profitability, not that of “So we chose to offer cash back. Our quite like Italy, but there are clearly oppor-
the cards themselves. And when multiplied problem, however, was funding the cost of tunities for banks with large debit portfolios
across many current accounts, that income that cashback.” to approach retailers to drive profit from
is very significant. The Italian bank then entered into lengthy card usage, and see the increased interest
“It’s not just about the six euro cents the negotiations with retailers. They empha- income that comes from larger volumes of
bank earns per transaction,” said Olbrich sised the importance of loyalty in terms POS transactions. <
www.vrl-financial-news.com 2011 y 15
coUntry sUrvey: norway Cards International
Norway’s double-digit growth story
Total card spending at the PoS in Norway has grown at a compound rate of 10.4% over the past
five years, placing it among the fastest growing cards markets in the developed world. How far does the
growth story have to run in Norway’s mature payments market? will cain reports
orway’s cards and payments mar- GDP per capita in Norway is among the n deBit card penetration*
ket is an easy one to overlook. highest in the world, at $79,089 in 2009 norway compared to selected markets (2009)
SEPA is creating new opportunities and $84,880 in 2010. This comparatively
across Europe, and growth rates in high wealth level and the development of
emerging BRIC nations continue to attract BankAxept, a no-interchange domestic debit
much of the attention. What does Norway, scheme, has established card usage as one of
a developed, mature payments market with the most dominant forms of payment in the
a population of just 4.7m really have to country.
offer? Card spending accounts for around half
The answer is plenty – Norway’s payments of all household expenditure in Norway,
industry punches well above its weight and is according to Norges Bank, Norway’s central
one of the leading lights in a Nordic region bank, and it has the highest number of card
which as a whole offers rich potential. transactions per capita of any country other
In dollar terms, at current exchange than Iceland.
rates, Norway’s 4.7m inhabitants spent a Many of the Nordic states lead the way
total of NOK465.8bn ($85bn) in 2009 and in this respect, with Finland, Denmark and
NOK500.1bn in 2010 on card products. Sweden all averaging more than 175 card
Those figures place the size of its payments transactions per person per year.
market close to European economies with far
bigger populations including Spain ($139bn debit cards
card spend, 46m population) and Italy Domestic debit scheme BankAxept is one of
*Number of cards per 1,000 working age individuals
($169.9bn, 59.7m) population. the primary reasons for high usage of cards in Source: BIS, Cards International, PaySys, Norges Bank
With compound growth in total card Norway. The scheme, owned by Norwegian
spending in the five years to 2009 of 11.9%, banks, has established acceptance coverage in payment terminals had a significant effect
Norway is faster growing than the UK that covers the vast majority of the country. on the shift from cash to card payments.
(11.5%), Australia (10.3%), Japan (10.3%) BankAxept’s acceptance network – the That sentiment is echoed by Mats Taralds-
and the US (9.7%). number of point of sale (EFTPOS) termi- son, deputy general manager for the Nordic
The strength of Norway’s cards and pay- nals in the country – increased from 2,487 and Baltic region at MasterCard.
ments market is the result of a strong econ- per million inhabitants in 1990 to 25,410 in “All of the Nordic countries were very
omy, an efficient and well developed domes- 2010. early starting out with card payments,” he
tic debit scheme and an increasing appetite A study in the International Journal of says.
among consumers for credit cards. Central Banking (IJCB) showed this increase “They started in the domestic debit
16 y 2011 www.vrl-financial-news.com
Cards International coUntry sUrvey: norway
schemes with local branding without interna- n indicators
tional logos. I think that triggered the usage norway – key economic and payments market indicators
we are seeing now. People’s use of the domes-
tic schemes have contributed I think. Follow- 2009 2010
year-on-year 5-year growth
ing on from that, because they were early growth (cagr)
adopters it means there is now a very good GDP (NOKbn) 2,381 2,505 5.2% 5.2%
infrastructure for card payments. We see that GDP per capita ($) 78,436 84,880 8.2% 5.4%
infrastructure as very solid and robust in the
Inflation (%) 2.2 2.4 n/a n/a
region and I think that helps.”
The other reason Norway’s electronic Population (m) 4.9 4.9 1.2% 1.3%
payments system has grown so quickly is a Working age population (aged 15-64, m) 3.2 3.2 1.2% 1.3%
pricing policy which encouraged consumers Card penetration per working age individual
to use more efficient and cheaper payment Cards with a debit function 1.9 2.0 6.2% 4.5%
products. Cards with a credit function 1.7 1.7 -1.0% 12.3%
It was promoted by Norges Bank, which
enforced transparent pricing of payment Total value of transactions (NOKm)
instruments by banks in the country and Debit transactions (1) 535.8 561.4 4.8% 5.5%
called for them to pass those charges on to Credit card transactions (1) 66.4 71.9 8.3% 17.6%
consumers. Total card spending (2)
465.8 500.1 7.4% 10.4%
This type of explicit pricing of payments
products is unusual – because if one bank (1) Includes ATM withdrawals and cashback from POS terminals (2) point of sale spending only.
implements charges by itself, it risks losing Sources: Cards International, BIS, IMF, World Bank, Norges Bank
market share as customers shift to lower cost
providers. 1990 to 78 in 2004. Cheque usage is now pared to NOK0.40 for an ATM withdrawal.
Norwegian banks were encouraged to shift negligible in Norway, with just NOK10.3bn Despite the price differentials pre- and post-
to a transparent pricing model on debit card worth of transactions in 2010, down from 1997, debit transactions grew strongly for
transactions, ATM withdrawals, electronic NOK102.4bn in 2000. the duration of the study.
giros and paper giros from 1986 by the cen- The pricing effect was less apparent in card The domestic debit scheme BankAxept is
tral bank. payments because prior to 1997, prices for based on a no-interchange model and has an
The IJCB study compares Norway to the debit transactions were set higher than for exclusive co-badging relationship with Visa.
Netherlands, which had no specific pricing ATM withdrawals – encouraging greater Domestic debit transactions run through the
model on transactions, and shows that the cash usage. Despite higher prices, debit card BankAxept scheme while overseas spending
pricing model helped drive Norway to elec- usage grew in Norway. on the cards is done via the Visa brand.
tronic payments more quickly. The study says this is because BankAxept’s Spending on debit cards has increased at
The process was most apparent in the acceptance network created a convenience a five-year compound rate of around 5.5%,
elimination of paper-based cheque usage in and security factor which encouraged con- although this figure also includes ATM with-
Norway. The differential in pricing began sumers to use cards, despite the higher costs drawals and cashback issued at point of sale
at NOK0.35 ($0.06) for each paper cheque charged by banks. terminals.
transaction and NOK0.10 for an electronic From 1997, the cost of making a debit The growth rate for debit spending was
giro in 1990. It had changed to NOK2.76 card transaction fell below the price of ATM 4.8% between 2009 and 2010, representing
and NOK0.09 respectively by 2004. Dur- withdrawals in Norway and at the end of the a slowing from the five-year rate. It is an indi-
ing this time, electronic giro transactions study period, in 2004, the average debit card cation the market may be getting closer to a
increased from 15 per person per year in transaction cost a consumer NOK0.26 com- saturation point. There are just under two
cards with a debit function for every working
n card Usage age individual in Norway, placing it among
selected countries – number of card transactions per inhabitant per year (2009) the world’s most heavily carded markets in
the debit space.
BankAxept is likely to come under greater
competition in the coming years from both of
the main international schemes.
Visa, although it has its co-badging rela-
tionship with BankAxept, has been working
hard on building its own acceptance network
in Norway and is “in discussions” with banks
to offer a Visa-only debit card product.
“No one offers Visa-only debit at the
moment – they are all co-badged but we
might expect to see some Visa-only debit
cards going forward,” says Visa Europe’s
Cristina Lind, country manager for Sweden
and a former country head for Visa Europe
Sources: Norges Bank, ECB, BIS/CPSS Red Book, Central Bank of Iceland “There’s been nothing announced yet but4
www.vrl-financial-news.com 2011 y 17
coUntry sUrvey: norway Cards International
4 discussions are ongoing and we expect to see n credit cards
maybe debit cards that are not co-badged norway – credit card spending
MasterCard is also looking at introduc-
ing a debit option into the market, which
it does not currently have. It is consider-
ing the launch of a “combo card” product,
which would feature a single card offer-
ing both debit and credit card function-
ality through the card’s EMV chip. This
approach has already achieved some success
for MasterCard in the Danish and Finnish
markets, and would increase the pressure on
After years of debit card growth, it is the
credit card market which has proven the Source: Norges Bank
most lucrative avenue for the international
schemes to pursue in recent years. Credit started to change. There’s been a lot of edu- of a surprise to some of the industry’s prac-
card spending is growing much more quick- cation about how credit can be managed as titioners.
ly – at a 17.6% on a five-year compound a tool. It doesn’t have to mean that you don’t Each year, Roger Augdal Olsen, head of
rate – albeit from a much lower base. Credit have good or stable personal finances.” cards at Norway’s largest bank DnB NOR,
card transactions were worth NOK71.9bn in Education initiatives are long, drawn out said commentators predict the rate of credit
2010, representing around 14% of total card processes that can take many years. The card growth will slacken. He says there has
expenditure. approach has included marketing and adver- been little evidence of this yet at his bank.
The growth in credit card usage is in con- tising, which is an important part of Visa and “We have thought for some years now that
trast to many countries across the world MasterCard’s strategy in all of their markets. the market must be maturing and we’ll see a
where debit card usage is growing more In addition, Visa launched an online educa- flattening curve,” says Olsen.
quickly. The situation in Norway reflects tion tool in Norway which aims to show “But we still see double digit growth on
the relative maturity of the debit market, consumers how to use credit and in what credit card turnover every year, so it’s still
according to Lind, and education initiatives circumstances it can be useful. growing quite rapidly.”
carried out by Visa and issuing banks in the “It’s very neutral – of course it is Visa The most recent statistics from Norges
country. branded, but you can use it, read and learn Bank show that there may now be signs cred-
“Norway is a very mature market in terms how to manage your finances,” she says. it card growth is starting to fall off. Industry-
of cards,” she says. “Visitors to the site can do budget calcula- wide credit card spending growth declined
“There are 4.7m inhabitants and around tions, answer questions about what kind of between the years of 2009 and 2010 to
5m Visa cards as well as other cards in addi- personality you have when it comes to spend- 8.3%, below the five-year compound rate of
tion to that. Consumers have been very deb- ing. It’s a bit of fun that also has a good mes- 17.6%. Equally, it may simply be a reflection
it-oriented because the domestic scheme has sage.” of the worse economic conditions of 2009
been so strong. The rate of growth in credit card penetra- and a slow recovery in consumer spending
They are used to using cards but in Norway tion and spending – there are now 1.7 credit – the size of Norway’s economy in 2010 had
and Sweden, credit has typically been con- card products in issue for every working age still not recovered to the levels seen prior to
sidered a bad thing in people’s minds. That’s individual in Norway – has been something the financial crisis.
n deBit cards prepaid, contactless and mobile
norway – debit card spending* For such an advanced payments market, it is
perhaps surprising Norway has been so slow
to start gearing its payments industry towards
more innovative forms of payment, including
contactless, mobile and prepaid cards.
The country recently launched its first near-
field communication mobile payments trial,
a collaboration between DnB NOR, mobile
operator Telenor and MasterCard. These tri-
als were first conducted in other European
countries as far back as 2007 and a few –
including the UK – already have products
available for general use.
The lack of innovation in Norway, accord-
ing to payments experts interviewed for this
article, is the result of a number of different
*Includes ATM withdrawals and cashback at the point of sale Source: Norges Bank factors. Most agreed that the strength of
18 y 2011 www.vrl-financial-news.com
Cards International coUntry sUrvey: norway
BankAxept and consumers’ familiarity with head of retail banking, said the bank’s main n marKet sHare
it made it harder for new products to catch focus was building its share of wallet among norway – market share of bank lending to
on. existing customers. the retail market (2011)
“Norway has a very well functioning Around 40% of DnB’s customers use other
national debit scheme and it’s really a very banks for products and services. The bank is %
fast service” says Olsen at DnB NOR. “If planning to simplify its loyalty offers in an DnB NOR Bank 31.6
contactless is going to succeed it’s not going attempt to encourage these customers to use
SpareBank 1-alliansen (1) 19.3
to be on the fact of being fast but rather on more DnB products and services.
Subsidiaries of foreign banks in Norway (2)
the convenience it provides for the private The bank has a cross-sell ratio of three
customers. products per customer compared to an aver- Branches of foreign banks in Norway (3) 11.0
“We have had and still have discussions age of 2.27 across a survey of 35 European Terra-Gruppen (4)
on whether the NFC payments should go banks. Other savings banks 13.3
directly to mobile or if we should go the way DnB is growing its lending to households
Other commercial banks 3.0
of contactless cards first. We still haven’t con- at a pace of 7.3% across its retail banking
cluded those discussions.” customer base and 8.6% in Norway’s four (1) An alliance of savings banks (2) Nordea Bank Norge,
Santander Consumer Bank, SEB Privatbanken and Nordea
Another reason for the lack of interest in major cities, Oslo, Bergen, Trondheim and Eiendomskreditt (3) Fokus Bank (branch of Danske
new products so far has been the shift to and Stavanger. These growth rates compare to Bank), Handelsbanken, SEB, Swedbank, Handelsbanken
Eiendomskreditt (4) A collection of savings banks
investment in EMV cards in Norway. The industry-wide lending growth of 5.7m. Source: Norges Bank
migration started in 2006 and now 81% of
all cards in the market are equipped with the Nordea Bank Norge/Eiendomskreditt a range of different offerings for mainstream
EMV chip. Swedish bank Nordea runs a subsidiary in adult customers.
Prepaid cards have also had a slow start Norway called Nordea Bank Norge, one of Its standard range is a package called
in Norway. No figures are available on the the largest banks in Norway and the largest Fokus 24/7, launched in March this year,
number of the products in issue. Banks of the foreign subsidiaries operating in the and voted the best value retail package in
started out offering gift card-type products, country. It has a branch network of 140 and Norway by personal finance website Finans-
but many were withdrawn from the market offers a number of payment card options to portalen.
because of a lack of interest from the public. consumers. The Gold Programme, aimed at high-end
Interest has picked up again recently, with It offers a product called Bankcard Visa, retail customers, comes with three card prod-
several banks offering products aimed at the a Visa-branded debit card product aimed at ucts, a Visa/BankAxept combo debit card and
youth and gaming segments with some suc- customers who need to make international two MasterCard credit cards – a platinum
cess. purchases, and offers free transactions for credit card and a product called 365Privat
Premium customers and those using a Nor- which offers discounts on furniture, petrol
Key players dea Bank loyalty programme. and clothing.
DnB NOR Nordea also offers a basic bank card aimed Finally, it offers an affluent/private bank-
DnB NOR, which will be re-branded simply at customers aged between 13 and 18 years ing package of products called Platinum
to DnB in the autumn, has a large share of the old. The cards carry the Visa Electron brand which provides a personal adviser and range
country’s retail banking market, with 31.6% and can be used for point of sale spending of investment options as well as the card
of the retail lending market in Norway and and ATM withdrawals but have limited products offered in the Gold package.
2.1m customers. At the bank’s capital mar- international acceptance. Electron products
kets day in June, Karin Bing Orgland, its at Nordea can also be linked to a service SpareBank 1 Gruppe
n credit card penetration* called micro-save, which rounds up transac- SpareBank 1 Gruppe is the jointly-owned
tions to the nearest krone and then deposits holding company of a number of regional
norway compared to selected markets (2009)
the difference into a savings account. Norwegian savings banks, insurance com-
It can also be linked to a charitable organi- panies, leasing finance companies and debt
sation, allowing funds to be deposited direct- collection companies. Most of the group’s
ly into a chosen charity’s account each time a composite banks are relatively small – Spare-
transaction is made. Bank 1 SMN, based in Trondheim, has 56
Nordea also offers one MasterCard prod- branches in 43 of Norway’s municipalities,
uct, a credit card with a credit line of up to serving retail banking and corporate clients.
NOK50,000 and 45 days of interest-free It has 182,000 customers, 138,000 of which
credit. It is linked to a frequent flyer pro- have debit cards and 74,000 of whom have
gramme, comes with travel insurance and credit cards.
offers protection against fraudulent internet SpareBank 1 SMN is also the first bank
transactions made on the card. to offer contactless cards in the Norwegian
economy, which it will offer via a Visa-
Fokus Bank branded prepaid card. There are currently no
Danske Bank-owned Fokus Bank has 41 scheme-only debit cards in issue in Norway,
branches in Norway and is headquartered in and offering a contactless product on a co-
Trondheim. It offers a range of loyalty pro- badged BankAxept product would prove too
grammes, or product packages, offering a complex, according to a Visa spokesperson.
mix of Visa and MasterCard cards. As a result, it was decided to test the market
*Number of cards per 1000 working age individuals The programmes are segmented into a with contactless by using a prepaid product
Source: BIS, Cards International, PaySys, Norges Bank
student offering, a youth product and then instead. <
www.vrl-financial-news.com 2011 y 19
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