Mobile Payment A new era of opportunities Thursday, September 27 th 2012

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1 Mobile Payment A new era of opportunities Thursday, September 27 th 2012

2 Philippe PIERRE Vice President of APSI & Partner at PwC Video of APSI to be included Mobile Payments - A new era of opportunities - 27/09/2012

19h00 19h05 19h20 19h40 20h15 Welcome Speech by Philippe PIERRE, VP APSI & PwC Partner Presentation of challenges, trends, issues and opportunities of mobile payments by Marc HEMMERLING, Head of

3 19h00 19h05 19h20 19h40 20h15 Welcome Speech by Philippe PIERRE, VP APSI & PwC Partner Presentation of challenges, trends, issues and opportunities of mobile payments by Marc HEMMERLING, Head of Banking Technologies and Payments at ABBL Presentation of authorization procedures and conditions for payments institutions and e-money institutions by Nadia MANZARI, Deputy Head of the General Supervision Department at CSSF Round Table "Mobile Payments - a new era of opportunities moderated by Emmanuelle HENNIAUX, PwC Partner Marc HEMMERLING, Head of Banking Technologies and Payments at ABBL Nadia MANZARI, CSSF, Deputy Head of the General Supervision Department Jonathan PRINCE, Co-Founder, DIGICASH Todd MAZUREK, Global Mobile Payments Leader, RIM Alexandre ROCHEGUDE, Mobey, CEO Cocktail and Walking Dinner Mobile Payments - A new era of opportunities - 27/09/2012

4 M-payment transactions (billion) E-payment transactions (billion) F 2012F 2013F F 2012F 2013F Non-Bank Providers Bank Providers CAGR* % 47.6% Alternative Payments Debit, Credit, Prepaid Cards CAGR* % 18.1% Total 48.8% Total: 19.1% Mobile Payments - A new era of opportunities - 27/09/2012

5 % 6.5% 2.7% % 10.0% 2016 (f.) 5.0% 11.5% 23.7% 28.4% 11.9% 22.6% 20.2% 0.3% 1.4% 59.8% 0.6% 1.4% 43.4% 1.3% 2.8% 36.5% Total users (million) Total transaction values (billion) N.A. $105.9 $617 Western Europe North America Asia/Pacific Eastern Europe Middle East Africa Latin America Source: Gartner, 2012 Mobile Payments - A new era of opportunities - 27/09/2012

6 Marc HEMMERLING Head of Banking Technologies & Payments at ABBL Mobile Payments - A new era of opportunities - 27/09/2012

7 Yes... at a first glance Over the last months: 3 mobile payment systems have been launched in Luxembourg Digicash Flashiz Paycash But they are not the first in Luxembourg: remember Ringtone Premium SMSs Call2Parc SMSTicket Bus VdL Mobile Payments - A new era of opportunities - 27/09/2012

8 No... not really Over the last months and years many systems emerged and this especially in technophile countries and in countries where the number of unbanked people is high But new Number of (smart)phone holders Full market penetration of mobile phones Rich service levels Technologic building blocks readily available Readiness of people to pay mobile Mobile Payments - A new era of opportunities - 27/09/2012

9 Some figures: Number of Asian people who paid by phone (2009: 41,9 mio / 2011: 69,6 mio) Number of Europeans who paid by phone (2009: 5,5 mio / 2011: 18,2 mio) Number of African people who paid by phone (2009: 16,6 mio / 2011: 45,5 mio) Number of electronic payments transactions in EU alone (CT/DD/cards) +/- 80 bn Mobile Payments - A new era of opportunities - 27/09/2012

10 Of course because its all about payments Technology driven change in consumer behavior Mobile Mobile more often at hands than cards Burden of investment and maintenance may be passed over to the user Political pressure (EC/ECB) New legislation Commissioner Viviane Reding's invitation sent to EPC and GSMA Mobile Payments - A new era of opportunities - 27/09/2012

11 Dialogue GSMA and EPC EPC: "White paper Mobile Payments" v 4.0 issued 22/05/2012 EPC centric view : mobile device used to initiate SEPA payment transactions White paper is quite comprehensive: tackles almost all the technical, security and management issues of mobile payment systems Mobile Payments - A new era of opportunities - 27/09/2012

12 Similar and different at the same time SMS ticketing Call2park Digicash Flashiz/Paycash But all use a mobile device to initiate a flow of funds from a payer to the payee Mobile Payments - A new era of opportunities - 27/09/2012

13 The EPC paper distinguishes use cases: Contactless (or proximity) payments F2F Self service F2M Information exchange via image capturing (QR code) or contactless radio technologies (NFC, IR, Bluetooth) Remote payments Payer and payee are not in the same location Transaction conducted over GSM networks or the internet Mobile Payments - A new era of opportunities - 27/09/2012

14 What the user doesn't see (but hopefully knows): How is the money moved from his/her account to the payee? MNO billing (amount, premium SMS, etc.) Prepaid - electronic money CT (credit transfer) initiation DD (direct debit) initiation Cards payments Mobile Payments - A new era of opportunities - 27/09/2012

15 What the user does want to know for sure: where are the required (confidential) payment information stored? Mobile wallet concept Onboard In the cloud Mobile Payments - A new era of opportunities - 27/09/2012

16 Architecture: building blocks : who invests, owns, maintains? Security issues: UICC-universal integrated circuit card (SIM-subscriber entity module)/se/microsd card Actors and relationships Business model: 3 corners / 4 corners Business model accepted by regulator/ec COMP : interchange issue Business plan - penetration and market size Mobile Payments - A new era of opportunities - 27/09/2012

17 CSSF BCL Enterprises on the scene ABBL / EPC / SPSI / workshop on e-payment Luxinnovation ICT Cluster - e-payment/e-invoicing WG Mobile Payments - A new era of opportunities - 27/09/2012

Thank you for your attention Contact: hemmerling@abbl.

18 Thank you for your attention Contact: Mobile Payments - A new era of opportunities - 27/09/2012

19 Nadia MANZARI Deputy Head of the General Supervision Department at CSSF Mobile Payments - A new era of opportunities - 27/09/2012

20 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Application procedures for payments institutions and e-money institutions Nadia Manzari CSSF Mobile Payments - A new era of opportunities - 27/09/2012

21 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES I. Introduction II. Authorization Procedure Requirements FAQ

22 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES I. Introduction Directive 2007/64/EC on payment services in the internal market Directive 2009/110/EC on the taking up, pursuit and prudential supervision of the business of electronic money institutions Law of 10 November 2009 on payment services (the law)

23 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Purpose of the directives Enhance the proper operation of the single market in payment services /e-money issuance Put in place a modern and coherent framework for payment services /e-money issuance The new legal framework should ensure the: coordination of national provisions on prudential requirements, align the supervisory regime of e-money institutions with the one applying to payment institutions

24 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES access of new payment service providers to the market, the respective rights and obligations of payments service users and providers (Titles III and IV of the law) Emergence of e-commerce

25 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES E-payments v. M-payments E-payments are payments made over the internet Remote payment card transactions through the internet. Online-banking based credit transfers or direct debits under which the payer uses an online banking portal for authentication. Payments through e-payment providers, with which the consumer has set up an individual account. Accounts can be funded through traditional payment methods, for example bank transfers or credit card payments.

26 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES M-payments are payments for which the payment data and the payment instruction are initiated, transmitted or confirmed via a mobile phone or device. Remote m-payments mostly take place through internet/wap or through premium SMS services which are billed to the payer through the Mobile Network Operator (MNO). Proximity payments generally take place directly at the point of sale. Using Near Field Communication (NFC), QR code systems the line between e-payments and m-payments is blurred, and may become even more so in the future.

27 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES II. Authorization Authorized Institutions Payment institutions SIX PAYMENT SERVICES (EUROPE) S.A. FIA-NET EUROPE S.A. DINERS CLUB BENEFLUX S.A. DIGICASH PAYMENTS S.A.

28 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES E-Money institutions AMAZON PAYMENTS EUROPE S.C.A. MOBEY S.A. PAYCASH S.A.

29 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Authorization procedure - Ministry of Finance - Investigation by the CSSF Application forms for: - Payment institution - Electronic money institution - Declaration of an agent - Declaration of provision of payment services via free provision of services, agent or a branch - Declaration of provision of e-money via free provision of services, intermediaries, agent or a branch - Authorization time v. instruction time

30 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Requirements Art 8 & 24-4 of the law (a) a programme of operations (b) a business plan including a forecast budget calculation for the first three financial years (c) evidence of the initial capital (d) hybrid paiement institutions/e-money institutions: a description of the measures taken for safeguarding payment service/emoney users' funds (e) a description of the applicant's internal governance and internal control mechanisms

31 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES (f) a description of the internal control mechanisms which the applicant has established in order to comply with the obligations under the law of 12 November 2004 on the fight against money laundering and terrorist financing (g) a description of the applicant's structural organization (h) the identity of shareholders or members, whether legal or natural persons, holding directly or indirectly qualifying holdings in the institution to be authorized (i) the identity of members of the administrative bodies and persons responsible for the management of the institution to be authorized

32 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES (j) where appropriate, the identity of the réviseurs d'entreprises agrées (approved statutory auditors) (k) the applicant's legal status and articles of association (l) the address of the applicant's head office

33 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES AML/CTF obligations Risk factors Product risks Firms risk Supervisory risks Maximum harmonization v. minimum harmonization

34 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES The control and security mechanisms of the IT systems the system s architecture the geographical distribution of the services and IT systems relating thereto the physical location of the equipment, physical securities and controls of holding rooms outsourcing (functional, system, physical) in relation to the systems described and indication of the subcontractor's name management information which are provided by the system (transactions' volume, value and destination, etc.) procedures that the applicant has/will have in place for identifying suspicious or unusual transactions

35 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES control and security mechanisms linked to the provided services, covering the authentication of the participants recovery plan in case of disaster risk management The European Forum on the security of retail payments: Facilitate common understanding among authorities of issues relevant to the security of retail payments

36 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES FAQ Mini-licence? - No mini-licence!!! - Exemptions of articles 48 & 48-1 of the law Art. 48 applying to PI: (a) the average of the preceding 12 months' total amount of payment transactions executed by the person concerned, including any agent for which it assumes full responsibility, does not exceed EUR 3 million per month. (b) none of the natural persons responsible for the management or operation of the business has been convicted of offences relating to money laundering or terrorist financing or other financial crimes.

37 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Art applying to EMI: (a) the total business activities generate an average outstanding electronic money that does not exceed EUR 5 million; and (b) none of the natural persons responsible for the management or operation of the business has been convicted of offences relating to money laundering or terrorist financing or other financial crimes. NO PASSPORT

38 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Limited network? (k) services based on instruments that can be used to acquire goods or services only in the premises used by the issuer or under a commercial agreement with the issuer either within a limited network of service providers or for a limited range of goods or services Specific purpose instruments: e.g store cards, petrol cards, membership cards,..

39 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Instruments which can be used for purchases in stores of listed merchants should not be exempted from the scope as such instruments are typically designed for a network of service providers which is continuously growing.

40 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Payment transactions executed by means of any telecommunication, digital or IT device? (l) payment transactions executed by means of any telecommunication, digital or IT device, where the goods or services purchased are delivered to and are to be used through a telecommunication, digital or IT device, provided that the telecommunication, digital or IT operator does not act only as an intermediary between the payment service user and the supplier of the goods and services e.g. ring tones

41 MOBILE PAYMENTS, A NEW ERA OF OPPORTUNITIES Agent v. intermediary (distributor)? Agent: a natural or legal person who can provide payment services as well as distribute and/or redeem e-money Distributor: a natural or legal person who can distribute and/or redeem e-money, but who cannot provide payment services. Distributors might include corner shops or petrol stations that sell prepaid e-money products.

42 Thank You Disclaimer: The views expressed in this presentation are those of the presenter only. Official positions of the CSSF are determined only after extensive due process and deliberation.

Moderator: Emmanuelle HENNIAUX, PwC Partner Panellists: HEMMERLING, ABBL, Head of Banking Technologies and Payments Nadia MANZARI, CSSF, Deputy Head of the General Supervision

43 Moderator: Emmanuelle HENNIAUX, PwC Partner Panellists: HEMMERLING, ABBL, Head of Banking Technologies and Payments Nadia MANZARI, CSSF, Deputy Head of the General Supervision Department Jonathan PRINCE, DIGICASH, Co-Founder Alexandre ROCHEGUDE, MOBEY, CEO Todd MAZUREK, RIM, Global Mobile Payment Leader Mobile Payments - A new era of opportunities - 27/09/2012

44 Mobile Payments - A new era of opportunities - 27/09/2012

Payment Services Directive 2 and other European Laws on Payments Systems Ayse Zoodsma-Sungur

Payment Services Directive 2 and other European Laws on Payments Systems Ayse Zoodsma-Sungur Seventh Conference on Payment and Securities Settlement Systems, Ohrid 7-10 July 2014 Outline Regulation, yes