Innovation in Retail Payments Activities of the CPSS Working Group on Innovation

Transcription

1 Innovation in Retail Payments Activities of the CPSS Working Group on Innovation The views and opinions expressed in this presentation are those of the speaker and do not necessarily reflect the position of the CPSS or Deutsche Bundesbank.

2 First impression: Retail payments a classical business 1950 Year TV Videorecorder Credit card 5% Others 4% 600 B. C. Compact disc Internet Debit card 32% Cash 59% Ancient chariot DVD 1996 MP3-Player 1996 POS-Payments in Germany 2009 Source: EHI

3 Innovation in retail payments: Fact Finding worldwide Market is dynamic, but few innovation have significant market impact so far Fact finding exercise Focus: top innovations in the respective markets, irrespective of whether being innovative in all markets Time horizon: last decade CPSS member countries + selected other countries Including also some international products Participation of 30 central banks Altogether: 122 innovations reported 3

4 Innovation in retail payments: Fact Finding worldwide Most innovations are domestic, but similar products have emerged worldwide Internet payments Payments initiated by devices connected to the internet 10,2 % 24,1 % 24,1 % 18,2 % 23,4 % Mobile payments Payments initiated + transmitted by devices connected to the mobile communication network / NFC Innovative card payments Cards as access device for payments EBPP Electronic bill presentment + payment Improvements in infrastructure/ security Innovations improving the efficiency of payments processing or improving security 4

5 Fact Finding worldwide Trends Acceleration of payment processing gained importance Faster interbank processing Faster initiation of payments 5

6 Fact Finding worldwide Trends Financial inclusion as driving force for innovation Special bank accounts with limited payments-related services or prepaid accounts with non-banks: addressing the issue of the relatively high cost of a standard bank account Business correspondents/agents: Providing alternatives to the traditional branch, ATM and POS terminal at retailers New means for transaction initiation + authentication: Mobile phones + networks as devices for accessing payment services 6

7 Fact Finding worldwide Trends Role of non-banks is significantly increasing Non-banks competing in areas that are not yet dominated by banks Possible trigger: use of innovative technoglogy Focus: internet and mobile payments High relevance of cooperation between banks + non-banks in mobile payments and EBPP No relevance of non-banks only cooperation 7

8 Drivers and barriers overview User habits Regulation Security Technical developments Innovation Cooperation Price + price structure Standardisation 8

9 Drivers and barriers Fulfilment of the criteria by payment instruments from the users point of view User habits Source: Deutsche Bundesbank

10 Drivers and barriers Regulation Regulatory regime for the provision of payment services Improving competition by opening up the payments market for non-banks: Lowering of the entry barriers to the payments market in many countries Improving competition by intervening in the pricing policy: A more transparent pricing in order not to distort the user choice Facilitating the use of innovative payment services: Removing legal obstacles eg for EBPP Relaxing requirements in order to promote financial inclusion 10

11 Drivers and barriers Cooperation The complexity of the M-payments chain The role of a Trusted Service Manager 11

12 Drivers and barriers Standardisation Facilitates the achievement of a necessary critical mass Enables competition + creates stable ground for new players to come into the market Additional revenue gained by standardisation enables the dedication of more resources for the development of new products Also possible drawbacks with regard to innovation, e. g. by diminishing the incentive to innovate or by restricting competition May raise competition issues if certain parties are excluded from the standard-setting processing or do not have access to the results 12

13 Drivers and barriers Security Card payments: Card-not-present transactions: stronger authentication procedures Contactless card payments: limits on the amounts + certification procedures Internet payments: Authentication of the payer s identity Protection of the online banking environment Mobile payments: applications must be adequately insulated + certified Improvements in infrastructure: Communication over open networks: adequate encryption methods + authentication Faster processing: strong authentication for primary bank account 13

14 Future developments NFC Internet payments Mobile payments Virtual currencies Opportunitites. Strong potential user demand Targeting cash (low value) Penetration of NFC-enabled HW E-commerce as main driver Growing c. b. activity Traditional instruments: no optimal choice Potential user demand High penetration at global level Combination with e-money [mobile money] Large customer base Users highly technophile threats Security issues Traditional instruments No global standards Efficient alternatives: cards / internet payments Cooperation issues No real currency No clear business case Traditional infrastructures 14

15 Innovation in payments Innovation will take time Ratio of year total to 1992 total Households Using a Debit Card

16 Innovation in payments Innovation is already pulling down walls Chip-based card payments / e-money E-money providers offering different access channels / access devices 16

17 Innovation in payments Geographical differences remain United States (347) Total number of transactions on cashless payments 2010 (Number per habitant in brackets) Germany (212) Euro area China (5) Japan (88) Mexico (21) India (6) Hong Kong SAR (nav) Areas with > 1 mn mobile wallets [Source: GSMA MM Deployment Tracker] % of total number of transactions (as far as available) 17

18 Outlook: Retail payments still a classical business? He who rejects change is the architect of decay (H. Wilson) 18