samee zafar trends in digital commerce
DESCRIPTION
How technology drives paymentsTRANSCRIPT
Trends in Digital Commerce
Samee Zafar, Director
Sofia
24 October 2014
Global Financial
Services & Payments
Samee [email protected]
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EDGAR, DUNN & COMPANY (EDC) is an independent global financial
services and payments consultancy. Founded in 1978, the firm is
widely regarded as a trusted advisor to its clients, providing a full
range of strategy consulting services, expertise and market insight.
The financial services and payments industries are increasingly cross-border and global enterprises
EDC leverages its global footprint and 30+ years of experience to facilitate development and implementation of successful strategies for our clients that satisfy both their market-specific and global needs
Today we serve clients in more than 45 countries on six continents from eight locations worldwide
Experts in Digital Commerce Consulting
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From Atoms to Bits
(this) book is made of "unwieldy atoms" that will probably be replaced by a digital copy by the time anyone reads it
Nicholas Negroponte 1995
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Digital Transformation
Computing
Communications
Digital
Transformation
Old technologies…
1,10
1,12
1,14
1,16
1,18
1,20
1,22
1,24
1,26
1,28
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Fixed-telephone subscriptions
Source: KPCB; World bank data; Google public data
2,00
3,00
4,00
5,00
6,00
7,00
8,00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Mobile-cellular subscriptions
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Bil
lio
ns
Fixed wired broadband
1,00
1,50
2,00
2,50
3,00
3,50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Bil
lio
ns
Individuals using the Internet
… being replaced by new
Quicker Path to Critical Mass
38 years
Telephone Television Internet IPod
Within ten years:
IPhone Facebook Android
Payments initiated by mobile devices will outnumber transactions initiated byplastic cards
50 billion devices will be connected to the web – up from 5 billion today
Angry Birds
35 days
More recently
13 years 4 years 3 years 2 years 2 years 1 year
?
To reach 50 million users
Digital Disruptors
Host Pays 3% Guest Pays 6-12%
Source: Provider websites7
Payments Innovation
DigitalPhysical
19901980197019601950 2000 20202010
Cloud computing
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The Enhanced Payments Landscape
9
Beyond Transaction Facilitation
Source: American Express 2011Confidential 10
&
11
Remittances, Personal & Bill Payments
Point of Sale
mPOS / Acceptance
$
Remote Payments –Digital Goods*
Remote Payments –Physical Goods
Loyalty & Incentives
Social Commerce / Virtual Currencies
Customer Data
Source: EDC; Forbes.com and other sites * Including in-app payments; carrier billing
MOBILE / DIGITAL WALLETS
Digital Commerce Matrix
Bringing it all together
P2P/MoneyTransfer
PaymentMethod
FinancialManagement
Coupons ComparisonShopping
Tickets/Passes Loyalty Rewards
$
Convenience Through Service Aggregation12
The current favourite
Confidential 13
Other favourites
Confidential 14
New technologies show promise
Examples of beacons
Confidential 15
Beacons: significant potential for retailers
Description: low-cost device based on BLE (Bluetooth Low Energy) technology
Why is it considering as significant? Does not affect current payment
infrastructure
Can directly increase sales and influence customer behaviour at point-of-sale
Enable location-specific services such as indoor navigation, advertisement delivery, couponing, payments, file transfer, etc.
Current status: need to be further assessed to understand full potential
1
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Navigate indoorsCheck-in
/receive coupons
Proximity marketing
Frictionless payments
Biometrics - making a comeback
Examples of initiatives
Confidential 16
Biometrics payments: some potential but significant concerns
Description: use of biological data to authenticate a client and authorise a transaction
Why is it considering as significant? Different types : fingerprint, palm vein
sensors, iris, voice Uniqueness of biological data for each
individual leads to strong security Potential to enable frictionless payments
Current status Different initiatives like Brazilian Bradesco
bank (palm vein sensors) or National Security in France (fingerprint)
Significant concerns regarding the use of biological data
So .. What will be the impact on payment systems?
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MerchantAcquirer
Card Issuer
Payment Company
Card Payment System
(payment charged to payment card)
ConsumersMerchants
Merchant’s Bank
Consumer’sBank
ACH / Retail Banks
ACH Payment System
(payment charged to bank account)
Existing leaders will have to innovate or become pure infrastructure providers
MerchantAcquirer
Card Issuer
Payment Company
ConsumersMerchants
Merchant’s Bank
Consumer’sBank
18ACH / Retail
Banks
MNO’sWallets TSM’s
Social Commerce
Alternative Players
Gateways / PSPs
Device Providers
Digital Content Managers Disruptors
Social Networks
Terminal / mPOS
Providers
“Apple”
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Payment economics and regulatory intervention – a hurdle?
Source: EDC Analysis (2013); Reserve Bank of Australia (2013); Mercator Advisory Group (2007)Note 1: See graph on declining MSC in appendix
The Australian experience
In 2002, the Reserve Bank of Australia intervened in the payment card markets to reduce interchange fees¹ for banks operating in its domestic market, impacting the issuers’ interchange revenue
With the decrease in revenue stream of interchange, issuers have made some strong alterations to their account terms in Australia
Issuers increased credit card related fees following the regulation as a way to counter balance the losses in interchange revenues
$61$98
$40
$85
$140
$80
0
50
100
150
Average Reward CardAnnual Fee
Average Gold RewardCard Annual Fee
Average Fee Revenue onBank-Issued PersonalCredit Card Accounts
2002
2006
+ 43%
+ 40% + 100%
Source: Mercator Advisory Group (2007)
Confidential
Au
s$
Innovators with a clear advantage
Confidential 20
91%
70%
81%
82%
91%
72%
74%
76%
77%
82%
85%
0% 20% 40% 60% 80% 100%
Merchant andmerchant initiatives
Emergingalternative players
Banks and financialinstitutions
Web-relatedcompanies
Card networks / paymentschemes
Establishedalternative players
2014
2012
Players most likely to drive the growth of digital payments
Source: EDC Advanced Payment Survey 2014
Examples
No data available for 2012
21© 2012 Edgar, Dunn & Company
Edgar, Dunn & CompanyCandlewick House120 Cannon StreetLondonEC4N 6AS
Tel +44 207 283 1114Mobile +44 7825 027 526
Fax +44 207 283 1007
Samee ZafarDirector
Thank You
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