There was something in the air at CARTES 2014
~4 min read
For the best part of three decades, CARTES has been a staple of the payments industry calendar, and over the years has extended its reach beyond Europe to Asia and North America. Although the theme this year was ‘Users on the move’, security was the hot topic among many of the speakers and delegates who converged on Paris this week. The digital transformation is posing as many questions for the payments and mobility industry as it is providing answers for consumers, and these issues seemed to weigh heavily on the minds of the assembled payments pros.
It is perhaps testimony to the exponential rate of technological change in the digital era, and the difficult challenges that this presents to those whose business it is trying to both shape and keep up with it, that the same concerns that dominated CARTES 2013 were still being ventilated 12 months later (see last year’s Mondato Insight covering CARTES 2013 for a point of comparison). Things in the payments industry have moved on considerably over the past year, however, and it appears that many are waiting for the dust to settle. On one issue, however, a degree of consensus appears to have emerged: one of the staple questions at CARTES for many years has been the question, ‘Will next year be the year of NFC?’ For 2015, finally, the answer would seem to be yes, a point emphasized by Oberthur Technologies’ Eric Dufrost (though the provider of the answer was, as ever, visible only through the Apple-shaped hole that marked its absence).
It wasn’t just Apple that was notable by its absence from this year’s event: Visa, MasterCard and Amex had no visible presence at this year’s proceedings, and of the big SIM manufacturers, only Oberthur had a stand, while Gemalto only had a meeting room, (nonetheless that still set them apart from their main competitors). Gone were the swish exhibitor stands of the main silicon manufacturers, equipped with cappuccino lounges and wine bars. The emergence of a tentative consensus on NFC also meant that gone too were the provocative, and sometimes tense, debates between the CEOs of industry titans at the opening key note session. Something major has happened, but nobody quite knows what it all means.
This is an industry in flux, and at the moment making connections is perhaps a wiser strategy than making a pitch to be the ‘next big thing’. There was a sense among delegates, however, that the play in payments made by Apple was significant in that it appears to have set a standard that other players in the ecosystem can now work with and towards. Those who want to compete with Apple also now know what it is they have to best. The vexing question that remained unanswered, then, was who is going to set the standard for security and authentication.
Several participants suggested that standardization via regulation, particularly in the European context, would be a desirable solution. Cyril Dougier, Head of Business Development for MyBank, however, pointed out that the mobile channel allows for real-time bank credit transfer, and may be an effective means of payment, especially for cross-border transactions. The Single Euro Payments Area (SEPA) has facilitated transactions within the Eurozone, and offerings, such as MyBank’s, hold the potential to leverage this pan-European standard using a secure system that the consumer already trusts: their online banking portal. The digital transformation of banking opens the prospect of payment cards being removed completely from online commerce.
CARTES last year added the strapline ‘Secure Connexions’. While the base numbers for cards look good, (Eurosmart Chairman Oliver Rastad told the conference that this year for the first time there were 2 billion Chip-and-PIN cards shipped, and over 5 billion SIM cards issued), the future appears somewhat less certain than the numbers may suggest. In an environment where even the head of Visa Europe admits that the days of the little plastic card are numbered, and where even the future of the SIM card appears to be in question, it may not be long before ‘secure connections’ are the main driver of interest, and cards are a thing of the past.
Security: As noted by Felipe Mello of Watchdata Technologies, whether based on a Secure Element on the phone, the SIM or using HCE, tokenization presents a relatively simple and secure means of beefing up payment security and reducing fraud. If the experience of the US is similar to that elsewhere (and there is little reason to believe that it will not be), the migration to EMV in North America is going to push a substantial amount of fraud over to card-not-present (CNP) and online. By taking tokens mainstream, Apple may have opened the door to a more fundamental shift in how online transactions are conducted. As Mr. Dougier noted, only 10% of transactions in Europe take place online, but 60% of all fraud does.
Omnichannel: Consumers are increasingly demanding an integrated and personalized shopping experience, but at the same time there are indications that, at the same time, concerns about data privacy and payment security are growing. Retailers and merchants who are able to deliver both are the ones who are going to succeed at what Verifone’s Vice President for Marketing and Business Development, Tom Conlon, described as “total retail”. Part of delivering on the consumer’s expectations is going to be the same ease of use and lack of friction in payment across all platforms, devices and in-store.
©Mondato 2014. Mondato is a boutique management consultancy specializing in strategic, commercial and operational support for the Mobile Financial Services (MFS) industry. With an unparalleled team of dedicated MFS professionals and a global network of industry contacts, Mondato has the depth of experience to provide high-impact, hands-on support for clients across the MFS ecosystem, including service providers, banks, telcos, technology firms, merchants and investors. Our weekly newsletters are the go-to source of news and analysis in the MFS industry.
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