Infographics: CPPO study reveals Canadian prepaid market grew 17%

The Canadian Prepaid Providers Organization (CPPO) released its second annual benchmark study, “Canadian Open-Loop Prepaid Market: 2016″, that shows 17% growth of the open-loop prepaid card market in Canada between 2015 and 2016.

Growth in all nine active segments of consumer-, corporate- and government-funded prepaid cards drove the market to CA$3.6 billion in total value loaded onto cards – revealing that Canadians are embracing prepaid payments tools at the same trajectory as most other major economies.

The Canadian open-loop prepaid market has experienced healthy growth in both total transactions and expansion into new segments. The CPPO study revealed that in 2016 Canadians loaded CA$1.8 billion on general-purpose reloadable cards, which are a payment tool to replace cash and checks and supplement bank accounts for a highly banked population.

The Canadian corporate incentive market reached CA$189 million in open-loop prepaid card loads in 2016, which is relatively small versus the US$90 billion non-cash incentive market in the US, showing strong potential for growth. Corporations and governments are replacing the costs and security concerns of paper checks by expanding their use of prepaid cards across corporate disbursements, payroll, healthcare disbursements, disaster relief and student cards. The average load onto corporate-funded prepaid cards grew 11%.

The  US open-loop prepaid market is expected to reach nearly US$353 billion by 2020, and while the Canadian prepaid industry is still in its infancy, it has a lot of opportunity. Canada’s largest province, Ontario, has a CA$51.8 billion financial services sector and a CA$30.5 billion information technology sector.

Ontario is part of the second largest information technology cluster in North America and it is a leader in mobile payments. US companies should consider the close proximity, language continuity and strong test market attributes in Canada as a place to launch new products or expand current portfolios.

By David Eason, CPPO chair 

Singapore regulator calls for more feedback on payments law

The Monetary Authority of Singapore (MAS) has launched a second consultation on its proposed regulatory framework, known as the Payment Services Bill, reports Banking Technology, Paybefore‘s sister publication.

According to MAS, the Bill will streamline the regulation of services under a single legislation, expand the scope of regulated activities to include virtual currency services and “calibrate regulation according to the risks posed by these activities”.

MAS managing director, Ravi Menon, says it wants to “encourage wider adoption of secure e-payment solutions”.

When the new Bill is enacted, payment firms will only need to hold one licence under a single regulatory framework to conduct any or all of the specified activities.

MAS points out that activities that face customers or merchants, process funds or acquire transactions, and pose relevant regulatory concerns will need to be licensed.

It adds that the Bill will differentiate requirements rather than apply a uniform set of regulations on all payment service providers.

The public consultation will run from 21 November 2017 to 8 January 2018. A copy of the paper is available on the MAS website here.

Codes and cash

As usual, MAS has been very active.

The Singapore Payments Council, set up by MAS, endorsed the specification for a common Singapore Quick Response Code (SG QR) that can accept electronic payments by both domestic and international schemes, e-wallets and banks.

MAS revealed that $2 billion of capital is now available for start-ups through the Singapore Investor Summit.

Accenture, MAS and the Association of Banks in Singapore (ABS) published a report on the outcome of Phase 2 of Project Ubin. This 13-week project is to develop software prototypes for improved payments on blockchain.

In terms of legal matters, back in July, MAS called for a second reading of “The Monetary Authority of Singapore (Amendment) Bill 2017″ because it says it needs to update its laws and regulations that deal with resolution, “so as to ensure effective handling of a financial institution (FI) that gets into serious trouble, and especially to avoid contagion or a loss of confidence in the system”.

European Payments Council’s SEPA Instant Credit Transfer scheme goes live

The Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) scheme created by the European Payments Council (EPC) is now operational, reports Banking Technology, Paybefore‘s sister company.

As of 21 November 2017, the EPC says nearly 600 payment service providers (PSPs) from eight European countries are offering instant payment solutions based on SCT Inst. It was launched last year, with Javier Santamaría, chair of the EPC, calling it a “new era in payments, based on speed and innovation” and it “will pave the way for emerging methods of payment, such as person-to-person mobile payments”.

The EPC says more PSPs from other European countries are expected to join in 2018 and 2019. The scheme allows the electronic transfer of money – currently up to €15,000 euros – across Europe “in less than ten seconds, at any time and on any day of the year, including weekends and holidays”.

The transactions covered must be denominated in euros. SCT Inst payments are currently available at nearly 600 PSPs (585 exactly, or 15% of all European PSPs) in Austria, Estonia, Germany, Italy, Latvia, Lithuania, the Netherlands and Spain.

According to the EPC, the geographical scope of SCT Inst will progressively span over 34 European countries. Other PSPs from the following countries are expected to join the scheme in 2018 and 2019: Belgium, Finland, Germany, Malta, the Netherlands, Portugal and Sweden.

In addition, the EPC states that it will make the scheme “evolve to better reflect market needs”. This will be done in “close dialogue with all payment stakeholders”. For example, the maximum amount per transaction will be regularly reviewed starting from November 2018.

With charming timing, the EPC recently created a nifty infographic that covers this scheme.

Q&A with Bob Raffo, FirstView Financial

Joining FirstView Financial in July 2017 as president and CEO, Bob Raffo has quickly become a proponent of developing the paytech segment, the opportunities it presents to serve larger consumer and B2B bases and accelerate payment processes.

FirstView Financial provides prepaid, financial, mobile and payment solutions. Over the last decade, FirstView has been delivering prepaid program management and processing services supporting a diverse array of prepaid card solutions, and Raffo is now preparing to take the company deeper into the paytech segment as a payment solution provider.

PayBefore recently had the opportunity to speak with Raffo about his views of the future of payment technologies and paytech.

Beyond prepaid: What do you see on the horizon as the next evolution for consumer payments?

Obviously there is a move to mobile, virtual cards, digital wallets, and remote data capture, which are already here, but which will gain wider acceptance. Next will be increased use of smart devices, new digital applications, alternative processing networks, wearable technologies and new payment processes like push-to-pay.

More important though, there has been a shift in how consumers and businesses think about payments. Beyond moving to cashless, paperless payments, there is an element of immediacy that makes near real-time payments increasingly important. In this post financial crisis world, it’s still difficult for many people to get credit and purchasing power. The more we compress the timing between getting paid and making a payment, the less dependent we are on credit. We’re moving toward closing the time gap in payment processing, so people and businesses can get paid immediately, similar to how Uber pays their drivers. The future of payments is paytech.

What is paytech?

Paytech is all about payment innovation, encompassing physical, digital and virtual technologies, which is a large and growing space especially here in the US and in the UK. It’s all about disrupting payment processes and the future of near real-time settlement throughout the supply chain.

For example, right now the supply chain provides terms of payments from manufacturers in the form of Asset Based Lending credit, to distributors and retailers though AP terms and lines of credit, and to consumers through instruments like credit cards and home equity lines of credit.

Paytech can digitize the float in the supply chain and settle all payments near real-time which increases the velocity of payments. This is a huge shift that can change the dynamics of the economy. Our growth is a function of money supply and the velocity of money. Increasing the velocity of payments will drive economic growth.

How is paytech different than fintech?

Fintech has grown to include a wide spectrum of existing and potential technologies, which encompasses everything from cryptocurrency to loan management systems. It is natural to see a coalescing around specific applications in the financial industry.

For example, there is now a vast regtech sub-category which are technologies that help companies better manage regulatory compliance.

Paytech is a sub-category focused on changing how we think about and execute transactions. According to the Emerging Payments Association (EPA), even in 2016, paytech companies represented more than 40% (and growing) of fintech.

The vision of paytech is to transform payment processing from “one to one” payments like checks, ACH, credit and debit cards to “one to many” payment marketplaces, and eventually to a “many to many” payment ecosystem based on emerging new blockchain technology systems.

The evolution is analogous to how communications have changed. From hand written letters and fax machines which only went from one person to one person, to text messages and emails which can be delivered asynchronously from one person to specific groups of people and now social media platforms like Facebook with instant messaging shared among large communities of people.

In paytech terms we will change from a consumer paying a retailer, who pays a distributor, who pays a manufacturer, to a system where the consumer payment at the point of sale is automatically split and distributed to the retailer, the wholesaler and the manufacturer at the same time. That will be the real impact of paytech, collapsing the payment cycle to near real-time payment for all participants in the supply chain.

How do prepaid companies progress to become paytech?

PayTech is a natural extension for prepaid companies because the underlying processes and platforms required to process payments and authorize transactions are the foundation for paytech.

The four core competencies of prepaid: remittance, reimbursement, deposit, and disbursement, are already well established and provide the cornerstones of a paytech strategy. Many prepaid companies have already transformed their transaction processing platforms to embrace mobile, digital and virtual payment capabilities.

As we continue to move toward a cashless economy, prepaid companies are well positioned to deploy new technologies that will enable advanced closed-loop marketplaces, support push payments across networks, and provide the infrastructure for financial toolkits that allow consumers to take control of their spending. Prepaid companies already understand this market and are well positioned to dominate the paytech arena.

How can paytech expand market participation for a prepaid company?

Historically prepaid has focused on very discrete markets; gift cards, loyalty and incentive cards, payroll cards and GPR cards. Between regulatory changes and saturation, opportunities for growth in these traditional participation strategies is limited. However, nearly 40% of Americans still have trouble paying bills in a timely manner, so near real-time payments are increasingly important to them.

Prepaid is already addressing some of the needs of the underserved constituencies both on the consumer and merchant sides of the equation. Furthermore, prepaid companies already have established access to networks of retailers and the ability to reach consumers wherever they are.

Paytech creates new market opportunities for prepaid companies to provide new products and services for the underbanked and underserved consumers to help them get paid faster and to make their payments faster which will improve their financial health.

In addition to the underserved consumer, B2B is perhaps one of the largest underserved markets in terms of moving to cashless payments – there are still such a large number of corporate payments – up to 78%, being made by check.

There is a huge opportunity to develop better connections between businesses to streamline payments and remittances processes. When merchants can pay their suppliers faster, who in turn can pay their manufacturers quicker, the whole economy accelerates. Several markets share similar demographics and are already using prepaid to solve very specific problems. They include: healthcare, consumer finance, corporate B2B, and travel/incentive. These markets can be better served with new PayTech solutions which present new and exciting growth opportunities for prepaid companies.

What will be the role of technology in the transition to paytech?

Prepaid is a technology-based business to begin with, but now the role of technology becomes even more central to the business strategy. Expanding the underlying technology and payment authorization process to support push-to-pay, direct to merchants, closed loop marketplaces, and how to best incorporate blockchain technologies are critical to the future of paytech.

The impact of blockchain cannot be underestimated. Beyond these early days of cryptocurrency and Initial Coin Offerings (ICOs), blockchain promises to change the way we contract and execute transactions.

Blockchain has the potential to be to finance what Twitter has been to mainstream media. Before Twitter, news agencies aggregated news feeds to media outlets that then distributed the news, much the same way we aggregate payments to banks who then redistribute the payments. Twitter provides a platform for news to be distributed directly to and between consumers, without the need for media outlets to aggregate the information. Blockchain provides the technology for payments to be made without the need for banks to aggregate and redistribute funds.

We’ve already seen how the well-known players such as Apple, Amazon and Walmart are making changes in the marketplace which alters the way we buy, so it’s up to companies like FirstView to focus on building out the technology to meet the needs of specific markets like healthcare to fully integrate the payment transaction cycle and provide real value by improving cash flow for every participant in the supply chain.

What are the challenges facing paytech providers?

There is an old adage “speed kills”. The more we accelerate the speed of payments the more sensitive the entire system is to even the slightest disruption. Building out the infrastructure that provides consistent and reliable near real-time settlement is no small undertaking.

Even more daunting is the challenge of retro-fitting or upgrading banking systems, payment networks, corporate purchasing systems and more. The technology supporting B2B payment processing is entrenched and not easily changed. Besides the investment needed to make the changes, many markets are heavily regulated. Ensuring that we can change the technology and processes and get over the regulatory hurdles without breaking the system will be critical to the mission of paytech.

From a market perspective, the challenges will be different for each target market. For consumer finance – how do we deliver solutions to help underserved and unbanked to not only pay their bills, but rehabilitate their financial status? In healthcare – how do we develop unique payment solutions for insurers, providers, manufacturers and HSA banks that make it easy for patients to navigate a complex and disintermediated industry? And in B2B, how do we replace traditional AP models and check processing – there is already some acceptance on the remote data capture side, but how do you move them to EFT, ACH, and beyond to virtual, while providing near real-time solutions without putting any of the participants at risk?

What do you foresee that could be a major disrupter in the paytech segment in the next few years?

The real disrupter for paytech will be the increased adoption of gig-pay or day-pay models like Uber. Labor costs are typically the largest single operating expense line item for a business and a big cash flow item. Broader adoption of near real-time payroll will drive changes throughout the supply chain to speed up remittance of trade payables.

Eventually, the supply chain will be compressed or shrunk down to the point of sale (POS). That is when not only the “one to many” model comes into play, but a “many to many” experience occurs, and a single POS transaction is paying everyone in the chain at the same time. The transformation will result in less cash, less float, and will speed up the velocity of transactions, ultimately accelerating the growth of the economy.

Change can come very quickly, we see that the speed of technological change is just accelerating every day. However, this is a seismic change in how we transact and although I see this change is inevitable, it will likely take years or maybe decades before the full effect is felt.

Nonetheless, P2P payment platforms are gaining traction and banks are already identifying and adopting new mobile technologies to meet the demand of millennials who are a new generation of people entering their prime earning and purchasing years.

Now is the time for prepaid companies to embrace the changes and develop the technology and business models to meet the needs of the future.

What defines global customer success?

Payments are changing rapidly, and the industry is struggling to keep pace. Many banks and other card issuers — including the service providers they rely on — lack the agility to stay competitive and quickly deliver the new products, features, and payments experiences today’s customers want.

Consumers have different expectations about their payments experience than just a few years ago. Financial institutions (FIs) are focusing their efforts on pleasing their customers and differentiating their brand in an increasingly competitive market. In the recent Bank Innovation Readiness Index survey, 50% of banks surveyed said that changing consumer behavior is the primary motivator for payments innovation.

This is not just a technology problem, nor is technology the only solution. For vendors that see themselves as partners of the financial institutions (FIs) they serve, the role of the Customer Success organization is more important than ever in enabling transformation in their customers’ payments business.

What differentiates a relationship in this business is helping your customer stay top of wallet in everything they do. Consumers today have a lot of options. If a cardholder has a bad experience — plastic, mobile, web, service, or support — they will leave. A seamless experience is important. Our clients want satisfied and loyal customers who have access to the most robust technology and tools, and service and support.

Our FI customers demand a seamless experience, too. That raises the bar for Customer Success teams spanning tech support, relationship mangers, and customer service personnel. They need to work together to understand individual program needs and map out the right solution that’s put together strategically with all the right products and services in their arsenal.

If an FI perceives a vendor that provides a key technology like core payments processing infrastructure as a commodity, then they are on thin ice. Vendors today have to work hard to move up the value chain to earn their place as a strategic partner, indispensable to the bank or issuer for growth and brand differentiation.

It Starts with Agile Technology

For FI solution providers, customer success starts with a modern, flexible technology that gives your customer the ability to keep pace with market changes. In payments, the foundation is a single, global platform that integrates processing across credit, prepaid, and debit programs with support for new technologies like digital wallets, mobile, and even watches. This Agile Processing platform reduces the learning curve for clients and simplifies scaling programs, even across geographies, which is something FIs are looking for today. In fact, 70 percent of FIs with a flexible IT infrastructure in the Bank Innovation Readiness Index said that their recent innovations were extremely successful—more than twice the average.

Strategic, Consultative Approach to Customer Success

Offering an exceptional technology doesn’t guarantee customer success. Making sure the customer achieves and maintains top of wallet status with your technology solution defines the mission of the Customer Success organization. That means every person on your Customer Success team should feel that they are an extension of the customer’s team, and that when they grow, you grow.

The first step in becoming a strategic partner is understanding the customer’s business and identifying what constitutes success for them and their programs. The client account manager needs to meet regularly with the customer to thoroughly understand their needs and challenges, how they will be measured on success, and the challenges they face. Working closely with technical experts and support managers, the team needs to understand the customer’s underlying IT infrastructure, their existing programs, and key players in their organization.

Investing time at the beginning of the relationship to understand scope and design a solution and the processes that support it is foundational to program success. Being consultative means pushing back when you need to. There have been times we’ve had to advise fintech customers anxious to get a payments program into market that though our technology enables agility, cutting corners to drive a swifter time line doesn’t constitute a strategy. Time spent up front is regained in spades on the back end. It is okay to not always say yes — even if some customers aren’t used to it.

Optimize Your Team Structure

Customer Success organizations need to be structured to create effective teamwork and problem solving. At i2c, we have a team-based approach to service delivery, where a customer has a dedicated team of cross-functional experts familiar with their business goals and solution. The account manager quarterbacks the business relationship, and is always paired with technology subject matter experts fully conversant with the technology. This structure makes it possible for the account manager to effectively advocate for the customer, making sure business, technical and operational issues are understood and resolved.

An important best practice is to make sure relationship managers are not overburdened with too many customer accounts. They and other key team members must have the bandwidth to understand their customers’ business and the details of the program that support it. It goes without saying that consistent, clear, and regular communications — both internally and with the customers — and documented processes supporting them are vital. All of this doesn’t happen naturally, especially if the team is too busy.

Leverage Your Expertise to Boost Customer Profitability

Customer Success teams’ deep industry expertise and experience working closely with a range of FIs put them in a unique position to add value to client relationships. Vendors that can leverage this knowledge and apply best practices on behalf of their customers have a distinct advantage.

Operations and Customer Service teams are your eyes and ears on the ground. They are close to your customers, and importantly, your customer’s customers. They can identify problems and surface areas that can lead to better solutions for the FI customer as well as the vendor. For instance, service teams can funnel direct feedback from cardholders about the effectiveness of digital coupons in a loyalty campaign, a new feature, or a process that isn’t working well. This gives FI clients valuable information about new products to enhance cardholder engagement and better processes to eliminate waste and reduce customer friction.

For example, we were working with a community bank that prides itself on high-touch, in-person service. The bank wanted to quickly launch a new payments product targeted for Millennials. We examined their portfolio and recommended changes to the offering based on our expertise and knowledge about what appeals to that demographic: push notifications and self-service features accessible via mobile, web, and IVR. This lengthened the implementation timeline, but in the end, the bank’s customers responded enthusiastically to a product that synced with how they wanted to manage their spending. Top-line revenue improved, and the self-service functionality had a positive impact on the bank’s bottom line.

In payments, making the customer’s program top of wallet is the highest priority. That’s no small task given the dizzying pace of change in the market. Combining modern, flexible systems and payments technology with a Customer Success organization with a top-notch consultative approach is the recipe for success.

By Peg Johnson, EVP, Global Client Success at i2c Inc

About the author: Peg Johnson leads the global operations of i2c’s client services and customer success organizations. Peg has over 20 years of experience running global service delivery teams in the payments industry, working with the largest credit, debit, and prepaid issuers in the world. Before joining i2c, Peg was senior vice president of business operations for First Data Corporation, where she led client services for the company’s Financial Services Business organization, managing 400 employees responsible for the strategic interface between the company’s executive, legal, and product teams and its clients.

Peg Johnson’s email: