World Payments Report 2014 Key Findings Presentation

0The information contained in this presentation is proprietary.

Copyright ©2014 Capgemini. All rights reserved.

October 2014

>

World Payments Report

Presentation



About World Payments Report 2014

What is Driving Payments Growth?

Increasing Overlaps of KRIIs and Increased Cascade Effect

Innovation and Transformation in Payments Processing

The Way Forward

World Payments Report 2014 (WPR) - Roadshow



Celebrating 10 years of analyzing the quickly evolving global non-cash market

2005 2006 2007

2008

20122011

20102009

2013

The industry‟s point of reference

for global non-cash transaction

market data

At the forefront of understanding

regulations and their interaction

with business models and

operations

The clear thought leader on the

various levers for successful

payments strategies and

innovation

WPR13 analyzed the client-end of

the value chain, WPR14

examines the fulfillment i.e. the

non-customer facing part of the

value chain -„Payments

Processing’

WPR 2014

2014



Payments executives from 31 financial institutions globally have shared their

opinions with Capgemini and RBS’ industry experts

WPR 2014 Executive Interviews — Executives Pain Points

“Handling data and transformation initiatives are getting complex, especially for

global banks which have to comply with regulatory issues across

geographies.”

“Our business transformation approach is to test and learn with new use cases as we go

along. We do not want to take a big bang approach.”

“Although it is a long journey, banks need to act now as

simplification of payments systems has a strong commitment

from key stakeholders.”

SELECT FIRMS*

Australia: ANZ

Austria: Erste Group Bank AG, Raiffeisen Bank International AG

Brazil: Banco BradescoCartões,

France: EBA, NatixisPaiements, Credit Agricole Cards and Payments, BNPP

Germany: Equens SE, UniCredit Bank AG

India: NPCI

Mexico: Banamex

Netherlands: ING, RabobankNederland, ABN AMRO, Deutsche Bank

Singapore: Standard Chartered Bank

Sweden: Nordea, SEB

UK: Aviva, Mastercard Worldwide

US: Citibank, PayPal, Veldos LLC

* Represents only the firms that agreed to be named in the report



A Ten Year World Payments Report Retrospective:

An Industry in Evolution

What Were Correct Predictions?

Penetration of non-bank PSPs in the

payments market

Increased fragmentation and

commoditization of the payments value chain

Challenges to business models caused by

regulatory and industry dynamics

Barriers to a full and successful SEPA

migration

Payments growing in importance and

reaching board level attention

What Surprised Us?

Sourcing strategies have remained

relatively stagnant in the payments industry

Decrease in usage of checks was slower

than expected

Consolidation of ACHs (Automated Clearing

Houses) did not happen as anticipated

The fast development of technologies

including smartphones, cloud-based solutions

and real-time payments was not anticipated







The Way Forward

World Payments Report 2014 - Roadshow



Global non-cash transactions volume growth decelerated in 2012, but is

expected to have accelerated in 2013



The mobile payments space is increasingly more competitive, with banks and non-banks striving for insightful data, market influence and consumer loyalty

Note: Number of Global Transactions (Billion), 2011–2015F

The growth continues in the e- and m-payments markets and a gradual

convergence is happening as the distinction between the two diminishes

CAGR: 15.9%CAGR: 60.8%

(Non-Banks: 82.7%, Banks: 58.1%)

Banks

Non-Banks

E-Commerce Transactions M-Payments



Cross border payments in the retail sector represents an opportunity for

banks, with large volume and potential growth

RemittancesB2C

CommerceGlobal Trade

Financial Markets

Key Industry Statistics in 2012

$529 bn(6.6% CAGR 2009-

2012)

Source (Estimated/Actual)

E-commerce: $300 bn

$22.6 tn(3.8% CAGR 2008-2012)

World Bank (E) PayVision (E)

Current Market Share of Banks

WTO (E) SWIFT (A)

2.2 bn securities and treasury transactions

(4.4% CAGR 2008-2012)

Snapshot of Data for Cross-border Segments

Corporate Retail

Banks should revisit the balance of risk and convenience within their product mix to further increase their overall share in the cross-border payments space

Growth opportunity for Banks

90% 100%10-30%

30-60%







The Way Forward




As Key Regulatory and Industry Initiatives continue to increase across the globe

their focus shifts from a regional to a global level, creating a cascading effect

Heat Map of Key Regulatory and Industry Initiatives (KRIIs), Global and Regional, 2014

North America

EMV Adoption in the U.S.

Prepaid Payment Products

Regulations in North America

Capital Rules for Foreign Banks

in U.S. LOW

HIGH

Europe

Access to Accounts (PSD II)

European Current Account Switching

Large Value Payment Systems Upgrades

SEPA / e-SEPA

SEPA for Cards

Mobile Payments Security in Europe

Cybersecurity Directive

Electronic Identification and Trusted Services

Internet Payments Security in Europe

Financial Transaction TaxLOW

HIGH

Note: Emerging Markets refers to Asia-Pacific, Middle East, and Latin America

KRIIs cited in previous WPRs

KRIIs introduced in WPR 2014

LOWIMPACT

HIGHIMPACT

IMPACT ONPAYMENTS

Emerging Markets*

Asian Payments Network*

Financial Inclusion

UAE Wallet

National Payments Corporation

of India LOW

HIGH

Global

Basel III Capital Norms

Basel and Intraday Liquidity Norms

Real Time Retail Payments

Pressure on Card Interchange Fee

Contactless Cards / NFC

Cross-Border Low Value Payments Processing

Payments Governance

Mobile Payments

Tokenization for Cards

e-Invoicing

ISO 20022 Standards in Payments

AML / ATF

Data Privacy and Payments

e-Government

Access to Clearing

Virtual Currency Regulations

U.S. Foreign Account Tax Compliance Act (FATCA)

Bank Payment Obligation

CPSS-IOSCOLOW

HIGH

Many European initiatives like:• Real Time Retail Payments• Payments Governance

are being taken to a global level



This year, more than 50% of the analyzed KRIIs focused on innovation with

60% overall falling into that trend

LOWIMPACT

HIGHIMPACT

IMPACT ONPAYMENTS

Standardization

Competition and

Transparency

Innovation

1a

27

4

6

28

3

30

98

20

5Risk Reduction

2

23

11

14

31

7

10

1b

19

25

26

29

34

32

33

12

13

15

16

17 18

21

22

24

Overlap of Industry Transformation Trends Driven by KRIIs1a Basel III Capital Norms

1b Basel and Intraday Liquidity Norms

2 Cross-Border Low Value Payments Processing

3 Access to Accounts (PSD II)

4 FATCA

5 AML / AFT

6 SEPA / e-SEPA

7 Pressure on Card Interchange Fees

8 Prepaid Payment Products Regulations in North America

9 Large Value Payment Systems Upgrades

10 Real Time Retail Payments

11 European Current Account Switching

12 EMV Adoption in the U.S.

13 Internet Payment Security in Europe

14 Data Privacy and Payments

15 Payments Governance

16 ISO 20022 Standards in Payments

17 Mobile Payments

18 Contactless Cards / NFC

19 SEPA for Cards

20 e-Invoicing

21 e-Government

22 National Payments Corporation of India

23 CPSS-IOSCO

24 Access to Clearing

25 Mobile Payments Security in Europe

26 Virtual Currency Regulations

27 Capital Rules for Foreign Banks in U.S.

28 Financial Transaction Tax

29 Bank Payment Obligation

30 Cybersecurity Directive

31 Electronic Identification and Trusted Services

32 Tokenization for Cards

33 UAE Wallet

34 Financial Inclusion

Y

Y







Data management is becoming a key bank strategy to effective regulatory

compliance and develop new service offerings that improve return on investment

Optimized Data Management for Effective and Efficient Regulatory Compliance

Sil

o’e

d

Ap

pro

ac

h

Leverage

external data

Correlate

internal and

external data

Leverage

analytics

Develop tools

Sin

gle

Da

ta M

od

el A

pp

roa

ch

Develop MIS

Improve

reporting

efficiency and

compliance

effectiveness

Consolidate

reporting

activities

Create vision

Develop

strategy

Define data

requirement

Develop

systems

Reduce

complexity of

technologies

Develop

dashboard

Ensure

accuracy of the

data

Robust

governance

Monitor the data

Going Beyond Compliance

Roadmap to Single Data Model Approach

Create

Configure

Conform

Comply

Complement

Deriving a single view of the customer will help banks improve their customers’ experience and enhance their sales opportunities



Leveraging payments data models can help firms move from a compliance-

centric approach to one of differentiation for customer value

Internal Focus Client Focus

Regula

tory

Non

-Regula

tory

Perspective

Dri

ve

r

Fraud Monitoring

AML

KYC

Regulatory Reporting

(Transactions and

Liquidity)

Cost Management

Product Innovation

Cross-Sell and Up-Sell

Improved Control and

Risk Reduction

Value Added Services

Big Data

Customer Analytics

Format Standardization

Transparency in

relationship (e.g.

transparency of prices

and not pricing

information , speed of

transactions etc.)

Shared KYC initiatives

EfficiencyDifferentiation

Compliance Support

E-invoicing

Supply Chain Advisory

Cash Forecasting

Data

Advis

ory

/

Serv

ice

Driver and Perspective Analysis for Payments Data Models







The Way Forward




Innovation has accelerated in customer facing areas but payments processing

face multiple external and internal challenges

External PressureImpact on

PP (E)

Security and Data

Privacy (Regulations)

Real Time Information

and Processing

Pressure on Traditional

Business model

Competition for Volume

Competition on Front

End

Disruptive Technologies

Price Pressure

Changing Product Mix

Reorganization (ring-

fencing)

Customer Demand for

Visibility into Data

Internal ChallengesImpact on

PP(E)

Complexity of Legacy

IT

Managing Internal

Bandwidth (and limited

resources)

Silo-ed Operations

High Cost of

Processing

Product Proliferation

Selecting Right

Partner

Challenges constrain firms from developing a full response to the external forces they face; traditional players now need a strategic review of their payments processing activities.

LOWIMPACT

HIGHIMPACT

IMPACT ONPAYMENTS



In addition to the client-facing part of the value chain, customer demands are

driving the need for payment processing transformation and innovation

Customer Demands Driving a Need for Innovation in Payments Processing

Real-time Capability

‘Anytime’ /‘Anywhere’ Payments

Multiple Payments Modes/Channels

Enterprise-wide Visibility (Cash and Working Capital)

Cost Control via Efficient Payments Processing

Risk Management

Treasury Technology Compliant with

Corporate IT

Ease of Payments

Value-Added Services

Visibility/Insights from Payments Data

Retail CorporateRetail/Corporate



For the majority of payments firms interviewed, transformation of processing

infrastructure is a top priority in the short term as well as medium to long term

Short Term

Medium Term

Long Term

Top Priority Top 3 Priority Not a Priority

Time Horizon of Transformation Objectives for Processors

Our research indicates a strong inclination towards quick prioritization of payments processing transformation project

Half of the

interviewed firms

indicated that

payments

processing

transformation is

the top priority for

them in the short

term

Most of the participants

indicated that payments

processing

transformation takes

time and hence have

retained it as a top 3

priority over the

medium or long terms

Payments

processing

transformation is

amongst the top

priorities for most of

the interviewed

participants in the

short/medium term

and a few indicated

otherwise



Firms need to reassess the basics of incremental transformation through

considering more robust execution aligned to a clear business vision

Roadmap Towards Desired Payments Processing Capability

Building

Transformation

Vision

Incremental

Transformation

Integrated

Payments Back-

Office

Delivering Long-

term Business

Benefits

Common constraints during transformation initiatives restrict the ability of firms to derive clear benefits from transformation

• Decide a long-term payments processing vision

• Assess the current maturity and agree the future desired maturity

• Formulate an incremental transformation

• Execute the strategy through short cycle projects

• Develop an integrated processing platform with desired capabilities and flexibility

• Deriving business benefits for the firm and the clients – retail and corporate







The Way Forward




• 800 billion number of non-cash payments transactions by 2024

• Developing countries growing to half of the total non-cash market by 2021

• Developing markets to be the focus of the majority of new solution development

• Entry by large numbers of non-banks into the customer-facing segments

• In several major countries, banks may no longer be the only party at the center of payments governance

• More PSP’s sharing parts of the value chain due to regulatory and industry changes

Radical Shift In Roles And Influenceof Key Stakeholders

Innovation And Convergence will Change Pricing and Product Mix

• Continued acceleration of innovation and convergence

• Emergence of additional currencies

• Rising usage of closed loop payments instruments (prepaid)

• Increased biometric identification

• Rising potential risk of fraud or failure of PSPs

• Continued proliferation of financial industry regulation

• Focus on consumer protection by regulators to continue

• Increased cross-border e-commerce

The 10 year horizon: potential changes in the payments industry



Closing Thoughts…

Section 1: Payments Landscape

The global non-cash transactions volume growth is projected to have increased by

nearly 10% (9.4%) in 2013 after decelerating in 2012 with a growth rate of 7.7%.

This projection is fueled by growth in developing markets and debit/credit card use.

E- and M- payments are converging.

Section 2: KRIIs

As banks face the increasing volume and complexity of key regulatory and industry

initiatives (KRIIs), data management offers opportunities to better manage KRIIs and

achieve some return on compliance investments.

Section 3: Innovation in Processing

Now is the time for PSPs to develop a long-term vision and realize that vision by

implementing short-cycle projects that provide agility and deliver immediate business

benefits/value.

Section 4: Industry Trends

Innovation and convergence are likely to accelerate, resulting in multiple changes in

product mix and business models. This could lead to greater choice for clients.

Questions?

www.worldpaymentsreport.com


http://www.capgemini.com/payments

http://www.rbs.com/

Thank you for joining us

today!


Pick up your free copy

World Payments Report 2014


http://www.capgemini.com/payments

http://www.rbs.com/




Appendix

Sources and Notes



List of Sources for World Payments Report 2014

Slide No. Sources and Notes

4 Capgemini Financial Services Analysis 2014; Word Payments Report 2005-2013

6 European Central Bank – Statistical Data Warehouse - 2012 figures released September 2013; Bank for International Settlements

Red Book, 2012 figures released December 2013, Country‟s Central Bank Annual Reports, 2012

7 Industry estimates for the overall size of the e-commerce and m-payments markets are derived from various industry and analyst

reports. For estimating transactional data for non-banks and alternative players in e-payments and m-payments, we have analyzed

transactional data from leading market players such as PayPal, Amazon, and Vodafone M-Pesa

8

9 SWIFT Annual Report, 2012; Migration and Development Brief, World Bank, April 2013; WTO – World Trade Reports 2009-2013

Note: Remittances are estimated and contain both cash and non-cash transactions. Global trade numbers include both cash and

non-cash transactions. The financial markets numbers reflect only SWIFT transactions.

11 Capgemini Financial Services Analysis, 2014; World Payments Report, 2011, 2012, and 2013



14 Capgemini Financial Services Analysis 2014

16 Capgemini Financial Services Analysis 2014; Executive Interviews for WPR 2014

Note: The chart has been prepared based on the executive interviews with 15 traditional processors

17 Capgemini Financial Services Analysis 2014; Executive Interviews for WPR 2014

Note: The chart has been prepared based on the executive interviews with 15 traditional processors



21 Capgemini Financial Services Analysis 2014; Word Payments Report 2005-2013

World Payments Report 2014 Key Findings Presentation

Economy & Finance

Transcript of World Payments Report 2014 Key Findings Presentation