The FINANCIAL -- Interview with Andrei Aleikin, Sr. Director, Digital Solutions at Visa CISSEE
Q. What are the key trends impacting cashless payments nowadays?
A. We are currently witnessing a revolution in the way people make payments, in fact in the whole lifestyle of our consumers, which on a scale is close to a technological revolution. Why am I speaking of a revolution?! It is because customers now have very powerful connected devices – mobile or smartphones, which provide constant 24/7 connectivity, the possibility to instantly access any information, any data, and any knowledge in the world though search systems, a possibility to select goods and services and etc.
All of that is included in a small device with very convenient interface with huge processing capability. This is a very powerful device which changes the possibilities and capabilities of a consumer very significantly. Customers now expect a lot more and can do a lot more – in terms of choosing and paying for goods and services, receiving services from financial institutions or from other service providers. All the participants of financial and digital commerce ecosystems now have to meet these demands and these capabilities – and this impacts the whole industry. So, the number one trend, in our view, is connected/smart consumer with a connected device in their hands.
The 2nd trend is a proliferation of all-in-one-platforms. Huge platforms and solutions provided by all-in-one-platform companies like Apple, Google, Amazon, Alibaba with Ali-pay– these are the ecosystems which allow customers to fulfil most of their everyday needs within the ecosystem. This is a new experience and possibility for both customers and service providers to work within this ecosystem. Gartner expects that by 2020 Alibaba will become the largest retailer in the world. This is an indicator of the significance of this trend.
The 3rd important trend is big data proliferation. There are some assessments that the amount of data doubles every two years, and by 2020 it will reach 45 000 Exabyte, which is hard to imagine. This data brings new, very strong, capabilities to understand better the needs and behaviours of our customers, and to offer solutions personalised to the needs of individual people. Artificial intelligence systems are proliferating, with machine learning capabilities growing fast and becoming available via open platforms to the majority of market participants. Big data plus artificial intelligence and deep learning capabilities are bringing new opportunities on a mass scale we didn’t have before.
And the 4th important trend is proliferation of new enabling technologies in connected devices, that help customers experience things much faster and in a much more exciting way than before. In payments this includes the new ways to authenticate the customer using biometrics - face recognition, voice recognition, etc., and the new ways to initiate payments. Customers can do it communicating through devices in a natural language interface, using chatbots and artificial intelligence advisers. According to forecasts, by 2020 about 85% of provider’s relationships with customers will be accomplished via artificial intelligence advisors and using natural language interface.
These are the four key trends in the payment ecosystem and that’s why we believe it’s actually a technological revolution happening now.
Q. How mobile and Pay solutions (Apple Pay, Google Pay etc) and proliferation of e-wallets influence and change payments?
A. We see quite clearly on the statistics of our launches of the mentioned pay solutions (like Apple Pay, GooglePay, Samsung Pay as well as e-wallets/issuer wallets) that when they come to the market, the number of transactions made by mobile phones of our customers grows drastically. First of all this is due to the perfect customer experience that Apple Pay and similar pay solutions bring to customers.
Initially they all started with contactless NFC payments made by NFC phones at contactless terminals, but we see clearly now that they are moving into the card-not-present space, with more and more payments within mobile applications (so-called “In-app payments”) being made using Apple pay, Google Pay and other “Pay” solutions. One more important trend now is that “Pays” are moving to e-commerce. We see more and more often a button ‘Pay with Apple Pay” on e-commerce websites and customers can make payments on such websites immediately, using Apple Pay. Again, the customer experience is very smooth and convenient, and this brings great potential of increasing the number of payments made in mobile commerce/e-commerce as well as in face-to-face NFC POS terminals. So, this is now very strong driver in moving to cashless and we believe that payment systems, banks, and financial industry in general should use this trend to increase the share of cashless payments in the economy.
Q. What is Visa’s role as payments move to gadgets?
A. Visa plays several roles in this process of moving payments to gadgets. First and very obvious role is the technical enablement on the banking side of the industry, as banks have to implement some changes in their systems to support payments with gadgets. The second very important part is that Visa is a provider of secured technology which allows to store card credentials securely in mobile devices. Now with this obvious trend of customers moving to wearables/mobile devices there is a need to load payment credentials to millions of devices in a securer way, so that fraudsters will not be able to steal these credentials and use them for payments.
As far as the number of devices is huge, it’s quite difficult to manage this kind of security in a traditional way. That’s why, Visa together with other payment systems worked on a new standard of storing payment credentials in gadgets, wearables and mobile devices by converting them into tokens. A token is a surrogate card number which resembles a real one, but which is just a pointer to a real card number stored securely on Visa side - at Visa Token Service. When you load tokens to mobile devices instead of real credentials, the fraudsters can’t do much with these tokens. They won’t be able to do payment transactions even if they steal tokens from devices.
Visa as a payment system will control to whom that token has been issued and how it can be used; so Visa will not allow such fraudulent transactions. This is a new higher level of security of storing payment credentials in mobile devices and wearables and Visa is providing this tokenization technology widely to banks to offer customers NFC contactless payments within their mobile banking applications (“Issuer Wallets”) in multiple markets – Georgia, Belarus, Bosnia & Herzegovina, Kazakhstan, Serbia, Ukraine and others.
We are proud that we have partnered with Apple, Google, Samsung in launching tokenization technology together with their “Pays” applications in multiple countries in our region. In particular, in Ukraine we’ve launched Google Pay with Google in November 2017 and Apple Pay with Apple in May 2018 - both based on Visa Token Service. Apple Pay has also been launched in Kazakhstan and Samsung Pay - in Belarus. Now Garmin Pay allowing to pay with Garmin smartwatches that support NFC) is also available in all abovementioned markets These technologies are moving quickly around our region and the background for that is tokenization and the Visa Token Service as a securer way to store card credentials on mobile devices.
At the same time, Visa helps to provide customers with seamless customer experience when paying with smartphones and wearables. , and this is due to implementation of biometric authentication. In payments it’s very important to validate the owner of the card before making the payment. The most convenient way to do it on a mobile device now is using biometric authentication, like finger print or face recognition which are already very popular,voice recognition is coming soon and Visa supports these methods with special solutions as well. These are the main new roles Visa is playing in payment ecosystem in order to support payments with mobile devices, in addition to its traditional roles of payment network, connecting all payment ecosystem participants, and payment scheme, establishing the rules for Visa card-based payments
Q. Do you think that all financial transactions will soon become cashless?
A. There are different opinions about that. We see obvious trend to cashless. Governments are interested in cashless payments; customers want them too, because they are safer and more convenient; the merchants understand that this is now a preferred way of payment for their customers and are also moving to cashless now. Meanwhile, there are some merchants that still prefer cash, because of some habit, taxation and other reasons,. There is the opinion that cash will still remain existing in some markets, especially in those that are moving slower than others. But here we should take into account the possibility of “leap-frogging” - great progress made by some markets which initially were at earlier stage of development, but are implementing the latest technologies intensively and are quickly becoming leaders in the industry.
I think Georgia is a great example of this kind of leadership. Georgia was one of the first markets in our region to launch Visa payWave contactless payments in 2009 and in just a few years it has become one of the global leaders in terms of penetration of Visa payWave contactless transactions. Over 93% of all face-2-face transactions (transactions made at merchant POS terminals) are being done now with contactless technology: contactless cards, or smartphones, or wearables. This is the second-best result in the world. Now, Georgia is moving fast to tokenization. Three Georgian banks – Bank of Georgia, TBC Bank and VTB Bank - have already launched tokenized Issuer wallets, Bank of Georgia has also launched Garmin Pay, which prepares them for Pays coming to Georgian market.
Q. What are the current demands of modern customers towards payment providers? How Visa is responding to these changing demands from customer experience?
A. I have already mentioned that we witness the revolution in the capabilities of customers because of the connected devices in their hands. Because of it they have new needs and new possibilities in terms of gaining knowledge about goods and services, choosing among them and making payments in a secure and seamless way. Visa is responding to this need for security by offering a securer way to store card data and pay with smart-devices using the above mentioned ‘tokenization’ technology. We also provide seamlessness with the help of contactless technology and biometrics.
There is also one more important demand which our customers with new great capabilities are developing: they expect their banks, merchants and service providers to offer additional value, bonuses, services, propositions, which will be fine-tuned to individual preferences of a particular customer. Such “personalization” is possible now due to artificial intelligence and big data capabilities, so this demand also has to be supported. In order to help our clients deliver this targeted personalized offers to customers, Visa provides loyalty and merchant offer platforms as well as customer segmentation capabilities based on analysis of customer behaviour and transaction history.
We also see that there are multiple new players on the market offer innovative customer experience, new ways to interact with customers – so Visa is really open to cooperation with fintechs and other players in the market in order to deliver better experience and additional value to our cardholders.
Q. What do you think differentiates Visa from the rest of its competitors in the payments sector in the new digital age?
A. Despite a lot of new players in the financial services world, Visa remains the largest payment platform in the world in terms of global coverage, the number of connected participants and processing power for financial transactions. Visa is present in 200 countries and connects more than 17 300 banks and financial institutions. We have 3.2 billion cards issued currently and 44 million merchants connected to the Visa network, which is processing 165 billion financial transactions per year.
But these are not the only distinguishing factors. Our strength is in combining global coverage with global interoperability. All the solutions which we launch are globally interoperable, which means that they will work the same smooth way at any point in the world where Visa card is accepted. Visa applies the highest security standards and our tokenization solution is a proof of that. Because of that Visa has gained loyalty and trust from our clients, the banks, merchants and customers, and as a result Visa is one of the most trusted brands in the world. But now Visa is changing – it is opening itself to other participants of the market: fintech companies, service providers. Visa was probably the first among payment systems, who opened more than 40 API interfaces to fintechs and other “external” non-bank partners. “API” is an “Application Programming Interface”, which is a simple way to connect directly to VisaNet and use Visa services together with banks to offer new solutions to customers.
Visa also has established a number of Innovation Centres in all regions, where we are conducting co-creation sessions with banks and fintech companies in order to help them build new customer solutions based on our technology. Also, we have a number of programs to support fintechs.
Q. How does Visa work with new fintech players?
A. Visa is diversifying the ways how we work with fintechs. I have already mentioned the first way APIs, which Visa has opened to the world through the special platform – the Visa Developer Platform. Anyone can access this platform through a website developer.visa.com and get all information about our APIs, try them in a “sandbox” and apply for production system access. .
Second way: Visa has launched a “Visa-Fintech Fast Track” programme, which is a program to speed up establishing partnerships, signing of standard contracts, and getting connected to Visa APIs and partner banks.
Third way: Visa has created a new function called the “Innovation and Strategic Partnership Team” with a task to identify the most capable, interesting solutions and fintech providers with highest potential; to find partners for them among banks; and develop solutions together.
Forth way: We have launched the “Visa Everywhere Initiative”, which is a new generation of hackathons for fintech players. Our finalists will have much more time to develop proper prototypes of their solutions, which helps the jury to identify the solutions with the highest potential for commercial success.
Q. What do you think is the future of cryptocurrency? And what will be the impact of cryptocurrency on traditional cashless payments?
A. I propose to divide this question into two parts. The first part is about cryptocurrencies themselves, and the second about the background technology on which cryptocurrency is based – blockchain technology. If we are speaking about cryptocurrency, currently Visa cards can be used to buy and sell cryptocurrency in markets where it’s allowed, and legitimate transactions can be done. In april 2019 Visa and the major bitcoin and cryptocurrency exchange Coinbase have launched the Coinbase Visa Debit Card which allows users to spend crypto as effortlessly as the money in their bank.
Another example of how Visa is using blockchain technology for building new services is “B2B Connect”. It is a non-card based cross border payments solution for corporate entities, developed and provided by Visa using distributed ledger (block chain) technology. It allows for cross border account to account payment from payer to payee.This solution has been piloted and launched successfully and we are now rolling it out in several markets.
All the above examples prove that Visa is expanding its role in payments ecosystem far beyond just card payment network – to a universal payment technology provider.
By Eva Bolkvadze