“Never has the field of payments been more dynamic, nor more exciting. The sheer volume and pace of change and innovation across our industry, reflected in unprecedented levels of investment as well as M&A, is just extraordinary. The PayTech Book provides an excellent foundation to help the reader navigate everything that's going on worldwide, and to better understand the drivers for all of that activity.”
Jim Wadsworth, SVP, Mastercard
“Technology and payments are yoked together. It is technology that is driving payments forward not only in developed markets but also in emerging markets where it is so important to have solutions that can enable the currently underbanked to have access to digital financial services. The PayTech Book provides a fascinating insight from industry thought leaders into how PayTech is powering the digital payments revolution.”
John Chaplin, Chairman, Payments Innovation Jury
“Payment is the most fundamental building block of commerce, and technology has always been a part of it. The bronze age gave us tools to hammer out coins. The industrial revolution let us print bank notes en masse. And now, in the 21st Century, the way we pay is being revolutionised by digital technology.
From contactless cards to mobile wallets to cryptocurrencies, technology is making it easier, safer and more convenient to make payments. It's a trend that touches people at all levels of society, and it shows no sign of stopping. Which means there's no better time than now to understand how the world of payments technology works, how it's regulated, and how new innovations will change the way we all do business.
The PayTech Book has a lot to teach us about this payment revolution. More importantly, it will spark debates about the role PayTech plays in our global economy, and which future payment experiences can benefit businesses and customers alike.”
Angela Yore, MD, SkyParlour
“Commerce is an essential requirement for societies, communities and families to thrive. Moreover, trusted payment companies fuel commerce and must perpetually evolve and adapt to delight users – or they're replaced. The PayTech Book provides invaluable insights in areas such as complex and varied payment paradigms and products, technical considerations including blockchain, compliance and regulatory to enable payments businesses and banks to thrive.”
Gary Palmer, Co-founder, President, CEO, Chairman, First Performance, Chairman, TECS (tecs.at)
“The PayTech Book explains essential concepts of payments and current worldwide payment infrastructures for anyone to read and understand, offers a brilliant insight into the complex topic of regulation and compliance, including blockchain around the world, and finally provides possible responses to the most pressing payment questions and as how the future system could be shaped. It is a joy to read and I recommend it strongly.”
Kamran Hedjri, Board Member, PXP Financial
“Keenly looking forward to The PayTech Book, the authors and contents suggest a formidable amount of brainpower and a fascinating read. This will be compulsory reading for the industry itself, but banks, retailers and large businesses ignore this revolution at their peril! I've worked closely with the editors and have the utmost respect for them. Enjoy!”
Mike Smith, Payments NED
“Few people understand the real influence and impact of payments and how they influence and promote economic growth. Few other consumer industries have adopted technology and innovated to the same extent as the payments space since the turn of the millennium and the pace of change over the last decade has been truly astonishing. From speed and ease of transaction and settlement to fraud detection and compliance there is no single discipline within payments that has not been materially and permanently changed for the better by the application of technology. Regulators consumers and merchants alike demand better, faster, more compliant, accountable, fraud-sure, frictionless and alternative payments. From watches and rings, to phones and fingerprints, the relentless application of technology and the willingness of both the established players and the burgeoning PayTech space to keep pushing the boundaries, the payments industry is undoubtedly answering all the questions posed of it. Who would have thought, just five short years ago that you would no longer need to buy a ticket to travel around London and always get the cheapest possible fare – as I say, astonishing.”
Michael Harty, Founder MD, The Card and Payments Awards
“Payments has become a huge, global subject, with technology at its heart. So The PayTech Book is a ‘must read' for all those involved in delivering or using payments. It very neatly takes the reader into this complex, evolving and interconnected world, drawing on insights from highly regarded industry experts, disruptive new market entrants and established players adopting digital transformation.”
Paul Anning, Partner, Osborne Clarke LLP
“The PayTech Book provides context to the use of emergent, technology driven, financial service resources in each of many market sectors. Automated Fare Collection systems in the transport sector are rapidly developing into fully integrated environments leading on to MaaS and Smart Cities. PayTech excels in detailing how the financial services industry is keeping up with this progress.”
Alan Leibert, Director, The ALCO Group Limited
“As we all know, ‘PayTech' is well and truly embedded into the payments industry. ‘FinTech' became ubiquitous when describing innovations within financial services, while PayTech encapsulates the specific technologies behind digital payment evolutions. It's these developments – plus the forward thinking companies behind them – that keep adding excitement to the payments ecosystem by innovating and pushing boundaries.
So, the key to staying on top is to keep expanding our knowledge and remain aware of industry issues. The PayTech Book offers just that opportunity – not only does it house a wealth of information on the infrastructure which supports payments, but clarifies and explores the regulation that ensures businesses and consumers are kept safe.”
Tessa Unsworth, CCO at PrePay Solutions
This edition first published 2020
© 2020 FINTECH Circle Ltd
Registered office
John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom
For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor mentioned in this book.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom. If professional advice or other expert assistance is required, the services of a competent professional should be sought.
A catalogue record for this book is available from the Library of Congress.
A catalogue record for this book is available from the British Library.
ISBN 978-1-119-55191-1 (paperback) ISBN 978-1-119-55194-2 (ePDF)
ISBN 978-1-119-55195-9 (ePub) ISBN 978-1-119-55197-3 (Obook)
Cover design: Wiley
Cover image: pkproject/Shutterstock
Edited by
Susanne Chishti
Tony Craddock
Robert Courtneidge
Markos Zachariadis
Join us on a journey through the fascinating world of payments. If you bring together consumers and businesses demanding change and a better customer experience, regulators enabling competition and technology making change possible, the future of payments is exciting, summarized in the term “PayTech”. We will share our vision for how the digital world will unfold, what this means for cash, plastic cards, digital wallets and mobile money and the financially excluded, and how cooperation will allow the payments industry to satisfy consumers’ and companies’ growing needs for instant, convenient and secure payments.
We will explain the changing role of money in our lives, introduce the concept of programmable money and its adoption in a world of open banking, commonly accepted standards and digital identity. We also cover the impact of the network effect in payments, and how overlaying data-driven insights enables more effective marketing at the point of purchase. Cybersecurity and its importance in a world of increasingly sophisticated criminals is explained, and how data analytics and artificial intelligence can prevent fraud and money laundering.
McKinsey forecasts that payments will become a US$2 trillion business by 2020.1 Payment transactions are increasing as economic activity grows, and the demand for payments is expected to rise globally as developing countries build their infrastructures and become more financially inclusive and as the emergence of the digital economy allows for more “on-demand” products and services driven by consumer demand. Investments in the sector have been strong – global PayTech investment reached US$18 billion across 123 deals in 2018. The record funding was due to Ant Financial’s US$14 billion deal.2
In summary, the payments and PayTech sector is booming, with FinTech entrepreneurs and investors across the world working on the most cutting-edge solutions. In order to share with our readers the most valuable insights globally, we followed the same approach as with The FinTech Book, The WealthTech Book (focused on how new business models and technology innovation will change the global asset management and private banking sector) and The InsurTech Book (focused on the rapid changes in the global insurance market) – the first globally crowdsourced books on the financial technology revolution, published by Wiley, which have become global bestsellers.
The PayTech Book is the first crowdsourced book globally on the future of payments – a book that provides food for thought to FinTech newbies, pioneers and well-seasoned experts alike. The reason we decided to reach out to the global payment and FinTech community in sourcing the book’s contributors lies in the inherently fragmented nature of the field of payments technology. There was no single author, group of authors or indeed region in the world that could cover all the facets and nuances of PayTech in an exhaustive manner. What is more, by being able to reach out to a truly global contributor base, we not only stayed true to the spirit of FinTech and PayTech – making use of technological channels of communication in reaching out to, selecting and reviewing our would-be contributors – we also made sure that every corner of the globe had the chance to have its say. Thus, we aimed to fulfil one of the most important purposes of The PayTech Book, namely to give a voice to those who would remain unheard – those who did not belong to a true FinTech and PayTech community in their local areas – and spread that voice to an international audience. We have immensely enjoyed the journey of editing The PayTech Book and sincerely hope that you will enjoy reading it at least as much.
More than 148 authors from 30 countries submitted 168 abstracts to be part of the book. We asked our global FinTech and payment communities for their views regarding which abstracts they would like to have fully expanded for The PayTech Book. Out of all the contributors, we selected 74 authors who have been asked to write their full chapter, which has now been included in this book. We conducted a questionnaire among all our selected authors to further understand their background and expertise. In summary, our selected authors come from 20+ countries. The majority of our authors have postgraduate university degrees (60%, see Table 1), strong domain expertise across many fields (see Table 2) and over 87% of our finalist authors have had their articles published before.
Tables 3 and 4 show that almost half our finalist authors are entrepreneurs working for FinTech startups (many of them part of the founding team), a quarter come from established financial and technology companies and another quarter from service providers such as consulting firms or law firms servicing the FinTech and payments sectors.
A quarter of our authors work for startups with up to 10 people and another 40% for startups/small and medium enterprises (SMEs) of up to 100 people. A third of our authors are employed by a large organization of more than 100 employees.
We are very proud of our highly qualified authors, their strong expertise and passion for payments, PayTech and FinTech – either through being entrepreneurs or often “intrapreneurs” in large established organizations, all of whom are committed to playing a significant role in the global FinTech and PayTech revolution. These remarkable people are willing to share their insights with all of us over the next pages.
This book would not have been possible without the dedication and efforts of all contributors to The PayTech Book (both those who submitted their initial abstracts for consideration by the global FinTech community, as well as the final authors whose insights you will be reading shortly). In addition, we would like to thank our editors at Wiley, whose guidance and help made sure that what started off as an idea, you are now holding in your hands.
Finally, I would like to thank my fantastic co-editors Tony Craddock, Director General of the Emerging Payments Association, Robert Courtneidge, CEO Moorwand and Markos Zachariadis, Professor at Alliance Manchester Business School. Editing a crowdsourced book naturally takes several months and Tony, Robert and Markos were always a pleasure to work with, given their strong domain expertise and vision for the future of payments!
Susanne Chishti
Bestselling Co-Editor, The FINTECH Book Series
CEO FINTECH Circle & FINTECH Circle Institute
Susanne Chishti is the CEO of FINTECH Circle, Europe's first angel network focused on FinTech opportunities and founder of the FINTECH Circle Institute, the leading FinTech learning and innovation platform offering corporate innovation workshops to C-level executives and online FinTech courses. She is also the bestselling co-editor of The FinTech Book, The WealthTech Book and The InsurTech Book (published by Wiley). Awards:
After completing her MBA, she started her career working for a FinTech company (before the term “FinTech” had been invented) in Silicon Valley some 20 years ago. She then worked for more than 15 years across Deutsche Bank, Lloyds Banking Group, Morgan Stanley and Accenture in London and Hong Kong. Susanne is an award-winning entrepreneur and investor with strong FinTech expertise. She is a judge and coach at global FinTech events and competitions and a conference keynote speaker. Susanne leads a global community of more than 130,000 FinTech entrepreneurs, investors and financial services professionals globally (www.fintechcircle.com).
An enthusiastic leader of the world's most influential association in payments, a lively public speaker and avid networker, Tony is passionate about payments and the difference they can make to lives everywhere.
Tony shares his deep payments knowledge born from 15 years' experience, and his evangelical zeal for innovation, when speaking and chairing conferences; publishing books and white papers; or enrolling leaders to join the Emerging Payments Association (EPA)'s collaboration network.
His role at the EPA is also to help shape projects that drive lasting change. These cover areas such as financial exclusion, open banking, financial crime, diversity, international trade and banking access.
Tony conceived and launched the EPA in 2012 and is its Director General. The EPA promotes the UK as a global hub for payments innovation and the interests of the EPA's 150+ members, which include banks, card schemes, payments service providers, issuers, processors and acquirers, who all come together to drive collective industry change.
Tony also leads the communities of EPA Asia, EPA EU, EPA USA and EPA Africa. His vision is that this global network of interconnected capabilities, people and knowledge will prove to be truly transformational in how the world works, for the benefit of everyone.
Robert Courtneidge was appointed CEO of international payments specialist Moorwand in 2018, following a distinguished career in the card and payments industry dating back nearly 30 years. He has been named amongst the Payments Power 10, a highly competitive ranking of the most influential payments industry contributors, for six consecutive years and was voted No. 1 in 2015.
During his career working across the entire payments ecosystem, Robert has developed a deep expertise in e-money, having supported projects for major financial institutions and well known technology providers globally. Robert is highly skilled in all aspects of consumer finance issues, including consumer protection, banking regulation and compliance and data protection.
Previously, Robert achieved success as a senior legal professional specializing in matters related to the cards and payments industry, and has been recognized in the Legal 500 for Corporate and Commercial – Financial Services.
Robert is a frequent spokesperson on current issues facing the European payments industry, including the second Payment Services Directive, fourth Anti-Money Laundering Directive and the laws relating to blockchain, cryptocurrencies and initial coin offerings. He travels globally to speak about card payments and financial technology. He is a regular writer in a number of key payments industry publications, and co-presenter of the Fintech Unplugged podcast.
Markos Zachariadis is Professor and Chair in Financial Technology and Information Systems at the Alliance Manchester Business School, University of Manchester, and a FinTech Research Fellow at the University of Cambridge. Markos's research sits at the cross-section of economics and strategy of digital innovation, financial technology studies and network economics, and he has studied extensively the economic impact of information and communication technology adoption on bank performance, the diffusion of payment networks and the role of data and standards in financial infrastructures and markets. His research has been published in top academic journals and books, and he has been awarded the NET Institute award for his study on the economics of payment networks and the SWIFT Institute and GRI awards for his research on open application programming interfaces and digital transformation in banking.
A board advisor, mentor and international keynote speaker, Markos has been invited to present his research insights to various international conferences, governments and global organizations. He was also the organizer of an international PayTech conference at WBS, funded by the Gates Foundation and Mastercard.
In the past, Markos has been a Professor of Information Systems Management and Digital Innovation at Warwick Business School, a Visiting Professor in FinTech at Ivey Business School, Western University, a Research Associate at Judge Business School, University of Cambridge and a Visiting Scholar at London Business School. He holds an MSc and PhD from the London School of Economics.
After the global book launch events of The FinTech Book, The WealthTech Book and The InsurTech Book, we met thousands of FinTech entrepreneurs, investors and financial services and technology professionals who all loved the books and wanted to learn more about how payment technology will change not only financial services, but our world overall.
We came up with the idea for The PayTech Book and spoke to our payment friends globally. Payment entrepreneurs across all continents were eager to share their powerful insights. They wanted to explain the new business models and technologies they were working on to change the world of sending and receiving payments to individuals and organizations globally. FinTech investors, “intrapreneurs”, innovation leaders at leading financial and technology institutions and thought leaders were keen to describe their embrace of the payment revolution. Payments are part of our lives, every day.
The global effort of crowdsourcing such insights was born with The FinTech Book, which became a global bestseller across 107 countries in 10 languages. We continued this success with The WealthTech Book and The InsurTech Book. We hope we can satisfy the appetite for knowledge and insights about the future of payments with this book.
We are aware that this would not have been possible without the global FINTECH Circle community, the Emerging Payment Association, the Fintech Unplugged Podcast and our own personal networks. We are very grateful to more than 130,000 members of FINTECH Circle for joining us daily across our website (www.FINTECHCircle.com) and our Twitter accounts and LinkedIn groups. Without the public support and engagement of our global FinTech and payment communities, this book would not have been possible.
The authors you will read have been chosen by our global payment community purely on merit: thus no matter how big or small their organization, no matter in which country they work, no matter if they are well known or still undiscovered, everybody had the same chance to apply and be part of The PayTech Book. We are proud of that, as we believe payments are at the centre of the world of finance. The global payment and PayTech communities are made up of the smartest, most innovative and nicest people we know. Thank you for being part of our journey. It is difficult to name you all here, but you are all listed in the directory at the end of the book.
Wiley, our publisher, has been a great partner for The FinTech Book Series and we are delighted that they will again publish The PayTech Book in paperback and e-book formats globally. Special thanks go to our fantastic editor Gemma Valler. Thank you and your team – we could not have done it without your amazing support!
We look forward to hearing from you. Please visit our website (www.paytechbook.com) for additional bonus content from our global payment community! Please send us your comments on The PayTech Book and let us know how you wish to be engaged by dropping us a line at info@FINTECHCircle.com.
Susanne Chishti Twitter: @SusanneChishti |
Tony Craddock Twitter: @TonyCraddock |
Robert Courtneidge Twitter: @PrepaidRobert |
Prof. Markos Zachariadis Twitter: @MarkosZach |
Twitter: @FINTECHCircle @FTC_Institute @FTCInnovate @PayTechBook |
|
Instagram: @FINTECHCircle @PayTechBook |
From banknotes and coins, to plastic cards and mobile devices, payments have evolved over the centuries to include a number of instruments and means that help financial transactions to take place in the real economy. By nature, payment transactions are increasing as economic activity grows; the demand for payments is expected to rise globally as developing countries build their infrastructures and become more financially inclusive, and as the emergence of the digital economy allows for more “on-demand” products and services driven by consumer demand. But what exactly is in a payment and how are these cleared and settled in a modern financial system? What are the different technologies and infrastructures involved, and which elements are necessary in order to facilitate a payment?
This part looks at the broader question of what’s in a payment? and provides explanations and descriptions of the various stages and elements of payment systems, as well as how automated clearing houses and real-time settlement systems work. It looks at these from historical as well as technological, procedural, socio-political and regulatory perspectives. It goes on to put this in the context of modern and emerging economies around the world. Special focus is put on the evolution of money and payments that look at the material representations of money, the establishment of electronic transactions and payment institutions, and the emergence of cashless societies. Case studies from emerging infrastructures and regulatory trends are used in order to illustrate progress in the field, and examples of new business model approaches – such as “payments as a service” – are highlighted to demonstrate how many of these technologies can introduce new business opportunities.