Cards Asia 2011 Smart Consumers Go For Smart Payments

Talking to banks and retailers globally, they're still saying that cash is very much king. And I want to make the point that Winkl Nixdorf isn't an advocate for cash. We'll work with the payment guys as well, but what the feedback is from banks and retailers is this is still one of their major pain points. And the fact is that the cash in circulation globally is still increasing. And we recognize that electronic payments are too, but the fact is that actual cash in circulation in mature economies and in emerging markets is still accelerating. So if I give you an example in Singapore, we just did some research with the Monetary Authority of Singapore. Cash notes and coins has gone from $13 billion in 2001 to $23.3 billion in 2011. in 2009, and that's the cash that circulated in the economy. And from what we're saying from that, in terms of what Singapore retailers are facing is— this is in terms of the cash cycle and the handling and the labor and the processing of this cash— it's costing retailers in Singapore about $1 billion Singapore dollars. It's not a contrarian view. We're not an advocate for cash, but the reality is what we're facing with retailers and banks is they want us to help solve that issue. And as it stands yet, we haven't seen a— although I do understand the trend— we haven't seen a massive trend yet to smart cards or NFC or that. I mean, we recognize it will happen in the future, but cash is still king for the time being.

The other trend that we do observe is that companies like PayPal, Apple, Google, etc., they are in the cloud, they started in the cloud, they have lots of customers, they have a big customer base. So actually it goes from 2 sides. We see the Traditional payment schemes moving into the cloud, and from the cloud, those that are in the cloud, we see them moving into the physical world. We see also convergence of technologies, and that's where it gets very interesting for us as scholars, because payment, ID, mobile, transit, it all comes together, and in the end, it all will reside in that handset.

E-commerce, in fact, took 10 years to go mainstream. Today, it represents some 4 or 5% of the retail market. Mobile commerce will go much faster. I think this is a very important trend, first of all. Another thing that also we are seeing a lot is domestic business, domestic transactions is very important. More and more Asians are buying locally, are buying from local websites. And the most important part that all people are telling us is they want to be safe when they go online. I think safety, security is the most important element where consumers are telling us, I'm hearing more and more about what's happening when my card is online. And what I'm seeing is the card industry is adding layers of security, which means that it was not so secure the minute before. We want, and they want, something quick and fast, being online and even further being on the mobile.

Contactless banking cards, Asia is leader. Definitely Asia is driving the way. Even in, they are 2 main areas where contactless is really very widely used. In the US, there is no security. It's magnetic stripe banking cards with the contactless capability, but there is very low security. Here in Asia, it's real EMV cards that are moving ahead. Here in Singapore, we have some contactless banking cards, and everywhere in Asia. So it's really driving the move worldwide on the banking contactless How do you think the adoption rate of NFC will be in Asia?

We have been using contactless already very widely. People know about it. So having the mobile devices carrying that capability as NFC, culturally, I think, is something that the consumers would easily understand. Therefore, the chances of the Asian consumers appreciating NFC I think is probably higher than other places in the world.

Today, technologically speaking, the solution is ready. Then really the matter is that whether you're ready as a consumer that you have your banking application onto your SIM card. That is the property of the telco operators. That is, if you are abroad, if you have a problem with your transaction, who do you call? So this is really today the main challenge. Technologically-wise, the aim of the NFC is to have with your phone a total interoperability with any type of infrastructure installed.

For NFC, the one thing you must not forget is global interoperability. I think many of you know that contactless technology historically was kind of fragmented, and a contactless card that might work here in Singapore may not work in other places because of the different interface specifications. In the days of plastic cards, this was maybe okay because they're still small and thin and light. You can carry multiple of them in your wallet, and depending on where you go, you might have a different plastic card that works there on the contactless infrastructure there. However, when it comes— that capability comes into the mobile phone, you will not carry a different phone just because the contactless standards are different in where you are going to travel to. So when— in order to bring this contactless technology into the phone, the first thing we figured out was that global interoperability is very important. And the NFC Forum, since its beginning in 2004, in the first 6 years we have completed the first wave specifications and certification program that ensures you at the contactless interface level Global interoperability of wherever you bring your phone to. So that's number one, and this was launched in December of last year. I think we have to make sure that the consumers really enjoy the NFC transactions, applications, services, whatever. For that, there are many things that we still need to work collaboratively as an industry, things like assuring the consumers that the NFC transactions or something that's not going to upset any of your reliability or concerns that you may have in that regard. Also, registering to a service should be easy so that the consumers can easily apply to an application. And there are many other things I think that will be necessary still for the entire industry to look into. Once, even after the devices become available, you don't want to see people not using these NFC services. So we want to make sure that the services are easy to use, comfortable to use, and, you know, the consumers really love it. So there are still many things that we need to work on.

You're never going to get down to one card because you're never going to get down to one relationship. You're never going to get down to one currency because we're not going to have a global currency. That's why we still have exchange rates. But the problem is that behaviorally, right now, I can make decisions about this. I can decide that for large purchases, I want to put it on my credit card. And I can pull that one out. I can decide that in— for smaller, maybe I want my debit card. I can decide that for some regions of the world, I want to use my Visa. I can decide that when I'm having dinner with my member from American Express, that I need to pull out the American Express card because it's appropriate that I pay for dinner using the card that the company that he works for. So no matter what happens, and by the way, if I decide I don't like a relationship anymore, the interest rate is too high, or the service that I'm getting for a particular relationship is not good, I have the power to take a card out and cut it up with a scissor. So all the behaviors that I like, I can select, I can discontinue, I can choose which are top of wallet. I still am going to want that behavior here. So the specification, if you will, and I— you knew I was going to bring this back to Global Platform. The means by which you can do application selection on So that the user can determine which cards are top of wallet, which ones are default, and why. And in certain situations, do I want to change the default to have a different card surface as my new default? Do I want to end a relationship, and how do I do that? Behaviorally, we're going to expect— because we can't get down to one card, because people are going to want to have multiple relationships, and they're going to want to change them for very personal reasons. What I see, however, is, is I don't have this thing, I got that thing, and that's quite a bit of difference. If I could just get my relationships down to that thickness.