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e-Payment and e-Purse : a Reasoned Approach. André-Jacques Selezneff Vice-President Low Value & Proximity Payment Solutions MasterCard Europe. Summary. Review of electronic payment means for individual card holders An approach of costs

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e payment and e purse a reasoned approach

e-Payment and e-Purse : a Reasoned Approach

André-Jacques Selezneff

Vice-President Low Value & Proximity Payment Solutions

MasterCard Europe

summary
Summary
  • Review of electronic payment means for individual card holders
  • An approach of costs
  • Evolution Perspectives for payment techniques and consequences on costs
existing electronic payment means
Existing electronic payment means
  • MasterCard Credit Card :
    • does not allow transactions anonymity
  • “Classical” Maestro Debit Card :
    • problem if no banking account
  • Maestro “Pre-Paid” :
    • communication cost might be too high for low value transactions
market situation for e payment means
Market situation for e-Payment Means
  • Market pulls card transactions towards low value amounts
  • e-Purse World Market unclear:
    • multiple incompatible national solutions
    • no cross-border inter-operability
  • e-Purse Choice too often technical
  • Security is important when business exists
master card s low value payments offer
MasterCard's Low Value Payments offer
  • Pre-Authorised Debit on M/Chip4:
    • standard EMV debit transactions,
    • no on-line authorisation
  • Clip e-Purse:
    • derived from existing transactions processing tools
    • dedicated infrastructure
  • Mondex:
    • THE MasterCard solution for "electronic cash"
    • dedicated infrastructure
future for electronic payment
Future for Electronic Payment
  • EMV (M/Chip 4 in MasterCard) offers members multiple features for debit / credit and for low value payments
  • M/Chip 4 incorporates known needs for face-to-face payments, as well as new needs like :
    • distant payments (on Internet, through GSM, …)
    • low value payments (e-purse type)
    • payment means for new customers (youth, newly employed, partners' clients…)
actual cost structure with successive scheme types

2

1

2

Learning Cost

1

Learning Time

Actual Cost Structure with successive scheme types

The hard facts of life

Total Cost

Volumes

actual cost structure with successive scheme types14

Learning Cost

Learning Time

Actual Cost Structure with successive scheme types

Total Cost

Required

€ Volumes

Volumes

transaction cost hard facts
Transaction Cost : hard facts
  • debit/credit needs telecommunication 
    • cost = telecomm and authorisation + processing
    • commissions just allow Bank to cover costs on LVP
  • e-Purse needs neither telecommunication nor on-line authorisation
    • allows Bank to make money
    •  estimated minimum transaction value 0,10 €
e payment infrastructure issue
e-Payment: infrastructure issue

e-Payment deployment is

  • Comparable to
    • Fortresses of XVIth century
    • Railways of XIXth century
    • Tap water of the 50's
    • Electricity of the 60's
    • Highways and Nuclear Plants of the 70's
    • Telephone and Prestel/Minitel/BST of the 80's
    • Pay-TV and Payment Cards of the 90's
    • Internet and ADSL in this early XXIth century

a long lasting operation

slide18

e-Payment and Transaction Costs

  • e-Payment  e-Authentication
    • Needs a new technical infrastructure
  • Long Return on Investment:
    • Characteristic of infrastructure
    • Amortisation increases cost to charge
  • Bank
    • complex job, difficult communication
    • Tariff per transaction well accepted for credit / debit
slide19

e-Payment and Transaction Costs

  • Issue : Users have for centuries considered cash as « free »
    • difficult to charge e-purse « service » to card holder
    • necessary to reduce costs
  • Answer : Shared Infrastructure
    • decreases per-application costs
    • opportunity to offer new applications
    • Marketing issue, not technical one
other issues to address
Other issues to address
  • e-Purse « limited » to low amounts
    • Undefined Risks?
    • Yet undefined Market?
    • Deployment complexity?
    • Lack of trust in technology?
    • Time required by users to get to grips with a new product?

?

!!

?

!

!!

suggestions
Suggestions
  • Shared Infrastructure
    • Rely on EMV deployment
  • Debit / Credit EMV allows DDA
    • Same security than for e-Purse
  • Abrandis NOT necessary for Low Value Payment products, IF solution is independent from the underlying technology
the emv obligation 1
The EMV obligation (1)
  • EMV-based LVP solution is

an absolutenecessity

to compensate for reduced revenue due to new interchange rates regulation

the emv obligation 2
The EMV obligation (2)
  • EMV-based LVP solution is

an absolutenecessity

to allow exploring new "low value payment" market, while

    • limiting required initial investment,
    • accessing an immediately available acceptance infrastructure,
    • guaranteeing cross-border interoperability.
the emv obligation 3
The EMV obligation (3)
  • EMV-based LVP solution is

an absolutenecessity

    • to help Members amortise EMV investment
    • whilst fully leveragin efforts spent at the occasion of EMV deployment
proposed approach
Proposed Approach
  • Pre-Authorised Debit on M/Chip4 allow quick access to interoperable pre-paid market
  • Acceptance rules based on existing programmes
  • Adaptation of e-Purse solution on EMV once business is existing

Results in

    • solution available today
    • consistent Card products offer with guaranteed future.
questions fragen questions
Questions? Fragen? Questions?

Andre-Jacques_Selezneff@Mastercard.com

MasterCard Europe

Tel. +32 (0)2 352 5275