The retail payments landscape has always been ripe for disruption and innovation not just because of evolving consumer behaviour but also due to regulatory reforms and governments’ drive for financial inclusion and digital payment. Concerns around handling cash have accelerated the move towards digital and contactless especially during the pandemic. The use of plastic cards still remains the main mode of payment in many countries around the world. However, the use of mobile wallets and QR-based payments have also been growing exponentially.
Will card payment survive a digital-first world? Experts wager on the future of payment cards with Bryan Carroll of TNEX, Sharon Tan of DBS, Ben Gilbey of Mastercard, Priyanka Madan of GrabPay, and Michael Robertson of Entrust pitting their views and wits during an insightful discussion.
Carroll opined that “plastic” will not survive as consumers, especially the Millennials and Gen Z, are already moving to mobile payments while Robertson argued that cards are here to stay as these have been the payment mode of choice for more 50 years and provide consumers a 24/7 tangible payment instrument that is robust, reputable, and ubiquitous. It is also evolving to be sustainable as well, available now in environmentally friendly materials such as wood and metals.
The five speakers also tackled portfolio performance improvement, the use of AI and data analytics to enhance customer experience, and new business models that are shaping advancement in payment capabilities.
The following key points were discussed:
The following is the edited transcript of the interview:
Mobasher Zein Kazmi (MZK): Good afternoon from Singapore. I'm your host, Mobasher Zein Kazmi, head of research at The Asian Banker. I would like to welcome you to this RadioFinance session on ‘Will card payments survive a digital first world?’ during which we will discuss with our invited guests the ongoing transformation of the payments business and assess some of the different approaches being taken by various market players in terms of seizing new opportunities that present themselves within retail payments today. While the COVID-19 pandemic has had dramatic impact in terms of the retail payment ecosystem around the world, we can credit both evolving consumer behavior and regulatory reform that has really contributed to this sharp increase in use of digital payments. But despite the traction we're seeing today in terms of the growth of digital mobile e-wallets and QR code-based payments, what does this mean for plastic physical cards in terms of importance? This RadioFinance session will discuss if card based-payments will be able to overcome this new dynamic, in terms of how they can meet the increasing requirements for low cost, speed, transparency, and predictability. Rethinking the business model has become imperative to both conventional and retail players and their non-traditional counterparts including digital new banks, as well as fintech to realise tailor product development, smarter service support, and more refined data management for a superior customer experience. Today, we're pleased to have expert guests who will give us a wide range of perspectives encompassing leading Asian banks, international card schemes, and technology service providers.
I would now take this opportunity to introduce our guests. First of all, we have Bryan Carroll, the co-founder and chief executive officer (CEO) of TNEX, which is Vietnam's first digital-only bank. Bryan has extensive banking and digital experience in Europe, Russia, the Middle East, the US and Asia. Also with us is Sharon Tan, who is the executive director of regional digital consumer finance and card payments at DBS. She oversees the digital experience transformation of the lending and cards business across the region and has 11 years of experience in consumer banking and wealth management. Next is Ben Gilbey, who is responsible for Mastercard suite of payment solutions. Prior to joining Mastercard, Gilbey worked at PayPal as director regional head for mobile Asia Pacific. He has spent the past 20 years in Asia Pacific working on a range of digital payment initiatives. Also with us is Priyanka Madan, who is the head of GrabPay at Grab Malaysia. She has more than 15 years of experience across payments, strategy, development, investments and operations. Before joining Grab, she held key positions at Lazada Group. And finally, we have Michael Robertson, who is the vice president of sales of Entrust leading the company's Bureau Solutions sales activities in Asia Pacific and Japan. Michael has over 20 years of experience in the card personalisation and issuance domain. We're very glad to have you join us today and for you to share your insights with us.
To get started, I would like to share the responses to a poll that we conducted recently among our online readers and followers on the topic. We asked this one question on what is driving your strategy for improving portfolio performance, with respondents having the option to choose from consumer experience or top of wallet product focus or a combination of both. In terms of the results, 33% of the people who responded chose providing the best consumer experience as a method to connect, build trust, and loyalty while enhancing customer value, simplicity and speed as the key driver. Eleven percent of respondents were of the view that having a top of wallet product focus, delivering personalised, well-designed and value-added programs that reward brand loyalty as the principal facilitator. A majority indicated and identified both as equally important. So, a combination of consumer experience and top of wallet product focus is needed to provide customers with a great first impression along with delivering long-term value that recognises and rewards brand loyalty. In this next slide, we've delved a little deeper to understand the why and the thinking behind the three options presented between customer experience, top of wallet and or a combination of both. An important observation is the potential of how customer experience can help drive the growth of transaction volumes and fee-based incomes for issuers. Whereas when we look at the top of wallet product focus, it is predicated on the ease of access, convenience and speed. And why are these both considered as critical elements? There's a broad acknowledgement that a digital and optimised customer experience is important to cater for the needs of an increasingly digital native customer base. As banks, card issuers, fintechs, new banks and other non-traditional players navigate the increasingly competitive landscape to drive the payment card business. These two key strategies continue to come to mind, delivering best customer experience and focusing on top of wallet product design, both being instrumental in terms of delivering long term value. With that said, I would like to pit our guests on the two sides of this argument for either delivering a superior customer experience or opting to maintain a top of wallet product focus. To start off, we can have Bryan and Sharon give their perspective from the consumer experience piece. And Ben to argue in favor of top of wallet, followed by Priyanka and Michael giving us their perspective in terms of both key factors. Ben Gilbey, you can share your thoughts from top of wallet product focus standpoint.
Creating compelling value propositions
Ben Gilbey (BG): I am going to come down a little bit on the fence on this one, however, and say that top of wallet is going to actually come also from a great customer experience. But top of wallet is becoming predominantly the end objective and the end goal in an increasingly rarefied and concentrated e-commerce and digital payments ecosystem. It's becoming incredibly important that you get that everyday use, also those subscription payments that you get from being top of wallet, on your everyday use applications such as Grab, for example, Priyanka, but also on areas like e-commerce, Lazada, Shopee, Amazon, and of course, your subscriptions to your streaming services, that we will be very dependent on over the last 12 to 18 months. Gaining that top of wallet is critical. And to that end, designing cardholder value propositions that speak to those particular merchants, those particular categories, to gain top of wallet is particularly important. We've rolled out programs with Amazon Prime, for example, to encourage people to provision their Mastercards, and together with our customers, our issuer banks, to provision those Mastercards as front of wallets on these key properties.
MZK: I'd like to ask Bryan Carroll to give his insights and inputs from a consumer experience standpoint.
Bryan Carroll (BC): I’d probably take a little bit of a different tack but I do agree with what Ben said. It's important that we look back before we look forward on this. It's important we remove the jargon. Because I'm sick and tired of it, I'm sure you all are as well. Customer experience, very simply, is how people feel about your company, their perceptions, how emotionally engaged they are with you. Not with your products, about your companies. If Apple launched a hotel tomorrow, it would be full, because of that customer experience, that linkage to it. But back in the past customer experiences face to face, supply was bounded by location, regulation, product availability, choice. I remember pre-digital, shop owners and bankers knew the first names of the customers, their background, credit score, ability to pay, and actually their needs. And what was most important, as I come to the future, the transaction was more than the product or service. It was about the experience and a lot of customers looked forward to it. I used to look forward to going to talk to my local shop owner down in Dublin, Ireland. I would gladly share that kind of experience with my friends and with my family if they needed to go to a shop or go to a bank. To speed it up, in 2007, it all changed, where actually with the launch of the iPhone, we have that compelling opportunity to do customer experiences. But unfortunately, banks and payment companies struggle with this, and they still haven’t got us. And it's an opportunity right now to deliver the customer experience of the old days of that shop or that bank.
What I'm seeing time after time is this replication of products. The classic one is a picture of a card in a digital wallet. That's good in a product differentiation first. That's really expensive, because you're buying loyalty, you're spending eyewatering amounts on customer acquisition and cashback and in fact, what you're trying to do is sweeten an analogue pill that a dodgy digital customer doesn't actually want to swallow. Coming up to now, it's back to the future time. Or how do we describe it? It’s beyond product, okay? And how the payments companies, the Mastercard, the (MV) members, the wallets, 39 of them in Vietnam add to this, it’s going to be about sustainability and actually long-term survival.
Now, I've been talking for 10 years about the death of plastic cards, and I've been wrong. I may have been wrong, and I don't think they're going to die very soon. It's all now about the second part of the sentence and as we talk about here in TNEX, no customer in the history of payments has ever said I want to make a payment, full stop. They've said I want to make a payment to buy a cup of coffee, to travel, to educate my children. And that actually opens up the experience, the true cross-sell, upsell, and bundling. The second part of that sentence is where the actual experience exists. The first part, which it seems to concentrate on the law is where the product is – I want to make a payment. So, the technology does exist. I know Mastercard, Visa, a lot of people are adopting this where cloud, application programming interfaces (APIs) ecosystem, marketplace, and data science. So, customer experience (CX) technology now exists to listen to customers. And we have to listen to customers to innovate, to generate loyalty, and reduce the cost of acquisition, and deepen or retain customers, and most importantly, to allow us to release new transformative or new value propositions. Because when I look at the card companies, I don't see transformative yet. I know they are in the process of that.
Customer loyalty vs. customer experience
BC: So how do we get to the top of wallet? Of course, we're in business, I run a bank, I've got a board, I respond, I’ve got to make profitability. But how we get there needs to change. We've really got to stop thinking of top of wallet and start thinking about top of customer experience. Finally, it's good business sense. We don't need the Accentures, the McKinseys, and the banks of the worlds to tell us that customers are willing to pay for a superior customer payment experience. Five-star hotels exists for a reason. Business class exists for a reason. People are willing, but this experience has to be more than transactional. And it has to be personalised to their lifestyle and their values. Organisations that are not governed by CX will diminish in importance over time and this will be hugely accelerated by Gen Z over the next three years when they enter the marketplace. Those companies, it'd be the Mastercard or Visa, that concentrate on CX and drive products from a CX perspective, whether by default, will end up at the top of the wallet. So, stop buying loyalty, give the customer what they want and by default, you'll end up there.
MZK: Sharon Tan, I'll pass it on to you. Is it really all just about giving the customer what they want? Our banks are falling behind on this and being disrupted in terms of ensuring a superior customer experience.
Sharon Tan (ST): For us, the best customer experience is for our customers to be able to pay with whatever payment methods that they think is the most convenient and the most rewarding to them. It can be in the form of card plastics but it could also be mobile payment wallets, or even cash. It's really up to the customer. As a bank, we need to provide these kinds of different options for them. So, DBS, being Singapore's largest card issuer, we do have a diverse card offering that caters to different groups of lifestyle needs, age groups, and so on. But we also, more importantly, have complemented that with a wide suite of digital payment solutions like our digital DBS PayLah! application. When it was launched in 2016, it has since integrated with many major payment rails and is widely accepted in Singapore as a mobile wallet. Creating a new engagement model is really what we are trying to focus on now. We need to do that by looking at how we can engage our customers in totality and allowing them to be rewarded in different platforms, to pay in different platforms.
MZK: I'd like to bring in Priyanka Madan into this debate between customer experience versus the top of wallet, product focus. Priyanka, would you weigh in on the great debate?
Creating more uses for the wallet
Priyanka Madan (PM): I'm on the fence on this one as well. Coming from a digital wallet space where our mission statement is to go head on against cash and convert the cash users to digital users, it is imperative for us to make the wallet ubiquitous, in terms of acceptance. So, the more daily needs, the more use cases we can bring to the wallet to add to the liquidity of how far the money goes – the money that is in the user's digital wallet – the better that works for us. But not to undermine how critical customer experience becomes in this whole journey. I have firsthand seen comments in our Net Promoter Score (NPS) reports, I have seen focus group discussions where it's only customer experience with a single use case that truly inspires the trust and confidence that the users build to go adopt the next use case that we launched in the market. So, to create that sustainability, to create the ubiquity of acceptance that we are aiming towards, it's equally important to not kick the eye of keeping that top notch customer experience so that the trust and the confidence doesn't waver.
To bring the point home, ultimately for us, it's as simple as having a very laser-focused view on who is our target segment? And what is their pain point? And how can we solve that in the most seamless, simple way? A very complex use case like investment has been fractionalised and needs simple bite-size investment for the users who are initiated to the whole investment world for the first time. So that's one end of the spectrum. The second end of the spectrum is simple retail investments. But how can we build a product feature as delightful as using your Grab reward points, or loyalty points along the way to create a discount as you're checking out. I'm literally on the fence here, I cannot overemphasise the need for both, at least for the juncture we are at in our growth journey for Grab.
MZK: I'd like to bring Michael Robertson in on this as well. Michael certainly can provide us input from a card solution perspective and looking at how financial institutions (FIs) can improve the performance of their card portfolio. So, Michael, over to you in terms of what a successful card product looks like.
Michael Robertson (MR): I'm definitely not sitting on the fence. I’m over the fence and through the field. So, from a business perspective, Entrust has 50% of its business segments on the digital sphere. We played very heavily in the mobile space via identity or payment, and everything in between. I sit on the card side and want to best represent the card side for the purpose of this discussion. But going back to customer experience and top of wallet, both are equally important in building that bond between the card issuer and the cardholder, and the program at large. Both can approach that in very different ways. But essentially, the output is portfolio performance, if you get either or both right, ideally, you're going to drive portfolio performance.
Providing customers the best combination
MR: My remit is far northwest as east as Japan and right down to Bangladesh, so I get to be exposed to different markets and different levels of maturity within those payment markets, and the involvement of different technologies and just watch that develop. And there is no silver bullet for payment. But the one thing I'm continually encouraged by, selfishly from a card perspective, is just that link between a card program and the success of the portfolio. Essentially, that is that combination between customer experience and top of wallet. From a customer experience perspective, it could be the way that you get that card issued. Then if they get the program right and the type of worldwide personalisation, everything will get into the conversation during the course of this discussion, that again drives that long-term portfolio performance.
MZK: This would be a really good segue in terms of moving on to our topic and really assessing the relative importance of plastic cards in terms of these being a source of branding. I would ask either Bryan or Sharon to weigh in on this, coming from both a bank and a digital bank-perspective, starting off with Sharon. If you can share your experience from a cards payment side representing a leading bank and in the Association of Southeast Asian Nations (ASEAN) region. What role plastic cards are playing as branding instruments and what implications will this have for your customers given that we're now transitioning to a very strong digital first environment?
ST: Card plastic is definitely a good instrument for branding. But like you said, as we move towards a more increasingly digital world, we need to find other ways to make payments, especially with COVID-19, we are now seeing an increase in contactless payments. At DBS, what we really want to do is to make banking invisible so that customers can engage with us seamlessly throughout their daily lives. To do that, it would require us to provide more than just the card plastic. We would have contactless payments. We have mobile wallets. What we really strive for is to embed ourselves in the lives of our customers.
Physical cards will not go away
ST: With that said, I think that the physical card will stay with us in short to medium term at least, especially in certain markets where some transactions still require a physical card. What's important is that we continue to invest in our card business and see how we can continue to create credit cards in a sustainable way. So just recently, we launched Singapore's first eco-friendly, recycled polyvinyl chloride (PVC) card called the DBS Live Fresh card. That's also one of our ways to continue to promote the sustainability agenda for our card business.
BC: Itotally agree with what Sharon is saying but this was a little bit from us. It's very much a jurisdictional market infrastructure question. So, if I take where we are in Vietnam, we've got 58 million people unbanked. We don't have a positive infrastructure. It’s geographically dispersed. We have a digitally-obsessed nation who spend an average 6 hours and 15 minutes on digital media. We have a card, for two reasons: one, it's our only method of cash out. Secondly, we built TNEX Pay, it’s our own closing payment system. But interoperability of course, is something that the QR payments haven't got to yet. There are too many standards. So how do you pay everywhere, if you’re not a member of the QR scheme? I don't see cards disappearing in the short term. I hope they disappear in the long term, because my bank is for Gen Z and it's also for micro merchants. I build volume. I don't have big analogue dollars. It's digital sense. We concentrate on a really superior customer experience. People can have a card, we don't have branches, it can be in their hands anywhere in Vietnam in 24 hours, it's contactless. We spent a lot of time, but it's expensive. So therefore, I give free banking, everyday banking and can make a profit, but it's one of my largest costs – cards. Because of my segment, it's about $3.20 into the hands of customers. And I'm dealing with customers and merchants who earn on average revenue $20,000 to $30,000 a year and customers who earn $2,172 a year on average. I need to keep the cost down. So to reflect on what Sharon is saying, we have multiple ways of payments: your B, your brand, your BX, maybe your CX, which may be your user experience design (UX). If your customers want a card, give them a card. If your customers want a card, don't.
MZK: When banks first issued magnetic stripe, plastic cards we haven’t had a lot of variety, and you've got co-branded cards or different card programs. Now the question is, don't you think the issue is with personal scripting, that is the problem restricting or hindering issues of plastic cards in the chip card space?
BG: It's also speaking to the fact that now that contactless chips are mandated across all cards, debit or credit, that the questioner was asking whether that hinders the design capabilities? I don't think it does at all, we're seeing a lot of unique designs, just take the example of Apple card. As to the design, where our brand wins, how the personalisation appeared on the front and the back of the card. And we've seen the same, for example, with the Grab card in Singapore, a lot of flexibility and personalisation that is available for the issuer, for the customer. We're addressing those issues by providing greater design flexibility.
Going green with sustainable cards
BC: The problem is it's not within the remit of EMV, a lot of these decisions. So, I think it's a bit unfair for you guys to take it in the neck. Regulators are very clear, particularly here in Vietnam, and definitely in other jurisdictions on how you can design a card. All of our cards or near field communication (NFC), are chipped. I wouldn't pick Apple as the main one. If you look at what Tinkoff Bank has done with their metal card a long time before that, and how that drove the design thinking. Tinkoff has done phenomenal work in this space in their design and how they match it to their CX. Their metal card, they were the first to do it. It's been phenomenal. Now we're seeing wooden cards. It actually means a lot that we have sustainable cards and we're not sticking microplastic into oceans and when these cards find their funeral.
MZK: So Priyanka, how does the Grab card relate to Grab payments in a mobile wallet sense?
PM: The GrabPay Mastercard prepaid card in context with Singapore where we have launched it, was leveraging on the card network to expand our opportunities in terms of presence and acceptance. Overnight, we got access to 15 million worldwide acceptance points, which are thanks to Mastercard network and in case of a wallet, that speed to market, that ubiquity of acceptance that comes trickling to us. So, a big support to creating that reach for GrabPay. I will also add how significant a disbursement channel it has become for us, because people have taken a liking to the innovation that was built around it. It’s a numberless card, it’s the first of its kind in the region, it’s secure. The usage of the card is not necessarily limited to physical plastic form factor. So, the value proposition around the card was really how can we make it secure, seamless, rewarded, and connected to every single use case that the wallet is going with? The growth trajectory that we are at, the card has only helped us push our business further.
MZK: Michael, we've had this discussion about plastic cards, how do you see these being differentiated in this fast-moving space? Looking at the different potential for it as a branding instrument, perhaps you can also share your input on this.
Tailor-made cards for customers
MR: What we're seeing is the most important part of a successful card program, from our perspective, and what's being reflected back on us is personalisation, the ability to personalise. So, whether that's through KYC, to personalise the card specific to the end user, that makes it more relevant to them, so it’s that continued use. Whether you look at a McKinsey personalisation model, or you look at third party entities that have reported on banks that have deployed personalisation programs over the course of 12 months and look at the lift and shift, the increased amount of transactions increased spend per card. This is again, related to that psychological bond between the issuer and that card program, and the closer you can get to something that's relevant to that cardholder, then the more beneficial that card program will become to everybody.
Being domiciled in Australia, we've seen the quick adoption of mobile technology, contactless technology many years ago across in the country. At that time, speaking to the banking entities, you couldn't speak to them about cards effectively. Their main state, ‘We're focusing everything on mobile’. And the interesting effect after having this in the market for 10 plus years is now the banks are coming back to us and saying, ‘We used to spend hours every day thinking about mobile and mobile payment, now we're refocusing on the card’. And it has been a quantum leap in the capabilities of card personalisation. Typically, it was a landscape embossed card that didn't really draw much attraction, attention, the ability to personalise, the ability to create that psychological bond. But now, technology has opened up, we've got all sorts of different formats, embossing can be passe now. We have vertical cards, metal cards, we've mentioned print on demand. The opportunities to target and personalise to that end user, almost infinite. And that's where we're seeing the increased spending. Banks are coming back to us and saying, different banks have been through the journey at different stages, and it's no silver bullet across the world. But the ones who have been through that journey are coming back to say that we're actually seeing that card is the most important branding instruments they have at their disposal.
MZK: I'd like to use that as a segue to move into our next topic, which is really around the application of AI and data and analytics. How that can also contribute to deeper understanding of customers and really support the push for personalisation. Sharon, from DBS’ perspective, we've witnessed how banks in the region are undergoing robust transformation in terms of applying artificial intelligence (AI) to better serve their customers. How do you see this evolving, particularly in the payment space? And what are you doing in terms of leveraging the extensive pools of data that you have in your data capabilities to support your customers, and potentially even personalisation?
Maintaining data integrity
ST: I would say that we are big on data. We use our data analytics capabilities, to provide intuitive and intelligence services, and not just to our customers. And this applies not just to our payment services, but across the bank for other products as well. When it comes to cards, what we're trying to do is to provide more personalised nudges and contextualised offers to our customers, working with our merchant partners, allowing them to tap on our base to provide those offers to customers, or even internally, where we are able to have a good read about our customers, their spending behaviour, their transaction behaviours, and how do we reward our customers based on these information that we know. For example, we know that some customers frequently order food delivery, so I'll be able to then push a personalised cashback promotion that is relevant to them. We are trying to do more of these contextualised journeys. And to do that, we need to have very meaningful insights about customers. And we at DBS, we want to have a framework to ensure the integrity of how we use our customer data.
We have this framework called the PURE framework. P stands for purposeful. We want to make sure that whenever the essential customer has a purpose, it has to be unsurprising. So, customers cannot feel why am I getting this message from the bank? How do they know this about me? So it shouldn't be unsurprising to them. It has to be very respectable, respectful towards the customer. Lastly, it has to be explainable. Are we able to explain clearly? Why are we doing this? Why are we using this data in a very logical manner?
MZK: Bryan, if you can give us also your input in terms of how advanced analytics can be a key differentiator, especially for facilitating customer retention, acquisition and then broadly in terms of driving those digital payments.
BC: We didn't transform. We're a greenfield, completely brand-new bank, everything is built on cloud from the bottom up. We don't have to implement master data management (MDM) or performance analytics (PA) or these other optimisations. The very center of our organisation is our customer data platform (CDP). We’re one of the first banks to put in a CDP. That's powered not by analytics. We need to move away from it by data science. Analytics just tells you what my operating model is for three million customers as 141 full time equivalent (FTE) over assets and liabilities, and payments and operations. In order to do that, I need loads of AI. We’ve also deep-learned. We've gone beyond AI. We've gone beyond simple natural language processing (NLP) stuff. In fact, that's quite customer divorcing, actually, most of the time. So, every night we relearn all of our customers, we use an open-source framework that relearned all of our customers. So even the user interface design (UI) and UX are personalised when you go in. We get down to a segment of one. We don't talk about personas and any of that nonsense. That's all you words for ‘I can't get insight into my data’. I understand why you've been banking many years, but we get down all to the segment of one. We change our UI, UX, our merchants have access to our AI. The other worry that we use it for is risk, of course. It drives payments, we do real time behavioural payments, debit card fraud, it helps us on security, and it runs our anomalies, we do real time anomaly using AI and then we relearn. So, the model trains, we train our security or behavioural model every night. Availability, of course, it will tell me when things are about to go, boom. Just because it's in the cloud, just because it's scalable, it doesn't mean it's not going to fall over. And the last is cost. As I said, my operating model, if I need to take on more customers, I don't buy servers. I basically buy cloud. I increase my OpEx, of course that makes it easier. So from change the bank, run the bank, and manage the risk around payments, around credit, around making sure that I deliver the right CX – data is at the very core. It is the largest team my bank, not information technology (IT). That's one of the smallest teams in the bank.
MZK: Ben, as Bryan has mentioned, data is really at the core. So how do you see its application in terms of the evolving payment needs of your clients and their end users and customers?
Creating a seamless experience for customers
BG: So Mastercard, I think just the same as DBS, we have very rigid and respectful rules about how we use data, all of our data is aggregated. None of it is personal data. And we're very cautious and careful about how we use that data. That's one of our key principles. I'll give a couple of examples of how we're leveraging data and information and AI, or rather machine learning. AI is a very overused term, quite frankly. One example is NuData Security, which is a company that we acquired two or three years ago. We use NuData and NuDetect, one of their products, for continuous consumer validation. We're looking to authenticate the user on their mobile devices, on their tablets, wherever they are, whenever they are. We do that through continuously tracking how they're holding the device, how their typing on the device, all kinds of behavioural considerations that give us a higher level of confidence to say that the user is the owner of that device, because we recognise those behavioural traits. So that provides us with a lot more confidence. It provides our merchants and our fintechs, who are using these services –
financial institution customers – a lot more confidence and allows them to be more measured in how they go about validating consumers. So not having to continuously validate them with SMS, etc. It means we can be a lot less intrusive and delight customers with a lot more seamless and frictionless user experience.
Another good example are products from Ethoca, which is another company we recently acquired, where we're able to provide a lot more information to consumers around the transactions they've made. So often, when you look at your card statements, whether it's online, whether it's printed, a lot of the names of the merchants are fairly opaque. There's not a lot of information that's given behind the transaction. Ethoca allows us to present a lot more data and a lot more meaningful data to the consumer. So just a couple of examples of how we're using anonymised aggregated data to just provide better consumer experiences, reduce the friction and just provide the consumer with a lot more detailed information that they can take advantage of.
MZK: Priyanka from Grab’s perspective, one of the points to pick from our discussion is having that frictionless seamless payment experience. So how do you see the role of data and analytics in terms of driving that and just being able to wow your customers?
PM: We are not trying to spring surprises at the customers. But we are trying to leverage the rich data we have to the various use cases under Grab as a super app strategy, how can we introduce users to these new use cases which come through in a targeted fashion that suits them the most. The other thing I would highlight is how we mine these hundreds and millions of transactions that happen on Grab ecosystem to really make our risk and reward system very secure, which is absolutely paramount to us, echoing some of the thoughts shared by the panelists earlier. Another example of how we are taking this forward is the recent launch of our PayLater product. This is exactly where analytics and data have come in extremely handy in creating a very robust credit scoring system, which keeps the customer experience absolutely top notch, fast, and gives them the spending limit, which is within their reach. And, of course, keeps our loss rate in check as per our risk appetite.
MZK: I'll use that as an opportunity to move towards our next topic, at how business and operating models are shaping payment capabilities. Sharon, perhaps you can share your thoughts in terms of how we're looking at both banks, non-banks, they're certainly rethinking and revamping their own business and operating models to adjust to these new shifts and transformations within retail payments. Just looking at for instance when we had the top and go and now you've got all these numerous digital wallets on offer, if we were to do a bit of stargazing, what new innovations do you foresee in terms of payments, in the short to medium term? And where do you see cards fitting in?
ST: We are constantly reviewing our operating model. But what I mentioned just now still stays, that we want to continue to drive that personalised engagement to our customers, sending them relevant nudges and also ensuring that the services that we provide to them can be instant, can be seamless. We have launched the instant card account last year in Singapore and also in Hong Kong a few years ago, where we allow customers to not just apply for a card, but they can apply, get instantly approved and they can instantly provision it to Apple Pay. So that allows them to be able to make payments instantly after they apply for a card. So a lot of these are some of the things that we want to continue to champion. Another area that we are looking very closely at would be how to work with partners, to innovate from a rewards and loyalty perspective, working with e-commerce, working with other type of industry partners to provide a really digital reward experience for our customers. These are some of the things that we're going to do in the next few years and we'll continue to sharpen this focus as we go.
MZK: Priyanka, I'll probably just circle back to you as well and get your sense in terms of how you see this space evolving. And how is Grab reacting to all of these new changes and innovation and payments?
PM: One of the key updates and recent changes is the rollout of the national QR, which just makes QR payments across all digital wallets at a level playing field. And the next step in this direction is how this national QR is soon to go cross border. We are particularly excited about this development where each of the country's national QR is now trying to create the cross-border education. The other particular trend that we are quite excited to be part of is the ‘buy now pay later’ trend that we see emerging. We genuinely see the gap and we have heard it firsthand from customers who don't necessarily have access to credit cards. But promoting a very responsible credit line to these customers, filling in for the gap, but avoiding them getting into a debt spiral or credit peril of any sort. I think that's the ultimate mission of this particular trend that we are latching on.
MZK: That's actually a very good segue for my next question to both Bryan and Ben. And it's on the buy now pay later scheme, especially as Priyanka has mentioned that debt trap. Given that, this is really targeted and designed for those millennials and the Gen Z segment. So, how do you see this space evolving? Where does this stand in terms of those customers who possibly wouldn't be eligible for a conventional credit card? I'll pass it to Bryan first.
BC: Buy now pay later is not you. It's a poor reincarnation of how we used to live pre-digital, where you paid on taking a shop and you pay at the end. Except the merchant wasn't charged 7%-8% for that service. It was a different world. Why is buy now pay later here? You nailed it! Credit cards are not accessible to Gen Zs, they don't have a credit score. And if you take that further – I think Priyanka is totally right – as an old corporate banker as well, it's very easy to lend money. So easy to lend money but it's very hard to get it back. And the issue with getting it back, Priyanka nailed it – and that's why I think Grab is going to do phenomenal things and this with the wealth of data – being able to do that ethically and being able to credit score using alternate data, lifestyle data is all that's really available in Vietnam at the moment, is huge. We've seen a massive move to buy now pay later in the US. I've seen buy now pay later for 10 bucks, $12 people are using it. And also, it's clean. Credit card companies are perhaps at times opaque banks. So, buy now pay later is quite simple: pay on time, you don't get a penalty. And really like what Priyanka said, as a banker, and particularly I've got a responsibility to the unbanked in Vietnam, I don't want to become a predatory lender. I want to be able to offer ethical credit that they can repay. You know, we want a certain level of default, guys, let's be open and honest. That gives us our portfolio performance.
MZK: So, do you think buy now pay later is equivalent to being a credit card for the next generation? Would that be a good or bad analogy? I'll let Ben take this one.
Utilising the ‘buy now pay later’ scheme
BG: I think BNPL is fascinating. It's not new. Afterpay has been around in Australia for at least four or five years, and is doing incredibly well. We estimate that about 3% of global e-commerce is now on buy now pay later. We expect that to go to 13% in the next two to three years. So, these companies are just going to take off, whether it's a firm, whether it's Afterpay, whether it’s Klarna, they've already taken off. And what's particularly interesting is that, yes, it's very relevant for those people who in Vietnam, for example, or in Malaysia, or in emerging markets who cannot get a credit score, cannot get access traditional credit. But in Australia, in the US, what we're seeing is people using this, even if they do have a credit card. We are seeing people in Australia in particular starting to utilise debit more than credit. That's typical. We saw that after the global financial crisis (GFC) in 2008, 2009, we saw a pivot toward debit and away from credit. We're seeing it again now in times of financial distress that people want more control. BNPL gives them that control. As Bryan said, it's clean, it's very easily understood. I buy it now, I pay back in four to six months. And I know exactly how much I'm paying back every month. We're going to see the growth. this is not going to cannibalise credit. Credit cards are still going to be here. And in answer, since we're wrapping up, Bryan said he expected them to die 10 years ago, we'll be here another 10 years, hopefully, and they'll still be around. And I don't think plastic, wood, bamboo, or titanium cards are going away in any form. I do think Gen Z will pivot towards a digital first or digital-only environments. That's what they’re used to with digital wallets. But that's in more of our emerging and developing markets. In developed markets like Singapore, Hong Kong, I would argue – even China, in Asia Pacific, and certainly Australia and New Zealand – we will see cards and plastic be around for some time. But BNPL is a very nice complement and a very easily understood construct for a lot of people. Merchants love it, the average basket size for merchants has increased by 85% where BNPL debt is deployed. So yes, merchants have to pay for it, in certain models.
MZK: I'd like to give Michael a chance to weigh in on this, looking at all these transformational shifts, the revamping of operating models, and new or old models such as buy now pay later. But fundamentally, Michael, how can cards really complement? Looking at all the different types of payment strategies of both bank and non-bank players, how can cards really support that? Give us your thoughts in terms of its ability to build trust, brand equity and loyalty?
MR: From my perspective, our cards have been payment instruments for better than 15 years. During that journey, there's been technological involvement from magnetic stripe or before magnetic stripe, optical character recognition (OCR), then to magnetic stripe, now to chip and then to contactless in the face. There have been technological advancements. But now branding is the space. We're getting that reflected back on. It’s just a branding instrument. So, whether you argue for debit, credit, buy now pay later, which all of those have card programs linked to them for the most part, we see these digital organisations all launching cards, whether its Venmo, Apple Pay, or Google or all Grab, they are all doing card programs. But again, it's that ability to have a 24/7 tangible payment instrument that is robust, repeatable, and is ubiquitous, essentially, given all of the AI, data mining, data science, and the ability to personalise, which is a technological shift, and the personalisation front that's all lending itself to a greater ability to market to that one person and add value. If you're not adding value, whichever way that looks like, you might as well not be around. It's all about adding value and I may be bullish, I may be arrogant, all of the above, but I think we're just scratching the surface of the card life. So sorry, Bryan. I know you want to see the demise of cards, though I am very bullish on the future of cards. And again, it's not my words, it's what's being reflected back on me.
Being part of the journey of different life cycles in three different countries and seeing very mature, very sophisticated countries now leaning into new opportunities to market to one. It's extremely exciting, and I will try and be quick. But this one thing you know, we're all familiar with a card activation label. The card activation label was there for activation or bring this number, identify itself and then you activate the card. Now it's been seen as an opportunity to market to one. So, with your data mining, your data science, with all of the ethical and feasibility controls, you can target a specific message to that user. And that message could be from the bank, it could be based on your habits or your data mining, it could be insurances or mortgages within a bank. But more interestingly, it could be to an external retailer, a sporting event, or a rock concert or the like where they target to you. That's a targeted message, which is temporary advertising, which doesn't destroy the brand, or the equity of the brand. That actually adds value to the retailer or the bank department, it adds value to the to the program, it adds value to the end user. So, everybody wins. I think we're just scratching the surface.
MZK: Certainly quite a compelling case, Michael. It's certainly is quite critical in terms of engaging with customers and really looking at all the different ways of offering those relevant, simple, timely, personalised payment products and services. As we mentioned earlier, as well, in terms of driving transaction volume and fee-based incomes. I'd like to invite anyone who wanted to share any final thoughts, comments, as we wrap up, looking back on how we started the session as well as in terms of whether cards will actually survive in this digital first world.
BG: As I just said, we'll be here 10 years from now and cards will still be around. So, Michael, you'll still have a job.
BC: Man, I'll take that bet. Okay there's growth. Unfortunately, all of us people will be dying, the cards will go in the coffin with us. I can't see how people are going to live their lives on a phone with the exception of a Mastercard, or Visa card or a co-branded wooden, fairy dust. It doesn't matter. People are moving to their phones. Plastic cannot survive. But if I don't succeed, I will buy everyone here anything you want. I'll give it eight years. I’ll hedge my bets.
MR: In this world of consistent noise and the fact that you always have to interact with your mobile, it's always asking for a slice of your life. Imagine a world where people want to shut down, they want to shut out. They want to go out and enjoy a user experience. And typically, most user experience these days, you have to pay for. If you want ultimate peace, then give me a piece of plastic every day. I will take that piece of plastic; it will ask nothing from me. But it will work every single time.
MZK: I want to take this opportunity to thank Sharon, Bryan, Ben, Priyanka, and Michael, for joining us for a terrific session today.