Curve Customer Protection covers all credit and debit card payments made via the Curve card, giving cardholders an extra layer of protection for disputes with merchants. The Mastercard chargeback scheme, which previously covered Curve card payments, continues to apply to transactions of more than £100,000.

Under the new policy, claims can be made within 120-days when cardholders have used their Curve card as the form of payment for an eligible transaction and the goods or services were not received, defective or not as described. It also covers eligible purchases in the event that the goods prove to be counterfeit and when a promised refund is not completed.

Alison Moore, FinCrime Manager at Curve, said: “Ensuring our customers are protected when they use their Curve card is a top priority, which is why we’ve had fraud protection in place from the outset. By introducing Curve Customer Protection, we’re adding an extra layer of protection for our cardholders, when facing certain disputes with merchants.

“With the new Curve Purchase Protection Policy, our customers can be reimbursed faster, offering them greater peace of mind. This is complemented by the Mastercard chargeback scheme, which offers additional protection for transactions exceeding £100,000, however different timescales for reimbursement may apply.”

Leveraging Angaza’s pay-as-you-go (PAYG) embedded metering and monitoring technology and Mastercard’s cutting-edge digital payment solutions and infrastructure including QR technology, this partnership will not only unlock access to the basic necessities, but will also help people without access to credit or traditional banking services start on a path to financial inclusion.

The partnership follows the successful launch of Mastercard’s first PAYG application programming interface in Uganda last year, which combines low cost QR technology - an open and interoperable technology, with the internet of things to lead more secure and efficient payments.

PAYG business models are emerging around the globe to give people the ability to pay for what they use, as they need it. The model adopted by Angaza allows life-changing products, such as solar home systems, clean cook stoves and water pumps, to be sold at a low upfront cost. Consumers can then pay off the cost of the products over a period of time.

Currently, most payments on the Angaza platform are conducted via cash or mobile money. With the integration of Mastercard’s API, the solution will provide new levels of payment flexibility and affordability impacting the lives of millions of consumers across emerging markets.

Additionally, this partnership could open up fresh access to other financial services and tools. By keeping accurate records of payments that a user is making, the user is able to establish a verifiable digital identity and trackable credit history which was previously impossible to create or maintain. This data gives companies and financial service providers the ability to put underserved populations on a new path to financial inclusion.

“We are delighted to be partnering with Anagza to bring access and inclusion to people and businesses around the world. This partnership will help consumers to overcome hurdles such as the significant cash outlay required to purchase critical items by leveraging micropayments, which in turn also helps to build their credit history. All of this is being made available via the internet of things, which is a great democratizer and is playing a critical role providing safe, secure and accessible digital ecosystems”, says Jorn Lambert, Executive Vice President, Digital Solutions at Mastercard.

“This is a pivotal collaboration for the last-mile distribution industry, bridging Angaza’s global pay-as-you-go solution with a leading digital payment provider,” said Angaza CEO Lesley Marincola. “The addition of Mastercard’s QR technology to Angaza’s platform will allow solar distributors and their clients to process payments for life-changing products securely and efficiently, while opening doors to broader financial inclusion.”

To date, Angaza’s technology has enabled more than five million people in emerging markets across Africa, South America and Asia to purchase over one million life-changing products like solar home systems, water pumps, and clean cookstoves. Following the completion of a successful pilot with the BOP Innovation Centre in Nigeria, Mastercard and Angaza will expand the programme to other markets in Africa and Latin-America to bring as many people as possible into the financial fold.

There is growing interest in the acquirer and merchant community in the Transaction Risk Analysis (TRA) exemption for Strong Customer Authentication (SCA). The opportunity to exclude transactions up to €500 from SCA and place the merchant back in control of consumers’ check-out process is understandably attractive. What remains unclear, however, is whether issuers will accept these opt-out requests. Here we argue that TRA should be regarded by issuers as acquirers providing a positive waved signal, not a desperate request for help…

 

Despite the many areas of uncertainty regarding the implementation of SCA, almost everyone agrees that consumers are likely to experience an increased number of authentication challenges as they shop online from September 2019 onwards. While this increased authentication volume is expected to drive down fraud levels across the EU payments industry, it has created significant concerns for eCommerce merchants. They are worried that increased friction at the point of purchase will drive up basket drop-out and many feel that they are bearing the brunt of the payments industry’s fraud problems.

Today most merchants have a choice whether to use authentication tools such as 3DS. This choice will disappear in September once the SCA mandates come into force. However, many large merchants do not currently use 3DS to create a smoother check-out and minimise basket drop-outs. Merchants take this approach despite the fraud risks and the liability shift they bear, strongly illustrating the importance attached to controlling the check-out experience.

In order to mitigate some of these concerns the European Union legislator created a range of exemptions to SCA within the Regulatory and Technical Standards. The role of the low value and recurring exemptions is relatively well understood and follows standard custom and practice within the cards world. White listing (trusted beneficiaries) remains a mercurial opt-out, which many industry participants believe may be an important part of the payment industry’s future but is unlikely to be a major opportunity to reduce shopping friction during 2019. This is because many issuers are struggling to meet the mandatory SCA requirements, and see white listing as a nice to have in the short term.

 

However, none of these exemptions is the subject of this blog... The area of focus here is the TRA exemption, and its impact on the signalling for and allocation of risk within the payment ecosystem.

 

TRA allows the merchant’s acquirer to exempt certain transactions from SCA in exchange for the acquirer taking on the risk of fraud. Acquirers are expected to assess transaction risk and decide if they wish to take on the liability for fraud. If acquirers do not want the liability, they can leave the risk with the issuer by enabling an authentication step-up, or by using one of the other exemptions. Acquirers will make this assessment using real time fraud tools and whatever additional information they have on the customer at the time. For more detail on the TRA exemption itself see our previous blog.

If the acquirer wishes to take on the fraud risk, they will need to present a transaction to an issuer with the associated TRA flag (currently being developed by the card schemes). The issuer is always the final arbiter of an authentication decision and can always request a step-up or decline. It seems likely that the most efficient way of presenting the TRA flag for an issuer decision will be at the point of authentication (i.e. via 3DS) rather than authorisation, as this should reduce transaction latency. If the issuer accepts the acquirer exemption, the transaction will be authorised without the associated authentication, the acquirer will take on liability, and bear the costs of any fraud.

 

Our question is: are issuers likely to accept TRA exemptions applied by acquirers for SCA opt-outs, and should issuers see TRA flagged transactions as higher or lower risk than other comparable transactions?

 

Our hypothesis is that issuers should be more disposed to accept requests not to decline TRA flagged transactions because:

Acquirers will only use the TRA flag if they believe that there is a relatively low risk of fraud. In some cases, acquirers/merchants may have better cardholder information than that held by issuers. If acquirers/merchants believe the transaction to be fraudulent, they have the option to use other opt-outs, or allow a transaction to be stepped up, passing the fraud risk to the issuer. This pushes risk out of the TRA exemption and onto other opt-outs or transactions with no opt-out requested If the TRA flag is applied, and the transaction does turn out to be fraudulent, then issuers do not bear the costs of fraud anyway, so why not accept the request? There may be concerns that fraud of any kind could drive up issuers’ fraud reference rates, even if they are not liable, reducing their opportunity to use TRA. Given that fraud rates are expected to drop, and some National Competent Authorities are considering splitting issuing/acquiring fraud reporting by liability[1], this should be less of an issue. It is possible for issuers to validate acquirer TRA risk levels over time as fraud emerges within the chargeback window. More advanced issuers are likely to implement feedback loops to test that TRA exemption requests deliver lower risk transactions in reality. This allows for more granular decision-making on an acquirer by acquirer basis, rewarding those who deliver low risk transactions with even fewer step-ups.

 

The implication of this approach is that issuers should see TRA flagged transactions as a low (arguably zero) risk signal from their acquiring counterparts and should thus be highly inclined to accept the exemption applied by the acquirer.

 

Whether this hypothesis turns out to be true we will just have to wait until Q4 2019 to see. It remains unclear at this stage how many issuers will be able to support their own TRA opt-outs or will even look for the relevant scheme TRA flags within incoming transactions.

 

[1] For example, the UK FCA is considering such an approach see: https://www.fca.org.uk/publication/policy/ps18-24.pdf page 20 “If more than one PSP is involved in processing a transaction (as is the case with card payments), a given PSP’s fraud rate should be calculated based on both the unauthorised transactions for which that PSP has borne liability and transactions involving manipulation of the payerwhich have not been prevented by that PSP.” This is also stated in the EBA Opinion on the implementation of the RTS, June 2018 para 46.

The current financial payment network has a closed system accessible only by banks. Although banks jointly launched an open API system in August 2016, access has been limited only to small fintech firms, charging relatively high fees, about KRW400 to 500 per transaction.

Under the FSC's plans, established banks must open their payment network to all fintech payment service providers as well as other banks. That would enable customers to use a single application to access their accounts at different banks and make payments. Fees charged on fintech firms for using the network will be lowered to one tenth of the current level to ensure fair competition.

Alongside this, amendments to the coutnry's Electronic Financial Transaction Act will mandate all banks to offer payment service providers with standardised APIs for money transfer. It will also prohibit banks from any discriminatory action against payment service providers using their payment system in processing money transfer and charging fees.

In the medium to long term, the FSC says it will consider allowing qualified fintech payment service providers direct access to the payment system without relying on banks’ services.

The FSC also plans to overhaul the current regulatory framework on electronic financial business to promote innovation and competition in financial payment services.

"The Electronic Financial Transaction Act, adopted in 2007, has limitations in keeping up with digital transformation in the past 10 years and reflecting new developments in payment services," states the regulator. "The current regulatory framework, therefore, will be overhauled to embrace more flexibility and scalability in response to the emergence of diverse financial payment services."

Under the new regulatory framework, licenses on electronic financial business will be granted on a business-function basis, rather than a business-sector basis, to better reflect diversification of payment services sector, for example via payment initiation service providers and e-money business providers.

The FSC says it will submit proposals to amend the Electronic Financial Transaction Act in the third quarter of 2019.

BIAN is a collaborative network of leading banks including ABN-AMRO, Nomura, Commonwealth Bank, Rabobank, Société Générale and UBS. In addition to banks, BIAN members include technology providers, consultants and academics including Accenture, Dell Technologies, Ernest & Young, Oracle, SAP, Swift and IBM.

BIAN membership allows Identitii to ensure its Overlay+ platform is compatible with BIAN standards, making it faster and easier for customers to integrate Overlay+ with existing technology systems also using BIAN. In addition, Identitii will work side by side with member banks and organisations, to define and develop the future direction of standards for the financial services industry - helping to align the strategic direction of the Overlay+ platform with the needs of current and future customers.

Overlay+ allows corporate banks and their customers to quickly and seamlessly adopt digital standards such as open banking, without costly technology infrastructure projects. It enhances internal legacy systems and payment networks, by overlaying them with a private blockchain that enables the secure, auditable and permissioned exchange of information related to payments and transactions. It also introduces an ecosystem of third-party applications that enable banks to access multiple value-added partner offerings, all from within the Overlay+ platform and API.

Nick Armstrong, CEO, Identitii said: “BIAN and Identitii share a similar goal, to help banks work smarter, digitise faster and provide a better more innovative service to their customers. We believe that one of the best candidates for this digital transformation is how corporate banks and their customers exchange information about payments. By ensuring our Overlay+ platform is compatible with BIAN standards, we are making it easier for our customers as they navigate transformation projects internally, as they are assured that the systems are interoperable. We feel privileged to join the BIAN community and look forward to working with them to help accelerate the adoption of new services and the speed of digital transformation in the industry.”

Hans Tesselaar, Executive Director, BIAN, said: “We welcome Identitii to the BIAN community and look forward to working together to help lower the cost of banking and improve the speed of innovation for the whole industry. Innovative FinTech’s like Identitii are vital to our success as they are helping our members and non-members realise digital solutions to some of their biggest challenges today. They also bring valuable skills and expertise to our working groups that further accelerate our goal of standardisation and of creating future-proofed solutions for the industry.”

Identitii enables corporate banks and their customers to transform how they exchange information related to payments and transactions. It uses a private blockchain to facilitate more accurate, faster and more transparent payments.

The backing comes from Souter Investments, family investment office of Sir Brian Souter and Jon Moulton, through his family office and with committed and uncommitted debt facilities provided by Shawbrook and Paragon Bank.

It will enable DivideBuy to continue to develop market leading technology and leverage it as a lender. The investment supports the growth of DivideBuy’s retailer network, allowing many more consumers access to a transparent, flexible and easy way to spread the cost of their shopping using interest free credit.

The company has been disrupting the consumer credit industry by offering technological driven solutions and a fresh approach to lending, both driven by user experience. Underpinning the consumer journey is the fully automated underwriting and decisioning, unlike the traditional point of sale market, zero customer applications are passed for manual underwriting.

This automation is backed by market leading approval rates where appropriate approval decisions are offered to 96% of applications. The focus is not just on converting low risk credit applications, but also creating sector first products, such as a guarantor solution designed to allow consumers with an emerging credit profile the ability to spread the cost of their purchases.

Max Thowless-Reeves, Co-Founder and Non-Executive Chairman of DivideBuy said: “This investment by leading private equity players and banks in DivideBuy reflects the value that our business model and technology creates for retailers and customers as well as our progress as an organisation.

“Allowing retailers to offer interest free credit to their customers is conceptually simple but in practice significantly complex. Over the last four years we have innovated and broken barriers; our technology seamlessly meshes with any retailer’s website and IT estate and their customers can enjoy interest free credit in seconds.”

By partnering with DivideBuy, retailers have experienced significantly improved conversion rates, increased basket value and reduced basket abandonment which helps to foster customer loyalty. Testament to the unique DivideBuy approach, retailers switching from competitors are typically seeing an increase of up to 70% on approvals and conversions.

Robert Flowers, Co-founder and CEO of DivideBuy added: “Our business model works because we have taken a technology first approach to lending. We are in complete control over the experience our retail partners and consumers receive, something that can only be achieved by owning the full lending journey. Our adaptive lending technology assesses an individual’s risk profile and finds an approval solution that works for them. DivideBuy specialise in offering interest-free credit, we help retail partners develop strategy and tailor solutions that deliver.

“DivideBuy has one overarching goal; to make interest free credit easy and accessible to both retailers and consumers. Whether it be developing the application to work seamlessly with assistive technology, or giving consumers the flexibility to log in to their account to change a payment date. DivideBuy has focused on delivering technology and solutions that enhance the experience of our users and we will continue to do so.”

Calum Cusiter, Investment Director at Souter Investments said: “DivideBuy represents an exciting opportunity for Souter Investments to support a fast growing, and innovative FinTech business with a highly backable and passionate management team. We look forward to working with Rob and his team during the next phase of growth.” Calum has joined the board following the transaction.

The system enables retailers to pick and choose which products they offer credit on with sales landing instantly in existing order systems. The DivideBuy integration updates retail partners’ inventory and links into warehouse management systems, meaning retailers do not need to change any of their normal operational practises. DivideBuy will continue to develop its product offering including enhancements to its offline solution, customer experience and innovative after care products.