Social networks, game-changer for e-money? Will …...new innovative mobile money services.12 GSMA,13 the trade association for mobile network operators, describes mobile money for

Delivered by Ingenta to: Henry Stewart PublicationsIP: 185.24.85.49 On: Mon, 27 Jun 2016 08:59:10

Copyright: Henry Stewart Publications

Philippe Caluwaerts is Policy Officer in theDirectorate-General Financial Stability, FinancialServices and Capital Markets Union of theEuropean Commission. He was previouslyinvolved in the design and implementation of theEuropean policy on payment services and retailfinancial services. As part of his duties, he tookpart in the design and negotiation of the revisedrules on electronic money and electronic moneyinstitutions (Directive 2009/110/EC), which wereadopted in September 2009. Currently, he isexpert in the EU regulation on credit rating agen-cies. Before joining the Commission, he workedin the private sector in banking, mobile telecom-munications and consulting. He holds a degreein Commercial Engineering from the Universityof Antwerp and an MBA in general managementfrom the Vlerick Business School (Belgium).

ABSTRACT

The idea that electronic money (e-money) couldchange the way in which payments are madehas been around for more than a decade.Despite high initial expectations, e-money haslargely remained a hype and has not reached themass consumer market. The recent boom insocial networks, connecting vast networks of cus-tomers across the globe, all seeking to ‘e-monetise’ their customer base, could provide newmomentum for the uptake of e-money. Thispaper outlines the main barriers that have lim-ited the uptake of e-money to date. The complex

ecosystem lacking global standards and requir-ing enhanced collaboration between mul tiplestakeholders including financial institutions, cardschemes, mobile network operators, serviceproviders and merchants, and the sometimesfragmented regulatory regimes, all have to beaddressed for e-money to be successful. Thispaper describes why we may be at the forefrontof a breakthrough in the e-money market,driven by social networks. In particular, theuptake of electronic commerce, the boom of socialnetworks connecting families across the globeand creating opportunities for money remittance,the active presence of merchants on social net-works to advertise and sell goods online. But,next to social networks, global technology enter-prises are also looking into the potential of e-money services and intend to transform thee-money and wider payments industry land-scape. Consequently, traditional providersshould prepare for this new environment.

Keywords: social networks, electronicmoney, mobile money, electronic pay-ments, money remittance, electronicwallets

INTRODUCTIONWhile wholesale payments are executedpredominantly electronically, in the retailsegment cash, in addition to credit and

Journal of Payments Strategy & Systems Volume 9 Number 1

Page 90

Journal of Payments Strategy &SystemsVol. 9, No. 1 2015, pp. 90–110� Henry Stewart Publications,1750–1806

Social networks, game-changer fore-money? Will social networks(e-)monetise the payments industry?

Philippe CaluwaertsReceived (in revised form): 6th December, 2014Policy Officer, Audit and Credit Rating Agencies Unit, Financial Stability, Financial Servicesand Capital Markets Union Directorate General, European Commission, Rue de Spa 2(SPA2 01/103), 1049 Brussels, BelgiumTel: (32-2) 2984811; e-mail: [email protected]



debit cards, remains largely the most pop-ular way for retail consumers to pay theirbills. The idea that electronic money, here-after referred to as e-money, the equivalentof cash, provided by banks or non-bankpayment providers, could change the wayin which payments are made has beenaround for more than a decade.1 Despite anumber of successful experiences, mainlyin emerging economies, such as M-PESA2

in Kenya, e-money has largely remained ahype and has not yet reached the massconsumer market.

The recent emergence of social net-works such as Facebook, Twitter and SinaWeibo, all seeking to ‘monetise’ their cus-tomer base, could provide new momen-tum for a massive take-off of e-money.

Social networks, which connect vastnetworks of customers across the globe,could bring the innovation necessary totransform the payment industry consider-ably. Recent announcements byFacebook3 and Twitter4 show that they arepreparing to take their share of the pay-ment industry. They have the potential tobring e-money to everybody’s smartphoneand allow payment for goods and servicesonline as well as in physical stores.

WHAT IS E-MONEY?Continuous technical developments andinnovations make it difficult to describeaccurately what e-money is. Furthermore,the term ‘e-money’ is often used to referto a wide variety of electronic paymentschemes.

In general, e-money can be defined asmonetary value stored in an electronicdevice that can be used to make pay-ments.5 In a more restrictive sense, e-money is defined as ‘electronically storedmonetary value as represented by a claimon the issuer that is issued on receipt offunds for the purpose of making paymenttransactions and which is accepted by a

natural or legal person other than the e-money issuer’.6 This definition of e-moneycovers a number of different concepts andservices, including card, internet andmobile-centric electronic wallets.

There are a number of key elements inthis definition: e-money is a liability of theissuer, is generally prepaid, and is a multi-purpose means of payment. E-money, isdifferent from currency, as it is a claim onan issuer and, in general, an obligation of aprivate company rather than of the centralbank.7 This element of liability is also dis-tinct from decentralised virtual currencysuch as bitcoin, where there is no form ofliability or claim on an issuer.8 Anotherfeatures of e-money is that the total valueof e-money is usually mirrored in a bankaccount, to ensure that, if the providerservice were to fail, users could recovertheir funds stored in their accounts. Inaddition, in contrast to bank deposits, e-money accounts can traditionally not ben-efit from any interest.9 Furthermore,e-money services can be provided bybanks and by non-bank service providerssuch as mobile telecom operators, trans-port operators and social networks.

Electronic wallets, mobile money,mPOS

Electronic wallet or e-walletAn e-wallet, or electronic purse, is prob -ably the most common type of e-moneyto date, where users store money on aphysical payment card or on a paymentaccount on the internet for making pay-ments in both the physical and onlineworld.

Mobile walletAn e-money account, whereby the elec-tronic equivalent of cash is primarilystored on or accessed through (and usedby means of) a mobile device, can bedefined as a mobile wallet.10

Page 91

Caluwaerts



Mobile money

The definition of ‘mobile money’ variesacross the industry, as it covers a widerange of overlapping applications. In gen-eral, mobile money can be defined as aservice that uses the mobile phone totransfer money and make payments.11

The wide adoption of mobile phonesamong consumers in some emerging mar-kets, with no or very limited access tobasic financial services such as a bankaccount, have resulted in the emergence ofnew innovative mobile money services.12

GSMA,13 the trade association for mobilenetwork operators, describes mobilemoney for unbanked consumers, definingit as a service that allows the mobile phoneto transfer money and make payments tothe underserved. One of the key charac-teristics is that the service relies heavily ona network of transactional points outsidebank branches that makes it accessible tounbanked and underbanked people. Inaddition, customers should be able to usethe service without having been previ-ously banked.

Mobile remote or mobile contactless?Another distinction made in mobilemoney services is the way in which fundsare exchanged for the purpose of paymenttransactions. A distinction is made betweenmobile contactless and mobile remote.Mobile remote payments14 can be definedas payments where the transaction is con-ducted over telecommunication networkssuch as GSM or internet, and can be madeindependently of the payer’s location or itsequipment. Mobile contactless payments15

are defined as payments where the payerand payee (and their respective equip-ment) are in the same location and com-municate directly with each other usingcontactless radio technologies, such as nearfield communication (NFC), Bluetooth orinfrared for data transfer.

Mobile point of sale

A mobile point of sale (mPOS)16 refers tousing a consumer mobile device to facili-tate payments and enable acceptance ofpayment instruments. An mPOS refers tothe acceptance infrastructure for mer-chants necessary for accepting paymenttransactions independently from the wayin which the transaction itself is executed.

UNACHIEVED PROMISESA survey from the Bank of InternationalSettlement (BIS) in 2001 projected‘Electronic money to take over from phys-ical cash for most if not all small-valuepayments’ and ‘evoked considerable inter-est both among the public and the variousauthorities concerned including centralbanks’.17 But, despite high initial expect -ations, e-money has obtained only limitedmarket adoption in both the USA andEurope. The main reasons why e-moneyhas not found its way to the mass markethas been the existence of well-functioningpayment solutions, including credit anddebit cards as well as credit transfers offer-ing limited incentives for new innovationsby existing players. Furthermore, the com-plexity of the payments landscape, withmany financial institutions, card networks,mobile network operators, hardware andsoftware providers, and other stakeholders,results in a considerable challenges to buildsuccessful e-money solutions.18

One player, PayPal,19 the payment serv-ice of the popular e-commerce platformeBay,20 has turned out to be the only e-money scheme that has obtained a globalreach. Owing to the success of e-commerce in recent years, its service hasbeen growing exponentially.21

In a number of markets, local successeshave been launched by mobile telecom-munications and transportation operators.In some Asian countries such as Japan22

and Korea,23 e-money services and

Will social networks (e-)monetise the payments industry?

Page 92



mobile-based payment services haveobtained considerable market adoption. InJapan, 24 per cent of households hold e-money in stored-value cards or throughserver-based online services. Approx -imately 150 million stored-value cards,which are used mainly for low-value pay-ment transactions, were in circulation in2011.24 The main driving factors for therelative success of e-money in Japan havebeen cultural preferences for paying withcash over paying with credit cards, theabsence of debit card schemes and a spe-cific business climate whereby non-bankproviders, such as rail networks and mobileoperators, offer additional convenience toconsumers through e-money services.25

In other emerging regions, where a largenumber of the population have little or noaccess to traditional financial services, thewide dispersion of mobile phones has givenrise to mobile money services for‘unbanked’ consumers. In these regions,alternative providers, mainly mobile net-work operators, have stepped in, providingconsumers with the possibility of accepting,storing and exchanging funds and payingelectronically by means of mobile phones.While the first successes were observed insub-Saharan Africa, mobile money serviceshave also expanded in Latin America andAsia in recent years, contributing to thefinancial inclusion of the unbanked.26 Forexample, in 2013, new mobile money serv-ices were rolled out in Bolivia, Brazil,Egypt, Ethiopia, Guyana, Jamaica, Tajikistan,Togo and Vietnam.27

Examples of mobile money and financial inclusion

KenyaOne of the most successful e-money ini-tiatives, M-PESA,28 was deployed bySafaricom, Kenya’s largest mobile oper -ator. Since its launch in 2007, the system’snearly 15 million users have been able to

use their mobile phones to deposit cashinto their accounts, using as a point ofdeposit any of the 28,000 shops aroundthe country that participate in the initia-tive. Among the main favourable factors tothe broad market adoption in Kenya havebeen the relatively large number ofunbanked consumers and the high adop-tion of mobile phones. M-PESA has fur-ther expanded to other markets, includingTanzania and South Africa.

PakistanEasypaisa,29 a mobile money servicelaunched in Pakistan through a partner-ship between Telenor Pakistan and TameerMicrofinance Bank, is another example ofnew innovations serving the needs ofunbanked consumers. The service allowssubscribers to use their mobile phones forpayment transactions, and subscribers candeposit or withdraw cash in Easypaisashops throughout Pakistan. Since itslaunch in 2009, it has acquired more thanfive million customers. The large numberof unbanked consumers in Pakistan com-bined with the deployment of a mobilemoney dealer network contributed to itssuccess.

ParaguayWith one of the lowest rates of bankingpenetration in Latin America (only 22 percent of adults in Paraguay have an accountat a formal financial institution), Paraguayhas a large potential for mobile moneyservices.30 Two service providers, Tigo andPersonal, have launched mobile moneyservices, Tigo Money and BilleteraPersonal, respectively, providing the abilityto store funds in an e-wallet, conductpeer-to-peer payments and process remit-tances. These innovations offer unbankedconsumers the ability to control theirfinancial lives better and increase theiraccess to formal financial services.31 In2014, Tigo Money was reported as having

Page 93

Caluwaerts



approximately 150,000 clients paying billswith its service, and Billetera Personal wasprojected as having 23,124 bank-backedBilletera Personal accounts and another62,796 non-bank e-wallet clients follow-ing the introduction of a new electronicpayments regulation in 2014.32

E-money in EuropeIn Europe, there has been relative growthin e-money since 2009, starting from avery low base, as shown in Figure 1,reaching 4.5 billion of total outstandinge-money at the end of 2013. It has notyet lived up to its full potential, and didnot become a digital replacement for cashas was expected in the early 2000s.33

Even though a number of innovative e-money service providers have entered themarket, non-financial institutions havenot been able to conquer the mass con-sumer market of e-money.34 According to

data from the European Central Bank(ECB),35 non-financial institutions issu-ing e-money had approximately 750 mil-lion of outstanding e-money at the endof 2013. Furthermore, some initial e-money schemes, such as ‘proton’ inBelgium36 or the ‘GeldKarte’ inGermany, were not such a success stories,as the relative share of these servicesremains small37 and the traditional e-money purse seems to be doomed.Newer services, such as contactless pay-ments,38 seem on the way to bypassingthe electronic wallet.

POTENTIAL BENEFITS OF E-MONEYDespite the limited success, there are vari-ous potential benefits of e-money and e-wallets for consumers and stakeholders in the e-money and wider paymentsindustry.


Page 94

Figure 1 Evolutionof outstandinge-money in the EU1999–2013 (end ofperiod, in millions ofeuro)

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

e m

illio

ns

Source: ECB, 2014, outstanding amount of e-money, dataset BSI. M.U2.N.A.LE0.A.1.Z5.0000.Z01.E



For consumers, e-money could be avery convenient way to pay safely andcost-efficiently without the need to havecash in hand or a debit or credit card.When widely accepted, e-money shouldnot be limited to purchasing goodsonline, but could also be a way of payingfor goods and services in physical stores.Furthermore, e-money could createadded value and additional conveniencethrough new innovations. For example, itcould allow the transfer of money peer-to-peer between consumers and enablenew services such as sharing bills elec-tronically. In emerging economies, e-money could be a driver of financialinclusion, providing non-banked con-sumers with access to basic financial services, enabling the acceptance andstoring of funds and paying bills electron-ically.

For merchants, e-money services havethe potential to reduce costs and risksrelated to receiving cash payments. Toattract merchants, it can be expected thatthe fees charged by new market entrantsfor accepting e-money would be lowerthan the existing charges by debit andcredit cards schemes. Furthermore, e-money systems could be beneficial formerchants if they allowed the acceptanceof e-money without the need to acquirenew POS devices associated with theexisting card schemes.

For potential new e-money serviceproviders such as social networks, thisbusiness could be a new way of monetis-ing their existing base of customers andmerchants. Given their global reach, even avery limited margin on individual transac-tions could result in considerable revenuestreams. In addition, payments data couldbe a new valuable source of data for socialnetworks (or their competitors) to obtaininformation about the payment habits oftheir customers, which could be of use toadvertisers.

THE E-MONEY REGULATORYREGIME

Across the globe, e-money has receiveddistinct treatment by regulators. In general,the regulatory frameworks for e-moneyremain complex, with distinct applicablelaws and regulation (including consumerprotection, anti-money laundering, pru-dential requirements and data protectionlegislation), and have difficulty keeping upwith continuous technological innov -ations. The regulatory intervention variesfrom no specific regulation in the USA upto a fully calibrated regulatory regime inthe EU.

In the USA to date, there is no singleregulatory framework or regulatoryauthority governing e-money. A report bythe Mobile Payments Industry Workgroup(MPIW),39 convened by the FederalReserve Banks of Boston and Atlantashowed that five different regulatory agen-cies40 have some oversight responsibilitiesfor mobile payments, which also applies toe-money and e-wallet solutions.According to the report, the regulatoryagencies’ main focus has been the need forconsumer protection, the security and effi-ciency of the payments system, data secur -ity and privacy, and accessibility and howto deal with non-bank alternativeproviders. To date, the regulatory agenciesin the USA have considered further mon-itoring and clarification on how theemerging innovations fall within the scopeof existing legislation, and increased coor-dination across agencies might be neces-sary. Recently the Consumer FinancialProtection Bureau (CFPB) proposedmaking a rule41 on prepaid accountswhich, when effectively implemented,could integrate e-money into the USAbank regulatory regime.42

In addition to a wide number of regula-tory agencies, the USA regulatory frame-work is characterised by the requirementfor non-bank e-money operators, depend-

Page 95

Caluwaerts



ing on their involvement in the paymenttransaction, to obtain a money transmitterlicence to provide money transfer servicesor payment instruments in any of the USstates that regulate this business activity.

In the EU, a specific regulatoryregime43 for e-money was designed in2000 with the intention to facilitate accessby non-credit institutions to the businessof e-money issuance. The main goal was tocreate legal certainty for e-money, buildconfidence by safeguarding the interests ofconsumers and businesses, and encouragenew market entrants and so greater com-petition. These rules created a significantlylighter regime for e-money institutionscompared with traditional credit institu-tions. The regime includes prudentialrequirements aimed to protect consumersand ensure safe operations.

Potential market participants consideredthe European e-money regime dispropor-tionate to the risks of the activity and thenumber of licences attributed did notmeet expectations.44 Following the lim-ited developments of the e-money indus-try, the regulatory framework was revised,and new rules entered into force in June2011,45 introducing a more proportionateregulatory regime, more in line with therisks of the activity of e-money. Theserevised rules allow e-money institutions toconduct other services such as operatingmobile telecommunication services moreflexibly,46 which was considered a catalystfor innovation and development of new e-money services.

Also in other jurisdictions where e-money has emerged, regulatory regimeshave been set. In Japan, where e-moneyservices are a popular alternative to creditand debit card payments, the Prepaid CardLaw, which covers the main rules relatingto e-money, provides a simple frameworkthat applies equally to both bank and non-bank issuers and which contains a pruden-tial framework considered proportional to

the size of the issuer.47 A new regulatoryregime governing mobile money was alsoadopted in Kenya in August 2014,48 cover-ing consumer protection and prudentialoperations, and promoting collaborationand interoperability between market par-ticipants. Following the uptake in sub-Saharan countries, recent regulatorychanges have been introduced in anumber of countries in Latin America,including Bolivia, Peru Brazil andParaguay,49 enabling non-banks to issue e-money.50 In some other Latin Americancountries, such as Mexico,51 provisionshave been introduced allowing non-banksto acquire limited banking licences toissue payments instruments.

FRAGMENTATION OF MOBILEPAYMENTS INITIATIVES CONTINUESWhile various developments in the e-money and payments industry are on -going, in the USA, the EU and the rest ofthe world, the e-money and paymentslandscape remains characterised by frag-mentation.

A report52 by the Federal Reserve Bankof Boston and Atlanta witnessed consider-able changes in the US mobile paymentslandscape in the period 2011–2013. Inparticular, the report observed ‘increasingcollaborative efforts across a diverse set ofindustry stakeholders, increased channeland technology convergence, participationby new non-bank entrants, and continu-ous technological innovation and experi-mentation’. Collaboration between mobilenetwork operators (MNOs), banks, cardnetworks and technology companies hasresulted in pilot mobile payment solutions.For example, some large MNOs founded ajoint venture with several financial institu-tions and a card network to create amobile wallet solution Isis, recentlyrebranded Softcard,53 based on NFC54

technology. In addition, some alternative


Page 96



payment providers have developed solu-tions and applications that leverage a rangeof technologies, such as cloud,55 QuickResponse (QR) codes56 and geo-fencing.57

One of the observed blocking factorshas been the slow adoption of new serv-ices by merchants, owing to concerns onthe business case for the implementationof mobile payment solutions. In the USA,the slow rollout of the EMV standard58

and NFC technology enabled POS solu-tions, combined with the introduction ofsome new low-cost alternatives such asQR code scanning, have created moremarket fragmentation.

In Europe, despite the latest revision ofthe rules on e-money, European-widemobile-enabled e-money schemes havefailed to emerge (with the exception ofPayPal) and the market remains highlyfragmented. A recent report on the newinitiatives on mobile payments in theSingle Euro Payments Area (SEPA) fromthe European Payments Council (EPC)59

demonstrates that the existing market situ-ation is widely diverse in terms of geo-graphical scope, technological solutions,level of collaboration in the paymentecosystem and size of participating mer-chant networks.

The EPC reports a total of 33 distinctinitiatives emerging in the period2013–2014 in Europe, covering 14 differ-ent countries. The geographical scope ofall initiatives is limited to national jurisdic-tions and, for some initiatives, the pilotphase is further limited to a city. The typesof initiatives surpass e-money services andare divided into four areas: mobile con-tactless payments60 (13 initiatives); mobileremote payments61 (eight initiatives);mobile wallet62 (five initiatives); andmPOS63 (five initiatives). Most initiativesare based on partnerships between one ormore players in the mobile paymentecosystem, including MNOs, payment

providers, banks and retailers. The marketpotential of the services is determined bythe number of potential subscribers, whichis limited at national level to customers ofthe collaborating partners, includingbanks, MNOs, payment service provideror participating retailers. Another key fea-ture is the acceptance of the service bymerchants, which for the reported initia-tives is also limited in scope to nationalborders, and varies from pilots with a fewthousand of participants to 300,000 POS.

Also in emerging economies where theuptake of mobile money services isexpanding, the types of services andecosystems remain widely dispersed.GSMA reported 294 distinct services in 84countries at the end of 2013 and 113planned deployments.64 The type of serv-ices offered varies across service providers.For example, 85 per cent of the mobilemoney service providers allow for peer-to-peer transfers, bill payments and airtimetop-up.65 Fewer providers allow for bulkpayments, merchant payments or interna-tional money remittance.66 Furthermore,interoperability between distinct mobilemoney services providers, allowing con-sumer to exchange funds between cus-tomers of distinct operators, remains achallenge to the further market uptake ofmobile money services.67

These findings in the USA, the EU andemerging economies, demonstrate that,while progress is being made, e-moneyand mobile-enabled payment servicesremain fragmented, in their early stage ofdevelopment. They will most likely requireconsiderable time and further collabora-tion among ecosystem partners to achieveconsiderable market adoption. An easy touse mobile enabled service, based oncommon standards or solutions, acceptedby a vast number of merchants and avail-able to customers worldwide or through-out large jurisdictions seem not yet to bematerialising.

Page 97

Caluwaerts



WHY ARE SOCIAL NETWORKSDIFFERENT?

The reports that global social networks,such as Facebook, Twitter, Sina Weibo andothers, are experimenting with e-moneyand electronic payment raises new expec-tations for the e-money industry. Itremains to be seen how the weaknessesand obstacles observed both in the USAand the EU can be overcome. In particu-lar, the complexity of collaboration acrossmultiple stakeholders in the eco-system,the lack of common solutions and stan-dards, the diverging regulatory require-ments, the limitations in geographicalscope, the cost and efficiency concerns ofmerchants, and privacy and security con-cerns among consumers should beaddressed.

There are various reasons to believe thatwe are at the forefront of a breakthroughin the e-money market driven by socialnetworks.

Favourable market trendsIn both advanced and emergingeconomies, some market trends68 are rais-ing the potential for social networks in thee-money and wider payments industry. Inadvanced economies, consumers arebecoming increasingly familiar withonline purchasing of goods and services.While such transactions are currentlymainly executed by cards or credit trans-fers, they could easily be migrated to socialnetworks by offering peer-to-peer pay-ment transactions on their platforms.

Many social networks have startedexperimenting with micropayments oflow value for purchasing virtual goods andservices or for rewarding loyal customers.Social networks have developed their ownvirtual currencies (such as Facebook cred-its, Weibo coins, Habbo diamonds), whichare obtained by exchanging real money.Consumer can use the virtual currency insocial gaming applications or purchasing

virtual goods or charity contributions.69

This has familiarised existing users ofsocial networks with the idea of purchas-ing real life goods and services or con-ducting peer-to-peer transactions throughsocial networks.

Money remittanceIn an increasingly globalised world, moneyremittance, a market mostly operated bybanks and other financial paymentproviders such as Western Union,70

remains an important way71 to transfermoney across countries subject to rela-tively high transaction fees72 Social net-works such as Facebook and Twitter,which already today connect consumersthroughout the globe, could facilitate for-eign workers to send funds to familymembers in their home nations throughtheir platforms at lower fees. A recentreport of the World Bank DevelopmentResearch Group73 estimated that over 90per cent of money remittance transfers aresent between family members who arealso connected on social media. In emerg-ing economies where the share ofunbanked consumers remains important,74

social networks are particularly growingtheir market presence.75 Consequently,they could add to their services low-costsolutions to serve the unbanked.

To be successful, social networks wouldneed to overcome some challenges that arelinked to the ‘branchless’ remittance trans-fers business model.76 These challengesinclude obtaining senders’ trust to handover funds to social networks, complyingwith regulatory requirements on anti-money laundering and ‘Know YourCustomer’ regulation, and offering recipi-ents convenient ways to obtain and use thefunds. In particular, social networks wouldneed to provide a solution for recipients topick up their funds. This could be facili-tated through third-party agent networks,bank accounts, mobile network top-ups or


Page 98



by developing their own e-wallets, provid-ing receivers of funds with connectivity toretailers.77

Global reachable mobile enabled customer baseThe largest social networks often have aglobal active customer base. For example,as shown in Table 1, large social networks,such as Facebook, Twitter and Sina Weibo,have reported 1.28 billion, 625 millionand 148 million monthly active users,respectively,78 connected to their servicesthrough the internet and increasinglythrough smartphones. Consequently, socialnetworks have the potential quickly andcost-effectively to provide customersthroughout the globe with an e-walletservice and enable them to pay for goodsand services through their e-money plat-forms wherever they go with their smart-phones.

A new application or a mere update of anexisting one could be sufficient to upgrademillions of users to the new services. As astep in that direction, the social media giantFacebook announced that it would extendthe functionality of its messenger service,82

allowing peer-to-peer payments earningfees on money transfers.83

Trusted and globally loved brandSocial networks such as Facebook andTwitter figure at 20th and 71st, respect -ively, on the list of most valuable globalbrands in 2014.84 That brings them closeto the existing dominant market partici-pants in the payments industry, such as themain cards schemes Visa (7th) andMasterCard (18th), American Express(24th), well beyond any other operator inthe e-money industry, with the exceptionof PayPal, whose former parent companyeBay is listed 61st in the list of most valu-able global brands. As a consequence ofbeing globally loved brands, social net-works could offer confidence to con-sumers not only to share their personaldata, but also trust their funds and pay forthe goods and services they need.

Privacy issues and data security onsocial media have been a major concern,85

which could make users reluctant to trustmoney to social networks. A recent study86

showed that only 14 per cent of con-sumers trust Facebook for their personal

Page 99

Caluwaerts

Table 1: Selective overview of social networks and e-money and payments initiatives

Enterprise Core business Existing or potential initiatives Potential users/size

Facebook Social network • e-wallet• peer-to-peer payments transactions• online payment transactions 1.28 billion monthly active

usersTwitter Social network • peer-to-peer payment transactions 625 million active usersSina Weibo79 Social microblogging • peer-to-peer payment transactions 148 million monthly active

site in mainland China (weibopay) usersRenRen80 Social network in • peer-to-peer payment transactions 178 million monthly active

mainland China usersHabbo81 Social network aimed • e-money (credits, duckets and 11 million monthly active

at teenagers diamonds) users (2013)

Source: www. Facebook.com, www.twitter.com, reuters.com, www.sulake.com



data. Therefore, it will be important forsocial networks to enhance their efforts tocreate trust in their services in order togain market adoption for e-money serv-ices.87 Privacy concerns could limitmarket adoption in advanced economieswhere many alternatives are available. Suchconcerns might be of less relevance inemerging markets with a high number ofunbanked and few alternatives.

Global merchant reachOwing to the global reach of customers,an e-wallet and related payment serviceallows merchants not only to advertise onsocial networks, but also to sell goods andservices and receive payments. As an illus-tration of this market potential, there arealready 30 million small businesses88 pro-moting and selling their goods and serv-ices on Facebook. An e-wallet providesnew incentives for merchants to join socialnetworks (in so far they are not yet activeon social media) and also accept e-moneyfor the goods and services they provide.Additionally, social networks, already con-necting millions of users, have the techno-logical capabilities to provide acost-effective and secure e-money plat-form for merchants necessary to deal witha high flow of e-money transactions.

Cloud-based technological efficienciesNew e-money services will most likely befully cloud-and web-based, avoiding anynew hardware interfaces for both mer-chants and consumers. This will allowsharing costs over global transactions andenabling social networks to enter themarket by offering competitive pricescompared with the existing card schemes.

Linking bricks and mortar with theonline worldThe use of an e-wallet should not neces-sarily be limited to the online world. The

extensive use of social networks throughmobile devices may result in the develop-ment and design of applications and serv-ices that allow the e-wallet to be used inphysical stores.

THE ROAD AHEAD: IT IS NOT ONLYSOCIAL NETWORKSGiven the interest of social networks inoffering e-money solutions and payments,it seems likely that a second chance will begiven to e-money. Social networks’ globalscope of operations offers the necessarypotential and network effects to make asuccessful e-wallet and payment servicewith a worldwide coverage. The largeonline customer base, the existing networkof advertisers and knowhow in the designof easy to use online services provides theopportunity for designing attractive e-wallet services for the mass market.

Social networks are not the only marketplayers with the intrinsic capacity to trans-form the e-money industry. Technologygiants such as Google and Apple havelaunched their respective services. In addi-tion, newly created payment servicesproviders such as Square, and global e-Commerce undertakings such asAmazon and Alibaba are well positionedto bring innovation to the e-money orwider payments market.

GoogleGoogle, which has also its own social net-work, Google+, has launched the GoogleWallet,89 which allows users to store debitcards, credit cards, loyalty cards and giftcards, as well as redeeming sales promo-tions on their mobile phone. Launched inMay 2013, Google announced that its e-wallet would allow for peer-to-peer pay-ment transactions to all contacts of theire-mail service Gmail.90

The service connects a user’s Gmailaccount with an e-wallet, and allows


Page 100



money to be sent to Gmail contacts free orfor a small fee if the transfer is made by alinked bank account or from a credit card,respectively.91 This enables, Google to cap-ture its users’ bank account and credit cardinformation. As 66.5 per cent of Gmailusers access their accounts online, the e-wallet is a true mobile payment plat-form.92 Combined with Google’s Androidoperating system for mobile devices,which represents 80 per cent of all soldsmartphones in 2014,93 it has a very wideuser base for its e-wallet.

Using its already popular Gmail service,which has a global reach of 425 millioncustomers,94 its e-wallet is a mobile pay-ment solution with global market poten-tial. Until now the Google Wallet has notachieved its market potential. In additionto the lack of devices supporting the serv-ice and the reluctance of merchants andtelecom operators, Google’s advertisingbusiness model has been an importantdrawback.95 The requirement for partici-pating banks to provide users’ purchaseinformation, which would enable Googleto refine its advertising business, createdprivacy concerns and made issuing banksreluctant to participate in the system.

AppleApple has made a late but decisive entryinto the digital payments industry withApple Pay. By collaborating with the maincard schemes (Visa, MasterCard andAmerican Express) and the majority oflarge US banks, Apple made importantallies by creating a service complementaryto the traditional market players.96

With the focus on security and privacy,combined with an easy to use customerexperience, it has strong assets to convinceconsumers. In contrast to the GoogleWallet, Apple will not collect what con-sumers buy with Apple Pay nor any pay-ment-related information. Furthermore, bythe use of tokenisation, whereby credit card

numbers are replaced with a randomly gen-erated numbers, Apple has created one ofthe most secure and fraud-proof mobilepayment mechanisms.97 In addition, the‘touch-ID’ fingerprint sensor providesApple Pay users with an additional securityfeature for ID authentication protectingpayment information.98

In the US market, Apple Pay can ben-efit from the requirement for merchantsto upgrade their POS terminals to theEMV technology accepting NFC bymid-2015, creating an incentive for mer-chant acceptance.

To drive adoption, Apple should entailto upgrade its existing user base of morethan 575 million users with registeredcredit cards in Apple’s iTunes applica-tions.99 Furthermore, with Passbook,100 anapplication introduced in September2012, which allows users to store eventtickets, loyalty cards and coupons on theirphone, Apple has gained experience withan electronic wallet platform. Passbook hasnow become a cornerstone of Apple Paywhere customers will store their creditcard information. Since the launch ofPassbook, Apple has established partner-ships with a wide range of third parties,including airlines, railway enterprises andhotels, which have linked their own sys-tems with Passbook.101 These existingpartnerships will certainly facilitate theroll-out of Apple Pay.

The main constraint to become awidely adopted service is the fact thatApple Pay is limited to the closed Appleeco-system and the latest Apple devices,102

which limits the uptake to consumerswith the purchasing power to own a high-end mobile device. This will remain anentry barrier limiting the uptake of theservice in emerging markets. Apple Pay iscurrently geographically limited to theUSA and should still prove itself in its tra-ditional home market as well as in the restof the world.

Page 101

Caluwaerts



Amazon

Amazon, one of the world largest onlineretailers, is also interested in grasping itsshare from the online and mobile pay-ments industry and has recently made animportant step in this direction. With 237million active users103 and annual sales ofUS$74.45bn in 2013,104 an own, fast andconvenient e-money or e-paymentsscheme could enhance its overall customerexperience and at the same time createnew sources of revenue.

As part of this strategy, Amazonobtained a licence as an e-money institu-tion in Luxembourg.105 On 9th June,2014, its e-payments intentions wereunveiled106 with the launch of its paymentplatform ‘Amazon Payments’,107 whichallows for paying online at merchantsother than Amazon.

For their online purchases, consumerscan access multiple merchants with onesingle registration at Amazon.108 They cansave time at checkout, as they will notneed to re-enter their credit card and ship-ment data for each purchase, which will besecurely stored in the Amazon account.

For merchants,109 the service offers easyintegration as well as Amazon’s securityand user data. With this new servicingoffer, available through desktops andmobile devices, Amazon has become adirect competitor of PayPal, which offers asimilar third-party service.

AlipayAlipay,110 the payments platform of China’sAlibaba,111 an online commerce site, whichrecently went public,112 is another newemerging challenger in the paymentsindustry. With 300 million registered usersand 100 million mobile users, and havingprocessed US$150bn in mobile transactionsin 2013, it is the largest mobile paymentsprovider in the world.113

In addition, Alipay’s business is not lim-ited to its mother company’s e-commerce

platform, but also serves other clients.Alibaba only represents 37.6 per cent of allpayments processed by Alipay on a total ofUS$519bn payments processed in 2013.114

Furthermore, its Alipay Wallet service pro-vides a wide range of solutions, includingmobile payment transactions, peer-to-peerpayments and paying in physical POS. Forexample the Alipay Wallet enables pay-ments through sound wave technology orQR barcodes115 in physical POS.Furthermore, its peer-to-peer functional-ity allows bill sharing among its users.

In addition, Alipay is expanding toother services,116 which are traditionally inthe hands of banks. The Alipay Wallet isalso a tool to be used as a current accountor to invest in Alibaba’s financial productYu’ebao,117 a money-market fund. Thefund, where consumers are expected toearn higher yields compared with Chinesebank deposits, has raised 250 billion yuanand became China’s largest investmentfund in January 2014.118

While Alipay is a huge success story inits home markets in China and Asia, itremains to be seen whether it will alsoconquer the rest of the world.

SquareA new market entrant that aims to trans-form the payments industry is SquareInc.,119 a merchant services aggregator andmobile payments company based in SanFrancisco, California.

Square Register, its main service, allowsindividuals and merchants in the USA,Canada and Japan to accept offline debitand credit cards, transforming smartphoneor tablet computers into cash registers.Consumers can pay by swiping their cardthrough the Square Reader, a small devicethat is plugged into a smartphone ortablet. In addition, another alternative pay-ment service, Square Cash,120 allows usersto execute free peer-to-peer paymenttransactions based on a debit card.


Page 102



Furthermore, Square is also experimentingwith its own wallet service SquareWallet.121

Square, which was projected to processUS$30bn payment transactions in 2014,122

was valued at US$5bn beginning in 2014.While Square does not have a powerfulbrand compared with Facebook, Google orApple, its innovative products could make itan important challenger, cannibalising theexisting payments industry. Furthermore, itwas reported that both Google and Applewere considering acquiring Square,123

which could transform it into a world classcompetitor, even if they would not make ita stand-alone entity.

OUTLOOK AND WAY FORWARDWhether it will be social networks such asTwitter or Facebook, or software andhardware providers such as Google orApple, or still someone else to drive theuptake of e-money is hard to predict.Google and Amazon have already madethe leap into this market, Apple has, withthe recent launch of Apply Pay, intro-duced a considerable challenger, andsocial networks are preparing to take thesame road.

The mere fact that global, powerfultechnology enterprises are looking intothe potential of e-wallet services offersprospects and will definitely shake andtransform the payments industry landscapein the coming years. Existing e-moneyissuers and payment service providers aswell as banks should rethink their businessmodel, as they could be easily cornered bybreakthrough innovative e-wallet servicesdesigned and rolled out globally by thesenew powerful technology giants.

The recent hiring of David Markus,124

PayPal’s former chief executive, to lead theextension of Facebook’s messaging serv-ices to payments should be a wake-up callfor all competitors: social networks are

serious about putting their (e-)monetisingstrategy into practice.

AUTHOR’S NOTE

This paper reflects the views only of the authorand does not represent the opinion of theEuropean Commission.

REFERENCES AND NOTES

(1) ‘An Introduction to Electronic MoneyIssues prepared for the United StatesDepartment of the Treasury ConferenceToward Electronic Money and Banking:The Role of Government’, available at:http://www.occ.gov/topics/bank-operations/bit/intro-to-electronic-money-issues.pdf (accessed 1stNovember, 2014).

(2) Jack, W., Suri, T. and Townsend, R.(2010) ‘Monetary Theory and ElectronicMoney: Reflections on the KenyanExperience’, Economic Quarterly, Vol. 96,No. 1, pp. 83–122.

(3) ‘Facebook e-Money Transfer ServiceEurope’, available at:http://www.theguardian.com/technology/2014/apr/14/facebook-e-money-transfer-service-europe (accessed3rd November, 2014).

(4) ‘Groupe BPCE Launches Twitter MoneyTransfers’, available at:http://www.nfcworld.com/2014/10/15/332017/groupe-bpce-launches-twitter-money-transfers/ (accessed 1stNovember, 2014).

(5) Bank of Canada (2014) ‘ElectronicMoney and Payments: RecentDevelopments and Issues’, available at:http://www.banqueducanada.ca/wp-content/uploads/2014/04/dp2014-2.pdf(accessed 15th November, 2014).

(6) Directive 2009/110/EC of the EuropeanParliament and of the Council of 16September 2009 on the taking up,pursuit and prudential supervision of thebusiness of electronic money institutionsamending Directives 2005/60/EC and2006/48/EC and repealing Directive2000/46/EC.

Page 103

Caluwaerts



(7) ‘Selected US Legal Issues in Issuance ofElectronic Money’, available at:http://www.arraydev.com/commerce/JIBC/9702-17.htm (accessed 2ndNovember, 2014).

(8) Bank of Canada, ref. 5 above.(9) Penicaud, C. and Katakam, A. (2013)

‘Mobile Money for the Unbanked, Stateof the Industry 2013’, GSMA, availableat: http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2014/02/SOTIR_2013.pdf (accessed 5thDecember, 2014).

(10) Ibid.(11) ‘Mobile Money, an Overview for Global

Telecommunications Operators’,available at: http://www.ey.com/Publication/vwLUAssets/Mobile_Money./$FILE/Ernst%20&%20Young%20-%20Mobile%20Money%20-%2015.10.09%20(single%20view).pdf (accessed20th November, 2014).

(12) Ibid.(13) Penicaud and Katakam, ref. 9 above.(14) Jack, Suri and Townsend, ref. 2 above.(15) European Payments Council (2014)

‘Overview of Mobile PaymentsInitiatives’, available at:http://www.europeanpaymentscouncil.eu/index.cfm/knowledge-bank/epc-documents/epc-overview-on-mobile-payments-initiatives-edition-june-2014/epc091-14-epc-overview-on-mobile-payments-initiatives/ (accessed 14thNovember, 2014).

(16) Bank of Canada, ref. 5 above.(17) BIS (2001) ‘Survey of Electronic Money

Developments’, available at:http://www.bis.org/publ/cpss48.htm(accessed 14th November, 2014).

(18) Bradford, T. and Hayashi, F. (2007)‘Complex Landscapes: Mobile Paymentsin Japan, South Korea, and the UnitedStates’, Payments System Research Briefing,Federal Reserve Bank of Kansas City,available at: http://www.kansascityfed.org/publicat/psr/Briefings/PSR-BriefingSept07.pdf (accessed 3rdNovember, 2014).

(19) PayPal, available at: www.paypal.com(accessed 17th November, 2014).

(20) eBay, available at: www.ebay.com(accessed 17th November, 2014).

(21) In the second quarter of 2014, eBayreported a total payments volumeincrease of 29 per cent and an increaseof 4 million active users up to 152million. eBay Inc. Reports 2nd QuarterResults, available at: eBay http://investor.ebayinc.com/financial_releases.cfm(accessed 14th November, 2014).

(22) Luyat, J. (2009) ‘A Tale of Regulation inthe European Union and Japan: DoesCharacterizing the Business ofStored-Value Cards as Financial ActivityImpact its Development?’ Pacific RimLaw & Policy Journal, Vol. 18, No. 3, pp. 525–546.

(23) European Payments Council, ref. 15above.

(24) Bank of Canada, ref. 5 above.(25) Luyat, ref. 22 above.(26) Penicaud and Katakam, ref. 9 above.(27) Ibid.(28) Jack, Suri and Townsend, ref. 2 above.(29) ‘The Mobile Money Revolution, Part 2

Financial inclusion’, ITU-TechnologyWatch, available at: http://www.itu.int/dms_pub/itu-t/oth/23/01/T23010000200002PDFE.pdf (accessed 22ndNovember, 2014).

(30) ‘Financial Inclusion in Paraguay: NewMobile Money Regulation’, available at:http://www.fomin.org/en-us/HOME/FOMIN-blog/Blogs/ArtMID/8837/ArticleID/2485/Financial-inclusion-in-Paraguay-New-mobile-money-regulation (accessed 28th November,2014).

(31) Tellez, C. and McCarty, M.Y. (2012)‘Mobile Money in Latin America: ACase Study of Tigo Paraguay’,http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2012/03/tigopyenfinal.pdf (accessed 28thNovember, 2014).

(32) ‘Supply-Side Assessment of FinancialInclusion in Paraguay — Draft report’,http://www.incoop.gov.py/v1/wp-content/uploads/2014/10/Draft-Supply-TN-100214_for-translation-oct-15-2014v2.pdf (accessed 4th December, 2014).


Page 104



(33) Papadopoulos, G. (2001) ‘ElectronicMoney and the Possibility of a CashlessSociety’, available at:http://www.academia.edu/630789/Electronic_Money_and_the_Possibility_of_a_Cashless_Society (accessed 14thNovember, 2014).

(34) E-money Impact Assessment, available at:http://ec.europa.eu/internal_market/payments/docs/emoney/sec-2008-2572-summary-en.pdf (accessed 14thNovember, 2014).

(35) ECB Statistics data warehouse, availableat: http://www.ecb.europa.eu/stats/html/index.en.html (accessed 14thNovember, 2014).

(36) Proton is a card-based e-money schemein Belgium, available at:http://www.proton.be (accessed 14thNovember, 2014).

(37) E-money, niche market that may beexpanding, available at:http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000288496/E-money%3A+Niche+market+that+might+be+expanding.pdf (accessed 14th November,2014).

(38) A mobile contactless payment is amobile device initiated payment wherethe cardholder and the merchant(and/or his/her equipment) are in thesame location and communicate directlywith each other using contactless radiotechnologies, such as NFC, for datatransfer (also known as contactlesspayments).

(39) ‘The US Regulatory Landscape forMobile Payments, Summary Report ofMeeting between Mobile PaymentsIndustry Workgroup and Federal andState Regulators on April 24, 2012’,available at: http://www.bostonfed.org/bankinfo/payment-strategies/publications/2012/us-regulatory-landscape-for-mobile-payments.pdf(accessed 10th November, 2014).

(40) The five agencies are: the FederalReserve System (FRS), the FederalDeposit Insurance Corporation (FDIC),the Office of the Comptroller of the

Currency (OCC), the National CreditUnion Association (NCUA), and theConsumer Financial Protection Bureau(CFPB)), the Federal Trade Commission(FTC) and the Federal CommunicationsCommission (FCC).

(41) ‘Prepaid Accounts under the ElectronicFund Transfer Act (Regulation E) andthe Truth In Lending Act (RegulationZ)’, available at:http://files.consumerfinance.gov/f/201411_cfpb_regulations_prepaid-nprm.pdf(accessed 16th November, 2014).

(42) ‘CFPB Issues Prepaid Account NPRM:Converging Prepaid into BankRegulation Mainstream’, available at:http://paybefore.com/pay-gov/cfpb-issues-prepaid-account-nprm-converging-prepaid-into-bank-regulation-mainstream/?sthash.BWkODTBE.mjjo#sthash.BWkODTBE.N2OoMGiB.dpuf (accessed 16th November,2014).

(43) Directive 2000/46/EC of the EuropeanParliament and of the Council of 18September 2000 on the taking up,pursuit and prudential supervision of thebusiness of electronic money institutions,available at, http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32000L0046 (accessed 14th November,2014).

(44) Report on the evaluation of theE-money Directive 2000/46/EC,available at: http://ec.europa.eu/internal_market/payments/docs/emoney/evaluation_en.pdf (accessed 15thNovember, 2014).

(45) Directive 2009/110/EC of the EuropeanParliament and of the Council of 16September 2009 on the taking up,pursuit and prudential supervision of thebusiness of electronic money institutionsamending Directives 2005/60/EC and2006/48/EC and repealing Directive2000/46/EC, available at:http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:267:0007:0017:EN:PDF (accessed 15thNovember, 2014).

(46) Following the adoption of the new

Page 105

Caluwaerts



e-money directive, an e-money licenceallows mobile network operators toconduct both their telecommunicationactivities and issue electronic money andconduct payment service activities.

(47) Luyat, ref. 22 above.(48) ‘Kenya’s New Regulatory Framework

for e-Money Issuers’, available at:http://www.gsma.com/mobilefordevelopment/kenyas-new-regulatory-framework-for-e-money-issuers(accessed 11th November, 2014).

(49) ‘Financial Inclusion in Paraguay: NewMobile Money Regulation’, available at:http://www.gsma.com/mobilefordevelopment/financial-inclusion-in-paraguay-new-mobile-money-regulation(accessed 20th November, 2014).

(50) Almazan, M. (2013) ‘Mobile MoneyRegulation in Latin America: Levelingthe Playing Field in Brazil & Peru’,available at: http://www.gsma.com/mobilefordevelopment/mobile-money-regulation-in-latin-america-leveling-the-playing-field-in-brazil-peru (accessed20th November, 2014).

(51) ‘A New Wave of E-Money in LatinAmerica’, available at:http://www.cgap.org/blog/new-wave-e-money-latin-america (accessed 20thNovember, 2014).

(52) ‘US Mobile Payments Landscape TwoYears Later’, available at:http://www.bostonfed.org/bankinfo/payment-strategies/publications/2013/mobile-payments-landscape-two-years-later.pdf (accessed 9th November, 2014).

(53) ‘Isis Mobile Wallet App Changes Nameto Softcard’, available at: http://www.bloomberg.com/news/2014-09-03/isis-mobile-wallet-app-changes-name-to-softcard.html (accessed 9th November,2014).

(54) Near field communication (NFC) is astandard for close-proximity radiocommunication to exchange databetween devices or a device and anunpowered chip. See ‘Hot Issues inPayment: QR code and NFC payment’,available at: http://payworksmobile.com/blog/2013/09/30/hot-

issues-in-payment-qr-code-nfc-payment/(accessed 15th November, 2014).

(55) In the cloud model, payment credentialsare stored in a remote fileserver (cloud),not in the secure element in the mobilephone.

(56) Quick Response (QR) codes aretwo-dimensional machine-readablecodes usually consisting of a matrix ofblack and white squares. They containdata that can be read and displayed by asmartphone. See ref. 54 above.

(57) Geo-fencing leverages location-basedservices (such as GPS and RFID) tocreate a virtual perimeter in which amobile device can be recognised and anotification generated.

(58) EMV stands for Europay, MasterCardand Visa, and is a global specification forcredit and debit payment cards based onchip card technology that definesrequirements to ensure interoperabilitybetween chip-based payment cards andterminals. EMV chip cards containembedded microprocessors that providestrong transaction security features andother application capabilities. The EMVspecification encompasses credit, debitand contactless (card and mobile)payment transactions. The primary usefor these chip-based cards is to performpayment transactions that storeencryption data for authentication. Aspart of the transaction authorisation, thecard uses the data to prove it isauthentic, thus preventing the use ofstolen or cloned cards. Available at:http://www.emvco.com (accessed 14thNovember, 2014).

(59) European Payments Council, ref. 15above.

(60) Mobile contactless payments are definedas payments where the payer and payee(and/or his/her equipment) are in thesame location and communicate directlywith each other using contactless radiotechnologies, such as NFC, Bluetooth orinfrared for data transfer. EuropeanPayments Council, ref. 15 above.

(61) Mobile remote payments can be definedas payments where the transaction is


Page 106



conducted over telecommunicationnetworks such as GSM or internet, andcan be made independently of thepayer’s location and/or his/herequipment. European Payments Council,ref. 15 above.

(62) A mobile wallet is a digital walletaccessed through a mobile device. Thisservice may reside on a mobile deviceowned by the consumer (ie the holderof the wallet) or may be remotely hostedon a secured server (or a combinationthereof) or on a merchant website.Typically, the so-called mobile walletissuer provides the wallet functionalities,but the use of the mobile wallet is underthe control of the consumer. EuropeanPayments Council, ref. 15 above.

(63) A mobile point of sale (mPOS) refers tousing a consumer mobile device tofacilitate payments and enable acceptanceof payment instruments. EuropeanPayments Council, ref. 15 above.

(64) Penicaud and Katakam, ref. 9 above.(65) Ibid.(66) Ibid.(67) Ibid.(68) In particular, the rise of e-commerce and

the increasing use of smartphones toaccess social networks in both advancedand emerging economies.

(69) Bradford, T. (2012) ‘Where SocialNetworks, Payments and BankingIntersect’, available at:https://kansascityfed.org/publicat/psr/briefings/psr-briefingdec2012.pdf(accessed 14th November, 2014).

(70) ‘Western Union, Moving Money forBetter’, available at: http://www.westernunion.com (accessed 17th November,2014).

(71) The World Bank estimates moneyremittance US$436bn in 2014, anincrease of 7.8 per cent compared with2013, available at: http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,contentMDK:23554937~pagePK:64165401~piPK:64165026~theSitePK:476883,00.html(accessed 15th November, 2014).

(72) For example, Western Union takes up to

a 15 per cent cut of remittances. Miller,N. L. (2014) ‘Money: Facebook’s FinalFrontier. Why Payments Not VirtualReality Are Its Next Holy Grail’,available at: http://www.fastcompany.com/3032001/money-facebooks-final-frontier-why-payments-not-virtual-reality-are-its-next-holy-grail (accessed15th November, 2014).

(73) World Bank (2014) ‘World BankReport: Digital Payments Vital ToEconomic Growth’, available at:http://www.worldbank.org/en/news/press-release/2014/08/28/world-bank-report-digital-payments-economic-growth (accessed 17th November, 2017).

(74) Nearly 2.2 billion financially unservedadults live in Africa, Asia, Latin Americaand the Middle East. Counting theWorlds Unbanked, available at: http://www.mckinsey.com/insights/financial_services/counting_the_worlds_unbanked(accessed 14th November, 2014).

(75) Facebook market penetration in 2013was 65.7 in Latin-America, 64.4 in theMiddle East and Africa, 25.2 per cent inAsia-Pacific. ‘Emerging Markets DriveFacebook User Growth’, available at:http://www.emarketer.com/Article/Emerging-Markets-Drive-Facebook-User-Growth/1009875 (accessed 14thNovember, 2014).

(76) ‘Does Facebook Represent the Future ofInternational Remittances?’, available at:http://www.cgap.org/blog/does-facebook-represent-future-international-remittances (accessed 17th November,2014).

(77) Ibid.(78) ‘Evolution of Monthly Active Facebook

Users’, available at: http://www.statista.com/statistics/264810/number-of-monthly-active-facebook-users-worldwide/; and ‘Facebook InvestorRelations’, available at: http://investor.fb.com/releasedetail.cfm?ReleaseID=842071 (accessed 14th November, 2014).

(79) ‘China’s Sina to Launch Online PaymentSystem in April-paper’, available at:http://in.reuters.com/article/2013/03/22/sina-onlinepayment-idINL3N0CE5

Page 107

Caluwaerts



GP20130322 (accessed 11th November,2014).

(80) ‘Renren Rides China’s SocialNetworking and Gaming to $3.20’,available at: http://www.forbes.com/sites/greatspeculations/2013/05/03/renren-rides-chinas-social-networking-and-gaming-to-3-20/ (accessed 17thNovember, 2014).

(81) ‘HABBO LaunchesHABBOPALOOZA’, available at:http://www.sulake.com/press/releases/habbo-launches-habbopalooza/ (accessed11th November, 2014).

(82) Mark Zuckerberg, CEO of Facebook,announced that it would extend itsmessenger to payments. ‘FacebookShares Surge to Record as Mobile AdsFuel Gains’, available at: http://www.bloomberg.com/news/2014-07-24/facebook-poised-to-hit-record-high-after-quarterly-gains.html (accessed 17thNovember, 2014).

(83) ‘Money: Facebook’s Final Frontier WhyPayments Not Virtual Reality Are ItsNext Holygrail’, available at:http://www.fastcompany.com/3032001/money-facebooks-final-frontier-why-payments-not-virtual-reality-are-its-next-holy-grail (accessed 17thNovember, 2014).

(84) ‘Brandz Top 100 Most Valuable GlobalBrands’, available at, https://www.millwardbrown.com/brandz/2014/Top100/Docs/2014_BrandZ_Top100_Chart.pdf(accessed 3rd November, 2014).

(85) Crum, C. (2012) ‘Would You TrustFacebook Your Money in the RealWorld?’, available at: http://www.webpronews.com/you-may-soon-be-paying-for-burgers-and-gas-with-facebook-2012-06 (accessed 16th November,2014).

(86) ‘The Everyday Bank: A New Vision forthe Digital Age’, Accenture, p. 9, availableat: http://www.accenture.com/microsite/everydaybank/Documents/media/Accenture-EverydayBank-NewVisionforDigitalAge.pdf (accessed 16thNovember, 2014).

(87) Zoller, E. (2014) ‘Facebook’s Biggest

Mobile Payment Challenge: Trust’,Ovum, 22nd April, available at:http://www.telecomasia.net/content/facebooks-biggest-mobile-payments-challenge-trust (accessed 14thNovember, 2014).

(88) ‘Facebook Says There Are Now 30MSmall Businesses with Active Pages,Including 19M on Mobile’, available at:http://techcrunch.com/2014/06/03/facebook-30m-small-businesses/(accessed 14th November, 2014).

(89) Google Wallet, available at:http://www.google.com/wallet/(accessed 16th November, 2014).

(90) ‘Google’s Brilliant Plan to Get Millionsto Adopt Its E-Money System: Gmail’,available at: http://qz.com/191496/googles-brilliant-plan-to-get-millions-to-adopt-its-e-money-system-gmail/#search/e-money (accessed 16thNovember, 2014).

(91) Ibid.(92) ‘By the Numbers: 10 Amazing Gmail

Statistics’, available at: http://expandedramblings.com/index.php/gmail-statistics/#.U8zYEFYVfwI (accessed12th November, 2014).

(93) ‘The iPhone 6 Had Better Be Amazingand Cheap, because Apple Is Losing theWar to Android’, available at:http://www.businessinsider.com/iphone-v-android-market-share-2014-5(accessed 12th November, 2014).

(94) Ref. 92 above.(95) ‘Why Google Wallet Has Failed?’

available at: http://www.pcmag.com/article2/0,2817,2469362,00.asp (accessed14th November, 2014).

(96) ‘Apple Isn’t Disrupting Credit CardCompanies, It’s Giving Them a HugeGift’, available at: http://www.businessinsider.com/apple-pay-and-credit-card-companies-2014-9 (accessed 14thNovember, 2014).

(97) ‘Apple Pay and Security: CouldTokenization Be the Tool that CurbsData Breaches?’, available at:http://www.zdnet.com/apple-pay-and-security-could-tokenization-be-the-tool-that-curbs-data-breaches-7000033585/


Page 108



(accessed 14th November, 2014).(98) ‘Apple Has All The Pieces It Needs to

Become a Powerful Force in Paymentsin 2014’, available at:http://www.businessinsider.com/apple-has-all-the-pieces-it-needs-to-become-a-powerful-force-in-payments-in-2014-2013-12 (accessed 16th November, 2014).

(99) Ibid.(100)‘Passbook and Apple’s Future on Mobile

Payments’, available at:http://www.collegemobile.com/2014/01/passbook-and-apples-future-for-mobile-payments/ (accessed 14thNovember, 2014).

(101)‘Apple Pay Is Here and It’s Going to BeGreat: Why The Skeptics Have ItWrong’, available at: http://www.forbes.com/sites/markrogowsky/2014/10/20/apple-pay-is-here-and-its-going-to-be-great-why-the-skeptics-have-it-wrong/ (accessed 18th November,2014).

(102)Ibid.(103)‘Amazon Annual Report 2013’, available

at: http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsother (accessed 14th November, 2014).

(104)Ibid.(105)Amazon Payments Europe S.C.A.

(Société en Commandite par Actions) isregistered as Electronic MoneyInstitution, in Luxembourg, available at:https://payments.amazon.co.uk/help/Personal-Accounts/User-Agreement-Policies/Licence-Information (accessed16th November, 2014).

(106)‘Amazon Expands Middleman Role inLatest Online Payments Push’, availableat: http://www.reuters.com/article/2014/06/09/us-amazon-com-payment-idUSKBN0EK0HW20140609 (accessed16th November, 2014).

(107)‘Amazon Payments’, available at:https://payments.amazon.com/home(accessed 12th November, 2014).

(108)Ibid.(109)Amazon Payments Developer, available

at: https://payments.amazon.com/developer (accessed 12th November,2014).

(110)‘Alipay Payment Services Brings theWorld’s Consumers and BusinessesTogether’, available at:http://global.alipay.com/ospay/home.htm (accessed 12th November,2014).

(111)Alibaba, available at:http://www.alibaba.com (accessed 12thNovember, 2014).

(112)‘Alibaba Gains 38% on First Day ofTrading’, available at: http://www.businessinsider.com/alibaba-ipo-september-19-2014-9 (accessed 15thNovember, 2014).

(113)‘Alipay Overtakes PayPal as the LargestMobile Payments Platform in theWorld’, available at:http://www.businessinsider.com/alipay-overtakes-paypal-as-the-largest-mobile-payments-platform-in-the-world-2014-2(accessed 15th November, 2014).

(114)‘Payment Service Alipay Holds Key toAlibaba’s Growth’, available at:http://online.wsj.com/articles/SB10001424052702303678404579535840686151748 (accessed 15th November, 2014).

(115)‘Wallet Wars: A Visual Peek InsideChina’s PayPal’, January 2014, availableat: http://www.techinasia.com/alipay-wallet/ (accessed 15th November, 2014).

(116)‘Alibaba Affiliate Alipay Rebranded Antin New Financial Services Push’,available at: http://www.reuters.com/article/2014/10/16/us-china-alibaba-idUSKCN0I50KJ20141016 (accessed15th November, 2014).

(117)‘Alipay Launches Online Current CountService Yu E Bao’, available at:http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20130620000055&cid=1206 (accessed 15th November,2015).

(118)‘Yu’ebao Becomes Nation’s BiggestMonetary Fund’, available at:http://www.globaltimes.cn/content/837721.shtml (accessed 17th November,2014).

(119)‘Start Selling Today, Take Care of YourBusiness Anywhere with Square’,available at: https://squareup.com/?sro=1(accessed 17th November, 2014).

Page 109

Caluwaerts



(120)‘Send a Payment With Square Cash, theService That’s Free, for Now’, availableat: http://www.nytimes.com/2014/02/22/your-money/square-cash-free-for-now-has-several-payment-perks.html (accessed 16th November,2016).

(121)Kazmucha, A. (2014) ‘Best Payment andWallet Apps for Iphone: Square Wallet,Paypal, Passbook, and More!’, 17th April,available at: http://www.imore.com/best-payment-and-wallet-apps-iphone-square-wallet-paypal-passbook-and-more(accessed 16th November, 2014).

(122)‘Putting Squares 5 Billion Valuation intoContext’, 13 January 2014, available at:http://techcrunch.com/2014/01/13/putting-squares-5b-valuation-into-

context/ (accessed 16th November,2014).

(123)‘Apple Considered Buying MobilePayment Firm Square But Google DealSeen As More Likely’, available at:http://appleinsider.com/articles/14/04/09/apple-considered-buying-mobile-payment-firm-square-but-google-deal-seen-as-more-likely (accessed 16thNovember, 2014).

(124)Millette, E. (2014) ‘David Marcus QuitsPayPal for Facebook — Zuck MustHave Big Plans For Payment’, availableat: http://www.forbes.com/sites/stevenbertoni/2014/06/09/david-marcus-quits-paypal-for-facebook-zuck-must-have-big-plans-for-payment/ (accessed16th November, 2014).


Page 110