Sometimes innovation in payments and commerce is pretty big, bold and obvious: moving from cash to plastic cards. Moving from plastic cards to mobile, and from shopping in physical stores to doing a lot of it online. And often those big shifts are the result of a series of moves by big players whose contributions are significant, even if their role is to enable those shifts by working behind the scenes.
Or in the case of Oberthur Technologies (OT) – inside the chips that make transacting safe, secure and interoperable across the many ecosystems in which commerce and payments innovation takes them.
To get the perspective of how 2015 has been for the company whose name is synonymous with EMV and securing digital identity, and what’s in store for 2016, MPD CEO Karen Webster spoke with OT’s CEO Didier Lamouche.
"The U.S. is only one part of our story for 2015,” said Lamouche, who shared a look back on the year and offered a glimpse into what’s ahead. “We see growth across all of our divisions, particularly the financial services and telecommunication divisions. We also see growth in all of our regions. They are all growing significantly. These strong results are thanks to OT’s underlying strategy and tight execution."
2015: Double-Digit Quarterly Growth
For Oberthur, 2015 has been a banner year. In fact, during the conversation, Lamouche revealed for the first time just how much market share OT has in the U.S.
Nearly 40 percent — fueled by the migration to EMV now underway there.
Lamouche noted that the nearly 40 percent market share in the U.S. for EMV is combined with strong financial results for OT globally in Q3 of a 33 percent growth at actual rates over Q3 2014 which followed 25 percent growth in Q2 over the same period in 2014, demonstrating a strong growth pattern year-to-date for 2015.
That prompted what Webster perhaps thought an obvious question: Is the decision by the U.S. to move to EMV causing other markets to pick up the pace with respect to their own EMV efforts?
"That’s an assumption I would not rule out,” Lamouche remarked. “I would not say it’s totally driven by that because we have seen a sustained growth for at least two years across all of our markets. But it’s very possible now since the U.S. has adopted EMV that the pace has quickened.”
What has clearly accelerated, Lamouche observed, is the time between decision to adopt EMV and deployment. Once a decision is made to switch, he said, it’s off to the chip-card races.
“In India, the decision was made to migrate to EMV and the execution started immediately, which is seldom the case,” Lamouche explained. “We saw a mandate from the Prime Minister in June and the first tender in September. And that’s very unusual.”
Judging by OT’s pipeline, Lamouche said that there’s still plenty of room to pursue EMV, as well as other technologies that are innovating payments cards.
Contactless, for example.
Innovation in Cards Revving Up
I believe in the next two years we will see a proliferation of contactless cards. I’m convinced of that. It was not the case three months ago. I think it’s a trend we’re starting to see.
Interestingly enough, Lamouche said, the conversations he’s been having with U.S. issuers have caused his already-positive views on contactless payments cards to be further enhanced based on conditions in the market over the past three months.
“The vast majority of U.S. migration volume has been contact [cards] only with chip and signature. But we are starting to see a lot of demand from our customers to move to chip and PIN as well as contactless. The increased interest in contactless is driven by the growing attention [the issuers] are paying to Apple Pay and Samsung Pay,” he said.
Lamouche says that FIs acknowledge that contactless transactions in the U.S. are low since it’s still “early in the adoption of their use,” but that the attention that Apple and Samsung are attracting to the new medium is prompting them to explore a shift to contactless cards.
“I believe in the next two years we will see a proliferation of contactless cards. I’m convinced of that. It was not the case three months ago. I think it’s a trend we’re starting to see,” Lamouche explained.
Contactless, though, isn’t the only innovation that OT is driving with the physical card form factor. MOTION CODETM, OT’s dynamic card technology, which enables secure transactions online via a physical card, is also garnering the interest of FIs. MOTION CODETM cards have a mini screen on the back of the card which displays a dynamically generated CVV randomly every hour, independent of any action on the part of a cardholder or any software plug-in. Card data has a limited shelf life, as a result – basically an hour.
“What we have seen in the countries that have migrated to EMV is increased fraud via card not present transactions — 65 percent or more of their fraud is from that channel. In anticipation of that, we created our MOTION CODETM technology, which is ready now, to help FIs secure transactions across many channels,” Lamouche shared.
He also said that OT has six proof of concepts with six different financial institutions — including one very large one in the U.S. whose name he declined to share. What he did share is that the technology will be commercial available in the U.S. in the next two years.
OT’s Stance On Technology – “We are Switzerland.”
Speaking of technology, Lamouche emphasized OT’s position as “technology agnostic,” as evidenced by their decision to support contactless technology via both HCE and the Secure Element. That, he said, leverages OT’s strength in software development AND embedded security which has helped OT develop “strong partnerships in the industry” across a variety of sectors – issuers, telcos, networks and mobile wallets players. He cited partnerships with “key players” like Samsung and a globally recognized issuer that OT just signed an agreement with which will be announced soon as proof points.
That position, Lamouche emphasized, also puts OT center stage with what is to be the next wave of innovation – payments and commerce at the intersection of the various ecosystems — that is the Internet of Things.
“We are very glad to be operating at the intersection of payments and telecom,” Lamouche explained. “Independent of each other, they are exciting ecosystems, but together they are going to create richer experiences for merchants, issuers and consumers that will drive innovations to enable commerce."
Telco will be the missing piece of the puzzle to bring the Internet of Things to life – making the myriad of intersecting ecosystems one.
Lamouche believes not only that wearables and smartphones drive the adoption of new payments technologies, but also that connected devices likes cars with chips embedded in them to pay tolls and pay for food at drive-thru restaurants will take commerce and payments to interesting new places and spaces. He firmly believes that what’s next for the industry is a massive number of connected devices that he calls the “bridge” between payments, security, technology and telecom – sectors OT knows well, enabled by capabilities that they have honed over many years.
“Telco will be the missing piece of the puzzle to bring the Internet of Things to life – making the myriad of intersecting ecosystems one,” Lamouche emphasized. “With the Internet of Things, the number of end-points to secure will be massive – billions and billions of devices a year to connect and to secure. What is interesting – and exciting — is that many of those devices, will have a payment capability inside.”
Lamouche admits that in today’s fast moving world where payments, tech and telecom are converging like never before – and on a global basis — only the fast and the nimble can keep up, since operating at scale is critical. But that’s why Lamouche is convinced that now is OT’s time to shine, having played at the intersections of the technology, mobile, security, telco and payments ecosystems for nearly three decades in nearly every corner of the world.