Automatic Top-Up - Alphacomm Solutions - Reloads

Automatic top-up: future-proof or passing fad?

An interview with Alper Altan.

We recently sat down and talked shop with Alper Altan. As the business development manager for Alphacomm Solutions’ top-up platform, Altan has a pretty good idea about where the industry is headed.

To many, top-up is as old as time itself. It’s quite likely that your very first mobile phone was prepaid. In a way, little has changed from the days of the old prepaid Nokia 5110. For most people, topping up credit still means buying scratch cards at the supermarket. Still, one wonders what the next chapter in the evolution of prepaid top-up will be.

That’s a question we all want to know the answer to. As for Alper Altan? He’s convinced the answer is automatic top-up.

What is automatic top-up exactly?

“Automatic top-up is exactly what it sounds like. The credit, is topped up automatically, without any human intervention. It’s completely frictionless and saves users a lot of time.”

Why does automatic top-up matter?

“Automatic top-up is an amazing tool, especially in the prepaid phone market. It makes the entire top-up process a lot more convenient. Let’s be frank, nobody likes to top-up their phone. The process can be quite cumbersome. Say, you’re in the middle of a call and your phone runs out of credit. That’s bad enough, but now you need to leave the house and visit a store somewhere, just to get extra credit. Annoying right? You never really know when you’re going to run out of credit. This is the dilemma that automatic top-up solves.”

So how does automatic top-up work in practice?

“Well, that depends on your credit usage and behaviour. If a user’s usage pattern is rather unpredictable, she could opt for a trigger based on her credit threshold. In other words, once the available credit drops below a certain amount, the payment order for extra credit is automatically placed. Similarly, the automatic top-up can be triggered on a recurring weekly or monthly date. If you know you get paid on time, just set automatic top-up to coincide with that date.”

Why do you feel this is a game changer?

“Automatic top-up gives mobile phone providers the ability to make ‘prepaid’ users more ‘postpaid-like.’ One of the main differences between the two is that postpaid users have signed contracts. Whether he or she uses the phone or not, is totally broke or currently travelling abroad, a postpaid user is required to pay a bill every single month.

A prepaid user with automatic top-up can rest easy. There are no financial consequences of a failed top-up. If the account balance is too low and the payment fails, nothing happens. The user would simply have to do the top-up manually. The next time an automatic top-up is triggered, the system will go ahead and try again.”

So automatic top-up is good for the consumer, but is it good for business as well?

“Of course. You know, one of the biggest challenges facing the prepaid phone market is customer churn. Since top-up is such an inconvenient experience, many users postpone topping up their phone credit for undefined periods of time. Many, influenced by special promotions, may switch SIM cards, opting for the flavour of the month, just to take advantage of temporary benefits.

Automatic top-up flips the script. We’ve seen that for users with automatic top-up, switching SIM cards simply isn’t worth the effort. They become more like postpaid users and stick around a lot longer.”

Any other benefits besides the reduction in customer churn?

“That’s cost reduction. How? Let’s take another look at the example of the postpaid user. If the monthly bill isn’t paid, consequences will follow. First of all, payment reminders are sent. After a couple of months, perhaps they block the phone’s mobile network access. After that, company personnel will have to chase down the user and try their best to get the money owed. If that doesn’t yield positive results either, a bill collector will be tapped to takeover the process.

By this time, the company would have spent considerable human and financial resources in its attempt to collect the outstanding payment. This is rather unfortunate. The last thing a mobile phone provider should be doing, is asking their personnel to chase after unpaid bills.

Offering automatic top-up is a means through which businesses can reap the benefits of having postpaid-like clients that pay on a recurring basis, without any of the risk associated with postpaid.”

At the moment, automatic top-up is mostly used in the mobile phone industry, but where else do you see it being used in the future?

“In theory, automatic top-up can be used in just about any branch of industry with products or services that rely on credit. Public transportation, car parks, school or office cafeterias and online gaming, to name a few, would all be more convenient if we didn’t have to think about reloading prepaid credit. I truly believe the possibilities for automatic top-up  are limitless.”

 

Alper Altan is business development manager for the Alphacomm Solutions top-up platform.

 

 

Alper Altan – Reload Services
Business Development Manager

I’m Alper Altan, Business Development Manager at Alphacomm Solutions. I make sure that Alphacomm maximizes profit on existing customers as well as new business.

More about Alper »


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Are consumers ready for PSD2 (and SCA)?

In my previous articles, I mainly discussed what PSD2 and SCA will mean for businesses. However, all of these developments are and will continue impacting consumers and customer experiences in various ways. In this article, I’d like to shine a light on how these changes will affect consumers.

In a nutshell. the newly revised Payment Services Directive (PSD2) is aimed at improving financial data management. The European Union wants consumers to be in charge of their financial data. Alongside this noble intention, the aim is also to increase competition and foster innovation within the financial sector. Still, do consumers even know what is going on?

Do consumers know what is going on?

While banks and businesses will do their best to make the transition to PSD2 and SCA as smooth as possible, it is true that consumer awareness regarding the pending changes isn’t very high.

Some countries are trying their best to inform and prepare their citizens. In the summer of 2019, Banking & Payment Federation Ireland (BPFI) launched two awareness campaigns in order to alert consumers regarding the possible effects of PSD2 and SCA.

Across Europe, consumers also feel quite differently regarding the changes. For example, the Dutch consider safety when shopping online to be less important than other Europeans. Consequently, in the Netherlands, 52% of consumers are comfortable with sharing biometric data like fingerprints, compared to just 31 per cent in the rest of Europe. Moreover, whereas the Dutch (50%) see speed and convenience as the most important factor when shopping online, the French (62%) and Germans (61%) feel online safety is most important. Research by financial services provider GoCardless has shown this to be the case.

#1 PSD2 will improve the banking experience

As banks share customer data with FinTechs, expect to see an increase and improvement in mobile apps or online services geared towards financial management.

Soon, a customer with accounts at two or three different banks, will be able to use a third party app that sources information from these financial institutions. Third party apps will also be allowed to manage the users bank accounts and make payments on their behalf.

For many consumers, PSD2 will lead to more choice in terms of services, better financial insights and easier financial management.

#2 PSD2 will deteriorate the online checkout experience

A critical part of PSD2 is the introduction of Strong Customer Authentication (SCA). This means that consumers will need to authenticate themselves at checkout by presenting two of the three following elements:

● Something they know (passphrase)
● Something they own (devices)
● Something they are (biometrics)

An online shopper, after logging into the webshop with her password and proceeding to checkout, will be challenged by the bank to authenticate herself via something she owns or something she is. A previously quick checkout experience, suddenly requires the user to take extra steps. In other words, SCA adds friction at checkout and in many cases, friction will lead to cart abandonment.

Still, some lucky businesses, granted they meet certain requirements, will be able to apply for exemptions and offer consumers frictionless flow.

Strong Customer Authentication Alphacomm Solutions

#3 PSD2 will increase privacy concerns

This is the big one. We’re living in an age in which consumers and their government representatives have become more aware of the dangers of data sharing. As with all matters of data sharing, there are many benefits to the consumer, but there’s always that risk of losing control. In the past, data has been shared, bought and sold with wanton abandon. Has the EU done enough to address these fears?

Personal financial data as price of admission?
Ideally, PSD2 opens up the market to allow new startups to launch innovative products that improve the lives of all consumers. Some of these companies will be very strict, adhere to all the rules and never try to gain an unfair advantage through the exploitation of data.

Still, there is also the fear that larger or less honest corporations that provide must-have goods or services, will leverage their popularity (power) in a way that consumers will find themselves handing over their data in order to gain access or receive discounts.

Here is a fictional example: what if a new version of the most popular mobile phone on the market would come at a €200 discount? In return, you’d need to grant access to your bank account, in order for the store to perform a credit check.

Or another one: what if a bigger, better and badder Game of Thrones sequel was only viewable through a popular streaming service’s ‘premium tier’? As a consumer, would you get premium in order to watch the show everybody else can’t stop talking about?

There are benefits to the consumer. By analysing financial patterns alongside viewing patterns, they could indeed make better recommendations or even produce better shows. Is this worth it to you? Like it or not, it will definitely be worth it to many.

Complicated cross-border spats?
European consumers are increasingly shopping across the border. Many don’t always know where businesses are based. If something were to happen, taking (legal) action against a business in another European country other than your own might prove to be a very difficult challenge for most consumers.

Two degrees of separation?
Lastly, the more data consumers share, the less control they have over their privacy. It is even possible for one person’s lack of privacy to affect another person’s data. Even if a particular consumer is totally against sharing financial data, her data isn’t 100% private. Simply transferring funds to a friend, who does share financial data with third parties, can already be enough.

_______________________________________________

In conclusion, personal data, though aggregated and anonymized, can lead to serious consequences when in the wrong hands. However, it can also enrich society and improve the lives of millions in countless ways.

Luckily, companies that want to participate in this open banking system will need to undergo screenings, acquire permits from the central banks of the countries in which they want to operate in and be accountable to various local authorities.

At Alphacomm Solutions, integrity and security are values we hold dear. We have been fighting fraud and securing payments for over 20 years. Looking for advice on how to prepare for PSD2 and SCA? Get in touch with us today.

 

About the author

Joep van Doornik – Payment Solutions
Product Owner

I’m Joep van Doornik, Product Owner at Alphacomm. I make sure that our services remain cutting edge.


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Strong Customer Authentication Alphacomm Solutions

The truth about Strong Customer Authentication (SCA)

Strong Customer Authentication is coming and it arrives – bearing headaches – on September 14th 2019. The impending implementation of SCA is part of the revised Payment Services Directive (PSD2) that came into force on January 18th 2018. 

For a refresher on PSD2, check out our article ‘An explanation of the revised Payment Services Directive (PSD2).’

But what is SCA exactly?

The Revised Payment Services Directive (PSD2) outlines that payments are to be made more secure and that platforms need to be open for integration. SCA specifically, refers to the way in which payments are made more secure. As of September 14th, online shoppers will need to verify their identity by sharing two out of three required elements:

  • Something they know (password, pin, secret fact)
  • Something they own (phone, wearable, hardware token)
  • Something they are (fingerprint ID, facial ID, voice ID, retina scan)

Strong Customer Authentication Alphacomm Solutions

Up until this point, the standard tool used to verify the authenticity of online transactions was the 3D Secure 1.0 system (3DS1). To make this stronger form of authentication possible, an update of the 3D Secure system from 1.0 to 2.0 was necessary. So now, along with the introduction of SCA, card schemes are adopting 3DS2 in order to better comply with SCA.

Don’t get lost in the acronym jungle. It’s pretty clear once you see how they are all connected:

  • PSD2 ⇒ A directive outlining the general goal of open banking, data sharing and security
  • SCA ⇒ A requirement of PSD2, stating that two out of three elements are needed for authentication
  • 3DS2 ⇒ The authentication tool that makes compliance with SCA possible

 

SCA adds friction and hurts conversion

So what does SCA mean for business? SCA is amazing because it makes payments secure and gives businesses a leg up in the battle to eradicate fraud. However, you need to be aware of the drawbacks. SCA adds friction to the shopping experience. Users had just gotten the hang of online shopping and now they need to learn new tricks like using biometrics at checkout. There’s no way of avoiding it. European banks will be required to decline payments that don’t meet the SCA standard.

While we’re waiting for 3DS2, let’s look at 3DS1. In April 2019, Ravelin released a shocking report on the effects of 3D Secure. After analysing millions of global business transactions, they found that 22% of payments were lost as a result of using 3DS.

A study by 451 Research suggests the European economy is likely to miss out on €57 billion in the first twelve months after SCA comes into force.

 

SCA exemptions

Luckily, there are various exceptions to the rule. The following are the most common:

Transactions (partly) outside the EEA
For SCA to apply to international transactions, both countries (that of the user and the seller) need to be located within the EEA. In other words, a transaction between a user in the USA and a German eCommerce website is exempt from SCA. However, some European banks might choose to apply SCA anyway.

People often refer to PSD2, GDPR, SCA etc as European. However, Europe is not synonymous with the European Union and the Union doesn’t quite cover it either. SCA applies to all businesses operating within the European Economic Area (EEA). That’s the European Union, plus Iceland, Liechtenstein and Norway. Note that Switzerland is not part of the EEA.

Low transaction value
Moreover, transactions with a value under €30 are exempt from SCA.

Low transaction risk
Issuing banks or acquirers can apply for an exemption for low-risk payments on the basis of Transaction Risk Analysis (TRA). In order to be considered for the exemption, fraud rates for remote card payments need to be between one and six basis points.

Trusted beneficiaries
After completing a payment with SCA, users will increasingly be able to whitelist trusted merchants. The next time a purchase is made, SCA will be bypassed. Whitelisting will become more commonplace as more card issuers start supporting it.

Excluded / Out of scope

The following transactions are excluded from SCA as they fall outside the scope of the regulation:

  • MOTO: Transactions completed over the telephone or via mail order.
  • MIT: Merchant initiated transactions (MIT) like recurring payments or subscriptions.

Frictionless Flow Alphacomm Solutions

Frictionless flow and chargeback liability shift

The Payment Services Directive (PSD2) includes provisions that allow merchants to soften the blow of SCA to the consumer experience. One such provision is ‘frictionless flow.’

Frictionless flow allows SCA measures to be bypassed. In other words, eligible merchants will be able to offer their consumers a checkout experience without any added friction.

Frictionless flow can only be applied to transactions that meet certain criteria; the size of the purchase in relation to the fraud rate of the merchant (acquirer).

For example, for transactions up to €100, frictionless flow is allowed only if the fraud rate is less than 0.13%. For transactions up to €250 and €500, the fraud rate cap is set at 0.06% and 0.01% respectively.

Frictionless flow is very beneficial to eligible merchants as it minimises the risk of cart abandonment. However, the merchant is liable for any chargebacks that occur through frictionless flow.

Still, there is an exception. If and when an issuing bank does not trust a transaction and refuses to grant frictionless flow, the consumer is presented with an authentication challenge. If the consumer passes the challenge, the chargeback liability shifts towards the issuing bank.

 

What can businesses do to soften the blow?

The bottom line is that conversions affect, well, your bottom line. It is of utmost importance that visitors carry out their purchases as intended, regardless of the new authentication measures. To that end, the best thing you can do is be upfront about it.

Own it. Inform your users that you’re proud to offer a secure shopping experience. Tell your customers that checkout is as safe as it can be because of your adherence to the latest standards. Most of all, tell them early, don’t wait until they are at the checkout phase.

Certain payment methods are intrinsically (in and of themselves) SCA-proof, for example, Apple Pay and Google Pay. Both of which already combine the OWN and ARE elements. Using a payment method like Apple Pay therefore automatically reduces the perceived friction.

Finally, the best thing you can do is ally yourself with an expert in the field of payments. Not sure whether your payment transactions meet the SCA standard? Looking for a partner that offers local payment methods that Europeans love and trust? Alphacomm Solutions can help. Let’s get in touch!

 

About the author

Joep van Doornik – Payment Solutions
Product Owner

I’m Joep van Doornik, Product Owner at Alphacomm. I make sure that our services remain cutting edge.


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EBA Report: Pay attention to cybersecurity and customer education

The European Banking Authority recently released a report in July. In the ‘EBA report on the impact of FinTech on payment institutions’ and E-money institutions’ business models,’  the EBA lists a number of key challenges faced by the payment industry. 

These key challenges include operational resilience and ICT security, operational capacity, regulatory framework, customer education as well as acquiring and retaining talent. In this article, I’d like to take a closer look at two of these challenges and how Alphacomm Solutions is taking them on.

Security

One challenge that stands out in particular, is that of operational resilience and ICT security. Security has always been and will always be a cause for concern. In the realm of eCommerce, fraudsters are quick to adapt their tactics and never stop looking for weaknesses to exploit.

Our lives have moved to the internet and so has our data. Our laptops and smartphones are treasure troves of private information. What complicates matters, is that data is shared with an increasing number of third parties. New regulations like PSD2 also play a part in this development.

The more digitally interconnected our society becomes, the larger the potential consequences of a security breach. The EBA report underscores this fact and foresees an ‘inevitable proliferation of cyber-risk in the payments industry.’

As the share of cashless payment transactions increases, protecting these transactions from prying eyes is becoming an increasingly difficult task.

Alphacomm Payments

Still, online businesses shouldn’t have to bear the risk of fraud. Your payment gateway provider should be confident enough to guarantee all payments. For example, Alphacomm Solutions offers 100% fraud risk takeover. Our SaaS fraud solution includes the automated screening of online transactions, including chargeback protection. It’s also GDPR proof; data is handled properly per EU regulations.

 

Customer education

Another aspect of the EBA report that requires close attention is customer education. The report illustrates a need for more digital and financial literacy among customers. A lack of financial literacy in the digital space can lead to one of two scenarios.

The first scenario is that innovative, forward-thinking, digitally-minded businesses are forced to launch or maintain a physical presence. The other is that less literate consumers end up excluded from participation, as innovators assert the digitally savvy market is large enough to operate in exclusively.

Consumers are not all the same. Businesses should ask themselves if and how they can better inform and educate their consumers as the industry inches forward into a fully digital environment.

Alphacomm Reminders

At Alphacomm, we are aware that not all consumers are equally ‘digital.’ One area in which we see this is payment collection. There are differences in literacy, financial stability, culture and these differences play a role in how a request of payment is handled. Therefore, when it comes to collecting outstanding payments, there’s no such thing as one size fits all.

In 1964, Canadian philosopher and media theorist Marshall McLuhan first coined the phrase, ‘the medium is the message.’ With it, he portends the character of the medium through which content is transmitted is more important than the content itself. It is the medium itself that influences our behaviour. In other words, if the medium is ill-suited to the recipient, the message may be lost.

We have solved this dilemma by developing a payment reminder solution that can be tailored to the preferences of any demographic. From formal letters to WhatsApp chats or complete interactive landing pages that feature multilingual instructional videos and ranging do-it-yourself payment options.

The EBA report

The EBA report is an informative read and goes far beyond the two challenges highlighted in this article. If you feel like tackling the 33-page report over the weekend, visit the European Banking Authority website. To read more about our solutions, visit our payments, top-up and reminders pages.

 

 

About the author

Joep van Doornik – Payment Solutions
Product Owner

I’m Joep van Doornik, Product Owner at Alphacomm. I make sure that our services remain cutting edge.


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Cold hard cash: a look at the cashless trend in the United States

The cashless trend is global. But as we wrote in a previous article: the impending cash extinction will one day be upon us, it just won’t happen everywhere all at once. In this article, we look at the state of cash in the United States. 

In 2019, the total transaction value of digital payments in the United States stands at $961.5 million. An annual projected growth rate of 8.6% will propel this figure toward $1.3 billion by 2023. But what effect does this have on the popularity of cash?

Shelle Santana, assistant professor of business administration at Harvard Business School collaborated with financial services provider Square to analyse millions of payment transactions in its database. The conclusions are interesting.

More spending on smaller purchases

In 2017, 30% of all payments in the USA were made in cash. While in 2015, 63.8% of American households had a credit card. In 2017, this number increased to 68.7%. More and more Americans have cards. Just like in other countries (with the exception of China), Americans are also using their cards for smaller and smaller purchases.

A comparison between 2015 and 2019 shows a drop from 46% to 37% in the use of cash for transactions under $20. Santana’s research shows that nowadays, half of Americans would use their cards for low-cost purchases.

Pushback

Overall, using cards instead of cash has many benefits. Among other things, it improves financial accountability, makes the shopping experience much faster and improves safety by limiting the amount of cash on store premises. It’s even healthier to use cards instead of cash.

Still, there has been a fair amount of pushback. Many Americans are of the opinion that modern companies shouldn’t have the right to be cashless. One of the arguments used is that cashless businesses discriminate against the less affluent members of society as they are more likely to be dependent on cash and less likely to have access to cards.

Interestingly, some noteworthy companies that had previously declared themselves cashless, have started accepting cash again. Either due to pressure from customers or as the result of legislative measures.

A prime example (pun intended) is Amazon Go. The super modern cashless (and cashierless) stores launched in December 2016, have recently started accepting cash. To shop at Amazon GO, one needs a smartphone. As it turns out, 23% of Americans who earn $30,000 or less, don’t own one and thus cannot participate in the ecosystem.

In the United States, there are cities and states that have taken measures to make sure citizens can always use their physical legal tender. For example, the state of New Jersey and the city of Philadelphia. Both have passed legislation banning cashless businesses. Similar legislation has been proposed in other cities as well.

The times, they are a changin’

Shelle Santana’s research revealed that 73% of small business owners believe that the United States will never be a fully cashless society and 83% said they would never go cashless.

Still, the times are changing. As digital payments continue to grow in both volume and value, and access to smartphones increases, society will continue to inch towards a cashless existence. As Greek fabulist Aesop (621 BC – 565 BC) hinted in his fable ‘Tortoise and the Hare,’ this is a case where, in the end, slow and steady will inevitably win the race. Similarly, the more we transact in the digital space, the more important the need for safe and secure digital payment systems.

What we must take away from the insights cited in this article is that there is a moral responsibility to make sure all individuals can properly participate in the economy and share in the prosperity that digital payment solutions provide.

 

About the author

Joep van Doornik – Payment Solutions
Product Owner

I’m Joep van Doornik, Product Owner at Alphacomm. I make sure that our services remain cutting edge.


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