The Future of Cashless Banking

By: Savio Thattil, CIO & SVP of Technology, Sephora Americas

With the decrease in cash use, the increase in financial literacy and the development of technology, payment system shave become even more important today. The legal regulations have also contributed to this development. PSDI, which was published in 2007, and then the recently published PSD II brought about many innovations. With the PSD II, the world of payment systems is in a very different position. There have been many developments in Turkey and the world after this directive, banks and other financial institutions have increased their work on this issue. After PSD IIUK Banking and The Berlin Group communities have offered their standards and many banks in Europe shared their Open Banking APIs by using these standards.

Aims of PSD II:

• Innovative and secure payment Technologies

• Customer experience

• Get into market for Fintechs

• Easy integration to bank systems

Two payment methods included with PSD II:

• PIS (Payment Initiation Service)

• Guarantees payment when goods/services are delivered

• Allows non-credit cardholders to shop online for low costs

• AIS (Account Information Services)

• Users will be able to view their financial status from a single application or platform

Highlights of this arrangement:

• Securing users’ payments and personal data

• Providing correct information to the user

We are working on two new payment methods. We will be completing our work on the payment initiation service soon. Our bank's customers will be able to shop on e-commerce sites without using cards.

Another issue regulated by PSD II is Open Banking. Open banking allows third party companies to develop financial services with APIs shared by banks.

Aim of regulation of open banking

• Creating a competitive environment

• Enrichment of products and services

With open banking, fintechs began to grow. Number of fintech companies increased after PSD II. There may be those who think fintechs are dangerous to the banking sector but we treat these companies as opportunities. The collaboration of banks and fintechs is called‘ co-opetition’. With the co-opetition of Fintech and the banks, the quality of service and product quality of the banks will increase, Fintechs will be able to provide products and services more easily and customers will have easy access to many products and services. Our bank cooperates with fintechs and these efforts will increase rapidly. We will continue to provide better quality and appropriate services to our customers by working with these companies.

As an example of Fintech cooperation, we have worked on the POS solution with the Pay core company. Our product, which is offered with Paycore’s collaboration, provides contactless payment by merchants without the need for an additional POS device. After installing the application on the NFC-enabled and roid device, the merchant can complete the simple activation process and start receiving payments. Customers can make a payment via contactless cards or devices at merchants that own mobile POS. Classic POS devices cause cost burdens to both banks and merchants such as maintenance/repair, installation of device, and equipment. This application provides a cost advantage by eliminating all costs. Merchants that do not want to purchase POS device because of the cost burden will be able to receive card payment with this application, and the cash usage will decrease and card payment systems will be improved. Cash-only payments in small firms without POS devices cause in for maleconomy. With this application, the number of card payments will increase and will contribute to the development of the country's economy.

The use of cash has disadvantages such as security, fraud, and informal economy. Increased using cards and Wother payment instruments has eliminated these risks. We also contribute to payment systems by improving our card features and working on products such as mobile wallets.