ACI Worldwide, which supplies the software that manages 99 percent of ATM transactions in Thailand, sees an opportunity to expand the number of point of sales transactions here, while president and CEO Philip Heasley speaks of a bright future for micropayments.
Heasley and ACI Worldwide's Asia-Pacific president, Jeremy Wilmot, also praised Thailand's policy to promote electronic payments, which are growing substantially, noting how this helped to boost the economy, while speaking about trends around electronic payments and the threats paused by fraudsters.
ACI first provided software for ATMs here in 1983, and for the past 15 years has partnered with DataOne Asia to provide payment solutions around ATMs as well as corporate and wholesale interbank transactions and risk mitigation solutions.
Wilmot indicated that ACI would expand its presence here and stressed a continued partnership with DataOne Asia, stopping short of saying the company would open an office here. He noted how 300 of the company's 2,400 employees were based in Asia, mostly in Singapore and India.
Likening payment systems to "heart surgery within a bank with a heavy technical services component to test, integrate and implement into a bank's infrastructure", Wilmot explained how ACI's teams in the region included project management people, business analysts, system consultants, system engineers and support personnel.
Thailand now has 20,000 ATMs, mostly using ACI's BASE24 software, while the company plans to expand to offer solutions around point of sales (POS) systems, which Wilmot said accounted for just one-tenth the number of ATM transactions. He pointed out that in mature banking card markets, POS transactions exceeded ATM withdrawals by a factor of five to seven.
Consumer payments here would grow and could include mobile payments and cash cards for transport and highways, he said and ACI could leverage its software that runs the ATM systems for this, the regional chief explained.
Wilmot praised the Ministry of Finance's payments steering committee whose objective was to grow the volume of e-payments and to reduce the amount of cash in circulation, noting that ACI and DataOne had played a big role in supporting this.
Heasley explained how the "velocity" of electronic currency accelerated economic growth by being immediately available. "It never has a physical state from being available in one account to being available in another account," he said, while Wilmost cited a recent survey by Visa for central Europe and Africa that showed that introducing efficient credit card and debit card systems and ATM and POS networks delivered an increase in GDP by between one and five percent.
Micropayments would be another big area. The concept, which includes having an RFID tag in your car or using a mobile phone to do vending, was just at the beginning stages, according to Heasley, who said that ACI's software and infrastructure could enable this.
Heasley said ACI was the only company to offer the full spectrum of payment solutions for retail, corporate and wholesale banking, with its nearest competitor on the retail side being one-tenth its size.
Wilmot added that while ACI also had competitors in the risk management, smartcard and card management sectors, the company was unique in that "it doesn't have a competitor across the integrated payments, across all lines, in retail, in wholesale and risk".
He said the industry was headed towards bringing these all togther and that ACI was "uniquely positioned".
"We've got all these different pieces which we are working to bring together over the next few years. And now our banks (customers), including here in Thailand, recognise that requirement--but it's not a requirement for 2008, it's a journey over a number of years," he said, adding that ACI was working with "thought-leaders in the industry" around that.
Heasley believes banks will be looking for higher revenues from payment transactions and he cites "stress ... in terms of the arbitrage side of banking. That is, the lending--borrowing side.
"You're seeing the bad stuff go through the markets right now. So as banks will naturally get more restrictive... so they will make less money on that side ... That would put more pressure on them to try to make more money on the payments side," suggested ACI's CEO, who is a 32-year veteran of payments and financial systems.
Asked about levels of fraud in e-banking, Heasley said banks never liked to refer to this, mainly because they did not want to reveal any information to the organised crime syndicates.
"Credit card debit fraud is as organised a business as our business is, except they do illegal business," he said. "If a bank makes it very clear what their fraud profile is, it makes it easier for the fraudsters to decide whether they would target that bank, or not."
He added that on the ATM side of the business, if the level of fraud was more than 10-basis points, or $1 in every $1,000, that would be very expensive to the banks. There was not that much revenue per transaction for ATM payments, so the "acceptable" level of fraud was lower than for credit card fraud because the interest rates on credit cards were higher, ACI's CEO explained.
But he added that Southeast Asia "has not seen attacks by the fraudsters the way that they will as the payment system grows. Because the pot has to get big enough before they want a piece of the pie. So more of the activities are probably local activities, they're not coming out of Macau or Nigeria or Japan", where there were big gangs, Heasley said.
Asked how banks were faring, he added: "I would say that the largest banks that are most vulnerable have actually done a good job, they probably spend less in basis points on fraud than they did one or five years ago. So it's improved. But is it still a huge amount of money they are spending on fraud? Yes it is. There's still a lot of things they can do to fight it."
Wilmot noted how Visa and MasterCard had mandated standards, and added that Thailand's payments steering committee was heavily focussed on containing fraud and mitigating risk.
The Europay, MasterCard and Visa (EMV) standard for smart cards made it much more difficult to copy the card by embedding a chip in it, he explained, noting how this made it easier for the banks to change the settings on that chip and that it provided another layer that the fraudsters would have to copy, which made the payment very secure.
The EMV standard was well adopted in Europe, the Middle East and Africa while Asia, North America and Latin America were in the process of implementing it, he said, adding that Thailand would adopt it over the next few years.
In response to a question, Heasley said Basel II compliance had helped ACI's business because its fraud-related tools helped banks to report on their fraud positions while Basel II emphasised a strong balance sheet and banks were increasingly looking to revenue from their payments infrastructure, which now amounted to close to 50 cents on the dollar of banks earnings, for this.
Asked if banks' payment systems were vulnerable to hackers, Heasley said most payments managed by ACI software were real-time and going over banks' highly-secured fibre-optic lines rather than "a common Internet" line.
"There are some very small payment providers who sell Windows-based Internet-based solutions, but we don't. We would not put the ACI name to that," he stated.
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