Payments are the equivalent of the cardiovascular system of an economy. Until recently, payments in the global economy were dominated by a few well-established players who, driven by economies of scale, grew for several decades through mergers and acquisitions into their current formidable size.
Dominating the market, they have until now had little incentive to modernise their technology. Payment platforms for these institutions were often built, at best, in the late-1970s to the mid-1980s and have not been modernised since then, as there has been little motivation or need for these organisations to change the way they work.
Today, however, these established players are coming under threat from new entrants with “revolutionary” payment methods and technologies, from multi-application smart cards and mobile devices to virtual cards and currencies.
According to Bloomberg Businessweek, there are more than 1,500 startups now operating in the new payments methods space, ranging from $1-billion companies to smaller players with valuations in of just a few dozen million dollars. Often these startups stem from university room-mates trying to earn a bit of extra money, who invent some peer-to-peer transaction system, build a prototype model and sell it off to innovation-thirsty investors, much as happened in the internet and e-commerce startups boom story of the late-1990s.
These startups have quickly realised the need for a modern payments platform that is fully integrated and flexible, but also secure, robust and scalable, which can support their growth to help them become real rivals to incumbent players. This, in turn, has increased the pressure on established payment providers, who now also require modern payment platforms capable of supporting millions of business transactions a day.
Although the need for such technology platforms seems to be well recognised by both groups, it is still not clear where this platform should come from. Payment technology is a relatively conservative area, more akin to a traditional bricks-and-mortar type operation than a Silicon Valley startup. For decades the market was dominated by very few monopolies, which appeared impossible to break, making it unattractive to investors looking for short to mid-term exits to support.
The result of this has been that the industry has failed to evolve or mature and has created a situation where there is a strong demand for a new technology platform, but a lack of credible suppliers.
BPC BANKING TECHNOLOGIES
There is, though, one provider capable of delivering such innovation. BPC Banking Technologies with 140 customers – banks and payment processors – in 50 countries on five continents is a leading player in the narrow but extremely sensitive niche of payment technology, providing solutions for all kinds of retail electronic payments through cards, mobile, internet and virtual currency.
Developed and fully owned by BPC, its payment platform SmartVista has been consistently ranked by Gartner as a leading provider and in 2013 was named best technology payment platform by Ovum. It has a strong track record: in the last 15 years not a single customer has been lost to a competitor and in the past five years it has been growing at up to 70 per cent a year, despite the various twists in the geopolitical landscape and the global economy.
With customers in ‘banking breakthrough’ countries, we have proved we can directly address any emerging technology needs, totally by-passing legacy systems
“But this is only beginning of the story,” says Anatoly Loginov, chief executive of BPC Banking Technologies. “Although it took us nearly 15 years to get ready, we are now uniquely positioned to supply in full the global demand for new payments platforms.”
Headquartered in Switzerland, with sales and implementation offices in major economic hubs, including Zurich, Madrid, Singapore, Dubai, London, Johannesburg, Panama and Miami, and development centres in Europe, Russia, the Middle East and Asia-Pacific, the company is well placed to help customers take advantage of new opportunities arising in any part of the globe.
But how could all this happen? “We are almost a text-book story,” says Mr Loginov. “What we have now is a result of a combination of extreme luck, ambitious long-term planning and strict adherence to very few, rather conservative, principles.”
The company was created in the mid-1990s by ex-Digital Equipment Corporation employees, who were responsible for projects for the financial industry.
“From the very beginning, we wanted to challenge the global monopoly of a very few players with proprietary solutions, and create modern, fully integrated, flexible and scalable platforms that could handle both existing and future payment types,” says Mr Loginov. “We also wanted to support or create any product they wanted and for them to be fully free to choose the environment they like – hardware, systems, peripherals, terminals, cards – all with the same or better functionality as existing proprietary solutions.”
The business initially drew on the experience of its founders, but also benefited from the expertise of talented Russian software developers to construct the SmartVista platform. With a background in former Soviet Union space and physics research institutions, these skilled individuals helped implement the platform in software codes, ensuring some of the largest financial institutions in Eastern Europe were able to progress from nothing to using the most up-to-date solutions, as well as acting as a test-ground for the newly built platform.
The business initially focused on ensuring its technology was proven, with organisations that were willing to take advantage of being “first movers”. One early customer was Sberbank in Russia, who from starting with fewer than 100 ATMs today uses the SmartVista platform to handle more than 20 million transactions every day, from 70,000 ATMs, 10,000 kiosks and 300,000 point-of-sale terminals.
Neither is this confined to basic functionality as SmartVista enables the integration of interactive voice and video communications from Sberbank ATMs, using Adobe Flash Player and web browsers to create a voice-over-IP session between customers and call centre staff. “Essentially this system can be used to turn each ATM into a mini-branch, where customers can interact with bank staff remotely to get advice and assistance,” Mr Loginov explains.
BREAKING NEW GROUND
BPC Banking Technologies, though, has a longer-term ambition to challenge the monopoly of existing payment technology providers and become a truly global player. “Many of our competitors, who mushroomed at the same time as us in the wake of opportunities in emerging markets, were tempted to build quick solutions to address the local and immediate needs of customers randomly scattered over the globe, who could not afford solutions from the dominant global providers,” says Mr Loginov.
These businesses gained an initial advantage and market share, he says, but were unable to sustain their customers’ growth when it came to more mature and diversified markets. “Now we do not see them anymore,” he adds. “Our next ambition is to challenge the incumbent leading suppliers where they are strongest at first-tier global accounts.”
The business intends to achieve this goal by sticking to the same basic principles that served it so well at the beginning of its journey. “We will continue to build truly global, fully functional and flawlessly integrated solutions while staying customer focused and customer dependent,” says Mr Loginov. “Often people assume ‘global’ means US focused, but with SmartVista, we bring a wealth of business and technology solutions, and ideas accumulated from our customers in 50 countries.”
With SmartVista, we bring a wealth of business and technology solutions, and ideas accumulated from our customers in 50 countries
BPC certainly boasts an impressive international customer list, including ERSTE Group, where it is building a common card platform on a single site to replace multiple systems in seven banks acquired by the group in Eastern Europe, and the State Bank of Mauritius, where it has replaced 11 different applications with SmartVista to create a fully functional and seamlessly integrated solution.
Other notable examples of customer projects around the globe include a microfinance scheme in Cambodia where BPC was among the first to deploy biometric technology at ATMs, and other initiatives focused around purely mobile transactions in countries such as Kenya and Malawi, Afghanistan and Iraq.
“As Bill Gates said, with customers in ‘banking breakthrough’ countries, from Indonesia to Namibia, Botswana, Kenya and Malawi to Vietnam, Cambodia, Laos and Myanmar, we have proved we can directly address any emerging technology needs, totally by-passing legacy systems,” says Mr Loginov.
The original database and built-in product parameterisation mechanism, which allows customers to incorporate new payment channels and products immediately, while maintaining integration with necessary infrastructure – something often neglected by startups – will also remain, allowing customers to maintain standards around issues such as security, throughput optimisation, auditing, reporting and analytics.
In addition, the business, for now, will stay privately owned, adds Mr Loginov, meaning it can ensure its focus remains on helping customers and avoid any exposure to market fluctuations or other external forces beyond its control.
The business is now ready to take on the challenge of using SmartVista to replace legacy solutions, while supporting new payment methods. To date, established first-tier global payment providers and big-name payment startups have proved unwilling or unable to take the necessary steps, but Mr Loginov remains convinced they will soon realise this is the only way they can survive in the modern payments era.
“We are fully ready both to replace legacy systems for established players and build future-proof platforms for serious modern startups,” he says. “They will come – because there is no one else who can offer the right platform for their needs.”