Charles Orton-Jones leads a discussion among four industry leaders on latest developments and the shape of things to come
Why are we seeing so many partnerships?
ALASTAIR LUKIES: Payment by its very nature is a partnership industry. The only reason you can get off a plane anywhere in the world and use the same bank card and same pin to access your cash is because of partnerships. LINK in the UK consolidates all the ATMs in the country, connects into Visa or Mastercard or Swift to go overseas, then connects to Atos Origin in France, which connects into Société Générale for you to be able to take money out of their ATM. But it is not an industry which is high-profile. What has changed is the introduction of mobile devices which is big news in its own right, so the partnerships are high-profile. That is the only difference.
JAMES LE BROCQ: We need collaboration to create the ecosystems to support very large-scale use with a ubiquitous experience. If you take, for example, NFC [near field communication] payments for transport. Until you are able to travel the whole country or maybe the whole Continent – in an NFC context where you buy your ticket in an NFC environment and use it in an NFC environment – until you have that, the consumer experience is going to be fragmented. Consumers are ready to use the technology. The challenge to a variety of industries is to get the ecosystems in place. What we need is for a bunch of players in a vertical industry to get together and declare they are going to work together to adopt contactless payments. First Group are doing so, but we need Stagecoach and a variety of other players to do so too.
PETER AYLIFFE: Visa has always operated on the basis of working with open platforms so everyone can compete on our platforms. That has been a fundamental thing for us. We believe that it is in the consumers’ interest not to have different closed-loop systems so that every time I want to use something I need to use a different payment device wherever I go. For example, the Oyster card is closed-loop. I can use it on the transport system, but I can’t use it anywhere else. Hence Visa has been working with mobile phone operators, such as Telefónica and Vodafone, and with handset providers – we have just done a major deal with Samsung around the Olympic Games. Collaboration is the best way to go.
There are so many new start-ups and platforms. Is the industry now too fragmented?
LE BROCQ: I think what we are seeing is a function of the fact that these new markets are very nascent. We are going to see lots of innovations for a period and then we are going to see consumers guide the market on which solutions are the most acceptable to them. Then we will see some consolidation.
By 2020, some 50 per cent of all processed Visa transactions will be on a mobile device
LUKIES: One hundred per cent spot on. If you think of search, of music, of mobile phones, of video recorders, of Walkmans, there is always multiple innovation. You get pioneers; you get inventors who create stuff. But it will all eventually go through a period of consolidation. The winner is not necessarily going be the best technology. The techies hate me saying this because they always say how pure their solution is, but consumers don’t give a monkeys about technology. Consumers will use what is intuitive to use. And I think that Apple, more than any other brand on the planet, has proven that time and time again.
DE GEER: I agree. I don’t think we have seen the beginning of fragmentation yet. Over the next two or three years, payments companies will be popping up all over the place. Give it four or five years and you will see a massive consolidation.
AYLIFFE: If you are a consumer, it must be quite difficult to follow. They ask, “What do I need? Do I need an O2 wallet? Do I need a Visa wallet? Do I need a Mastercard wallet? A PayPal wallet? A Google wallet?” It is unclear. Hence I think we will start to see more consolidation over time. But now is not the time to strangle the innovation; let’s get the ideas about and work together to see how we can leverage them.
What is the size of the opportunity for the victors?
AYLIFFE: By 2020, I think that 50 per cent of all our processed Visa transactions will be on a mobile device. That is how big it is. We have already seen at the Olympics that one in every six transactions taking place across the venues was contactless and in Horse Guards it was one in every four. There are 24 million plastic cards in the UK which can accept contactless payments. That capability is moving to mobile. By the way, I have no idea what a mobile will actually look like in 2020.
DE GEER: Smartphone penetration across Europe is 30 or 40 per cent. Yet point-of-sale payments penetration across Europe is something like 1.5 to 2 per cent. That is a massive gap to be bridged which we can do with the help of cell phones. At iZettle we are democratising payments, making it possible for anyone, even a sole trader, to take card payments.
What is the ultimate goal of the payments industry?
DE GEER: The ultimate goal of the payments industry is to increase the transaction flow the greatest extent possible. If you ask most card schemes what is on their agenda, they say it is to declare war on cash. Across Europe payments or electronic payments, and 70 per cent are still cash and invoices. 50 per cent is still cash. There is massive potential to convert those to card payments.
LE BROCQ: Ultimately the end goal for O2 in the UK is to connect our customers to the people and things which matter to them. We will be looking to bring services and experiences and capabilities and products to our customers that they are interested in and motivated to use. So I don’t have a goal which is payment-dominated, I have a goal which is around giving our customers access to the products, services and experiences which enables them to remain connected to the people and things which matter to them.
President and chief executive of Visa Europe, he previously spent more than 20 years with Lloyds TSB where he held a number of executive posts in the bank’s retail business. He also spent five years as a non-executive director on the Visa Europe board and is a non-executive director for Investor in People. He was named Industry Personality of the Year at The Card Awards 2009.
JAMES LE BROCQ
A 23-year-old veteran at Barclays and Barclaycard, he became managing director of O2 Money in 2010. He has also overseen O2’s adoption of contactless technology, and the introduction of pre-paid Load & Go and Cash manager cards. The mobile operator’s latest product is O2 Wallet, which allows customers to use their mobile as a payment device.
JACOB DE GEER
Founding chief executive of iZettle.com, which produces a mini chip-card reader and app that lets anyone process card payments on an iPhone, he launched the service in Sweden last summer. It is now available to individuals and small businesses across Sweden, Norway, Denmark, Finland and the UK. The firm recently closed a $31.6-million Series B funding round.
Co-founder of Monitise, he says the payments industry thought he was “insane” when he first proposed a mobile payment platform in 2003. Today the Monitise platform is used by more than 300 financial institutions to allow consumers to make payments and check their bank balances on a mobile. The AIM-listed firm is valued at £304 million.