24 December 2014
2014 was a year of change
If there is one word that would characterize the year 2014, then it would be ‘change’. The year was full of changes in the area of payments, banking and technology. The long-awaited offend-date for SEPA, innovations in the field of mobile payment and (still limited) acceptance of Bitcoin are the most important changes. Even though these developments were very impactful, the introductions ran fairly smoothly in most cases.
The migration to SEPA was scheduled on February 1st. All participating states had to switch to the new SCT and SDD schemes on that date. Although there had been a lot of preparation, some countries in Europe weren’t fully ready to make the transition. The European Commission saw this problem and reacted with a proposal to postpone with six months, which set the migration date at August 1st.
Stick to the original deadline
The European Payments Council (EPC) then issued a press release in which all parties involved were advised to proceed as usual and stick to the deadline of February 1st. In general, most national financial authorities tended to stick to the original deadline. That was clearly visible in the statistics from the European Central Bank (ECB), because migration pace gathered speed towards the deadline. The ECB stated that if the pace of migration continued, the vast majority of stakeholders would complete their migration by February 1st, the original deadline. Thanks to this hard work there weren’t any migration problems on the postponed date. As of August 1st, SEPA was a reality.
SEPA meant a lot of alternations regarding payments. With the introduction of SEPA customers can buy and pay for products throughout the entire SEPA zone. The payment method for online shopping is Direct Debit, which is easy to use and cost-effective. Mandates for these direct debits have been widely used, but were limited to national payments. With the introduction of SEPA, direct debits turn into SEPA Direct Debits, but the national mandates can’t be used across borders. This called for a SEPA e-mandate.
Every country with its own preferences
Some countries have their own solution (for example Einzugsermächtigung in Germany) but e-mandates still lack a general SEPA solution. Several providers are investigating the possibilities of e-mandates because there are various forms of the electronic mandates. The same goes for mobile payments, where each country has its own solutions.
A survey from management consulting firm Bain & Company showed that only a quarter of respondents in the US and Western Europe are willing to use their mobile devices for in-store payments.The key is to persuade more consumers to switch over from debit and credit cards by convincing them of the value available in adopting mobile payments, such as faster checkouts, discounts and/or promotions, access to real-time balances and location-based marketing offers. For retailers the use of mobile payments is an interesting business, because those who use mobile payments are statistically big spenders.
A mix of physical and virtual processes
The uprising of new payment methods also holds a difficulty for retailers. For retailers, the many purchase options have lead to increasing complexity, as they need to make sure the various flows of goods and payments are handled correctly: the more channels are used, the bigger the challenge. Payments are no longer handled exclusively electronically; it is a mix of physical and virtual processes, with a local payment preference.
In various countries innovative payments methods have been introduced. In the UK paying is made as easy as sending a text message with Paym, In Belgium there was the introduction of SixDots. Then there was the announcement of Twitter that entered the market of mobile payments as well. Although they sound really easy to use, the next hurdle is to convince consumers to actually use these new methods.
Mobile payments are hot but lack engagement and trust
The same is true for the introduction of mobile wallets and other forms of mobile payments. In 2014 nearly 700 mobile payments start-ups sought funding, according to AngelList, an online platform for entrepreneurs and investors. Consumers want to trust third parties to handle their money, but there’s a flipside. Even though a lot of parties introduce new payment solutions, consumers aren’t eager to test out these novelties. Why? They lack engagement and trust.
This is why the introduction of Apple Pay had a lot of impact in the payments sector. If one company has the user base and the technology to make it happen, it is Apple. Apple included Near Field Communication (NFC) chips on the new iPhone. The combination of the new iPhone, NFC chip and iTunes account with credit card information delivered a new payments service: Apple Pay. Easy to use, supported by the three major American credit card companies and the introduction of a NFC chip – it sound like a good combination for a new payments service. In 2015 we’ll see how popular this new groundbreaking service really is.
Another breakthrough in payments was the adoption of the Bitcoin technology in 2014. Germany and the United States announced that Bitcoin are a legitimate payments method. On the Equens blog we published various articles on the pro’s and con’s of this new technology.
And again, 2015 will show how this will further develop.