5 October 2020
‘The whole world will be instant in a while, and so will payments’
Sibos has been a breeding ground for new ideas and visions in the world of payments for years. If you look at last year, you saw a positive vibe around Instant Payments, but there were also some concerns about whether banks were adapting quickly enough to the new digital era.
Now Sibos 2020 started, member of Worldline’s Executive Committee Michael Steinbach gives his vision on Instant Payments, the digital development of the banking sector and the global battle for payment solutions between the US, China and Europe. “Digitization is driven by the US and China; the train has left and will not stop in other regions and countries.”
How do you see the development of Instant Payments over the past year?
Steinbach: “The speed with which Instant Payments was embraced has slowed down. There are various reasons for this, depending on the country, the bank and the situation. The Netherlands, for example, is the only country that has come up with a country-wide approach and that has not only ensured a successful implementation and a stable product, but also a high acceptance rate among citizens. It shows what you can achieve when banks work together.
Of course,COVID-19 has slowed down the process, as banks have recently focused on the adoption of working from home and running day-to-day activities. Obviously, they had other priorities, but even without COVID-19 Europe would not have been completely up to speed when it comes to Instant Payments. My view: Europe has not yet recognized that Instant Payments are going to be the new normal. In general, Europe doesn't see the absolute urgency. You can notice this because this payment method is still a premium service in some countries, for example. This is strange because it is clear that in the long run all payments will always be instant, based on the technical standard ISO 20022. The whole world will be instant in a while, and so will payments.”
Does this delay also apply to the acceptance of Open Banking by banks?
Steinbach: “That's a little different. Banks have to make their data available to third parties, but they are reluctant to open up, because they don't want to give up their position on account holder data. But it's not just a risk, it's also an opportunity, because banks can expand their dataset with information from other banks or financial institutions. For that, valuable business models and business cases need to be worked out. When into comes to PSD2 and Open Banking, banks are currently mainly focused on compliance.
Is there still enough time for banks to prepare for the digital age or will fintechs and bigtechs take off with lots of market share?
Steinbach: “The question is which fintechs and start-ups will still exist or have been taken over at the end of the current pandemic. Start-ups with a strong market position and a good product are also struggling at the moment. Nobody knows what the market will look like after COVID-19, but you can see that bigtechs like Amazon will further benefit the most from the current situation and will become stronger than they already are. That is a threat. Still, I think there are certainly opportunities for banks because they have a good reputation, are taken seriously and are seen as trustworthy. I believe this plays a major role and we as Worldline will support banks in their transition to the new world.”
You said earlier that the dependence from banks on non-European payment solutions is worrying. What is your view on this issue?
Steinbach: “I hope that the banks understand the urgency of European cooperation, because otherwise the bigtechs from the US and China will continue to enlarge their market presence in Europe. I see the European Payments Initiative (EPI) – a group of 16 major European banks that are aiming on a unified pan-European payment solution – as a very good basis but also as their last chance. We as Worldline support this EPI initiative. In a later blog, Mr C. Bovero – Head of Cards & Innovative Payments at BNP will share his vision on their participation in EPI.
Digitization is driven by the US and China; the train has left and will not stop in other regions and countries. As a European payments market, we really need to take steps now.”
What is your advice to banks?
Steinbach: “If I were to run a bank, I would say: let's put everything on the table. How do we do things internally (within the bank) but also externally (towards our customers)? Make an inventory of the whole house. What you may find is that different business lines draw their own conclusions and visions. These may be completely true, but if they are not embedded in an overall strategy, it will not work. Then you create different islands within a bank, as is the case with legacy systems. So, you have to demolish these islands not only at the system level, but also at the strategic level.
If I were a bank, I would be convinced of the target scenario from the payment side. In this scenario, any payment anywhere in the world, from any device, will be instant in the future. I recommend committing to this, because one way or another, Instant Payments will become the new normal.”