What are the key mistakes and misapprehensions that payment start-ups and banks alike make, the world over? Does technology drive consumer behaviour, should the proposition always target the consumer? Anna Milne highlights a few, as cited by thought leaders and entrepreneurs at Money 20/20 Europe
There was no shortage of opinions and insights at Money 20/20 Europe. Some of the speakers put to bed some misconceptions about the way to go about innovation.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
1)Regulation doesn’t always trail technology
In many cases the regulators are up to speed and ahead of the tech providers, certainly of the banks
Take for example the UK’s Payment Systems Regulator (PSR), which has got full-steam-ahead behind the cause to open up access to payment systems in the UK, much to the surprise, frankly, of much of the industry. Rich Wagner said himself at Money 2020 Europe in Copenhagen, he has been "amazed by the engagement of the Bank of England", saying the bank is finally understanding the financial risk (to the Bank) is far less than imagined.
Wagner explained the situation is now such that the technology providers who would be tasked with the logistics of opening the systems, are lagging behind in preparations to be able to provide the service. The only two out of ten providers who are ready and certified are FIS and VocaLink.
The regulator is way ahead of the curve. The end goal is for small Payment Service Providers to gain direct access to the UK’s payments systems, such as Faster Payments, by having a settlement account with the Bank of England. Currently, these small providers rent access to the systems from the bigger banks who collectively own the systems.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe recent UK launch of bitcoin P2P service Circle provides further evidence that the FCA is not so risk-averse and conservative as some expect. Karina McTeague, speaking at Money 2020 on a panel about the future of banking said as much: "We are not conservative or risk averse."
Monica Monaco, who consults on EU regulation, said that while regulators may be wary of blockchain technology, they are absolutely taking action to educate themselves on it. If we take the EU as the slowest, most slow-moving bureaucratic institution, then as a benchmark alone this serves as evidence that regulators are perhaps not as stuck in the past as we might assume and that we better stop using that as an excuse for change ourselves.
2)Technology does not drive consumer behaviour
The art is in using technology as a facilitator. Too many start-ups and banks get over-excited about new technological developments and set about creating a product which doesn’t actually serve any viable purpose or solve any problem.
DBS’ Chief Innovation Officer (CIO), Neal Cross is a keen adversary of this mindset.
Take blockchain: as Michael Moritz, Sequoia Capital, says, on the subject of blockchain: "It may work perfectly in theory but it doesn’t solve a problem for the consumer."
That’s not to say it isn’t potent technology that could revolutionise the entire financial system- but the message is not to get carried away and to play the long game to develop something that actually solves a problem.
Simon Taylor, VP blockchain R&D, Barclays says the same, it will be the platform devloping propositions that survive, not the product-focused ones. "Start from what the requirements are and work from there."
Matthew Hampson, CTO, Nomura, says: "I encourage all companies to have a go with blockchain technology using real business projects and problems, not in some lab out back."
Vitalik Buterin, the talented developer and creator of Ethereum, bemoaned the rush of bitcoin products that launched, a lot of them citing as their business case the rising price of bitcoin. "That is not a business model," he said.
3)Do not underestimate or dismiss China
As Klarna’s Sebastian Siemiatkowski said, "I would never go to China because Alipay is one of the most impressive companies I’ve ever met, they’re amazing, so impressive, so smart, so dedicated, and so hard-working, that there’s just nothing [for Klarna] to do in China. Investor Michael Moritz says: "The Chinese government are interested in having American companies, despite what the Western press says. They’re interested in having American companies succeed in China, it’s good for the Chinese economy, for Chinese consumers. People in the west just aren’t self-critical enough about the way in which the western companies go to China and the reason that most western companies fail in China is down to their own doing, nothing to do with the Chinese government or regulation- it’s a whole series of western imperial arrogance that brings them down. That’s a minority viewpoint."
Neal Cross, CIO, DBS Bank, is of a similar opinion: "What the Chinese are doing is just streets ahead in every way- the banks, the payments companies- they know their customer and learn exactly how to serve them."
4)Going directly after the individual consumer is a "suicide mission"
Any organisation, be it bank or start-up, who targets the customer directly is embarking on a suicide mission, says Sequoia venture capital’s Michael Moritz.
"In payments, unless you’re a very large company- very large, it’s very difficult to go with a new product and try to persuade a consumer to trust your service’s payment mechanism if they don’t know anything about it. It is far more prudent to go and convince the merchants who already have lots of consumers that you can do a fantastic job for the merchant- like Klarna- and help them make their business better," he said.
5)Do not underestimate consumer faith in banks to deliver the best services
BBVA, ING and CGI, among others championed the powerful position banks still have, despite some rhetoric to the contrary. While it’s true banks need to innovate, move forward and not be complacent, their customers believe they will deliver.
Kevin Poe, retail banking global lead at CGI, said the number one most important customer-facing concept "across every demographic in every country" (among 1,670 consumers surveyed globally) was protection from ID theft, data theft and fraud and that "90% of those consumers said they expected banks to address it within the next two years".
"So it’s a real opportunity for the banks to either win or disappoint," Poe added.
