As the first Visa, CSFI Research Fellow payments technology
industry veteran Dave Birch has a tough task ahead mapping out the
future of innovation in the European payments market. He outlined
to EPI the approach he will follow and highlighted an area
he sees as having major potential, mobile payments.
Described by the Centre for the Study of Financial Innovation
(CSFI) as one of the UK’s “uber-techies,” Dave Birch is no stranger
to cutting-edge innovation in the electronic payments industry. And
as the 2009 Visa (Europe) CSFI Research Fellow in Payments at the
Birch will be putting his experience to full use as the
co-ordinator of a research programme looking at the process of
innovation in payments.
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Birch, a director and co-founder of UK technology consultancy
Consult Hyperion, becomes the first person to be honoured as a
Visa, CSFI Research Fellow in the CSFI’s Fellowship Programme
launched in May 2008.
The London-based CSFI is described as an ’independent think
tank’ focused on research into the future of the financial services
industry. Formed in 1993 the CSFI is supported by banks,
professional firms and technology companies, as well as official
organisations such as the Bank of England, the UK Treasury and the
UK’s Financial Services Authority and Department of Trade &
Industry.
Commenting on Visa’s sponsorship of the CSFI fellowship
programme Sandra Alzetta, senior vice-president at Visa Europe,
said: “We are committed to helping our bank members across Europe
to exploit new payment opportunities in more effective ways by
pushing electronic payments beyond traditional card transactions
and making new payment methods faster, more convenient and
secure.”
A tough task
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By GlobalDataBirch’s brief as defined by the CSFI is to develop a “road map”
for European financial institutions, regulators and technology
suppliers to assist them in directing their investments in new
payments products and services more effectively. The road map is
intended for use over what the CSFI said was the short (five-year)
to medium (ten-year) term and beyond.
Birch explained to EPI that his approach will be to focus on the
process of innovation and to explore why some innovations have
proved successful and others not. He will look beyond the payments
market and “apply it to the payments space.”
However, defining which new payments products will be the
winners is no easy task. .
“It is easy to create new [payments] ideas but it’s also hard to
get people to accept them,” said Birch.
But on one new payments technology Birch payments and banking, a
field in which he has been closely involved for several years.
Of particular significance was Consult Hyperion’s role in the
development of is the M-PESA mobile payments service in Kenya, a
joint venture between Kenyan mobile network operator Safaricom and
the UK’s VodaFone with a user base now approaching 5 million.
“For us, M-PESA is a very exciting project, as it highlights the
way in which digital money can really make a difference in the
world,” stressed Birch.
“In the developing world it is obvious that mobile phone
payments will displace cash. The impact of the mobile will be truly
transformational on a grand scale.”
The transformational impact will also extend into the global
remittance market where companies such as Western Union and mobile
network operator (MNO) industry body the GSM Association are
actively promoting mobile remittances.
“Mobile payments is a significant change-agent in the global
remittance market,” stressed Birch. “I am very enthusiastic about
what competition will do.”
Beyond developing markets
It is not just in developing markets that Birch sees a big
potential future for mobile payments and banking.
“It may seem a bit of a stretch to imagine the likes of G-Cash,
Cellpay and others might have Europe in their sights,” said
Birch.
However, indicative of the probing approach he will follow in
his role as a CSFI Research Fellow he stressed: “But why not?”
G-cash is operated by Philippine MNO Globe Telecom. Cellpay is
owned by South African bank First National and operates in Zambia
and Democratic Republic of Congo.
“In the UK, banks and post office branches are steadily being
withdrawn in rural areas, and it is becoming too expensive to
service customers in those areas,” said Birch. “So why not use the
mobile networks?”.
“What if the next wave in financial services actually strays
from the norm – out go the same old some boring bank accounts,
credit cards and statements – and instead we begin to see schemes
like M-PESA combined with branchless banking?” continued Birch.
“Any financial institution could provide the credit used to fund
the pre-paid account at the heart of the scheme, so it is not so
far-fetched.”
Birch pointed out that a potential argument against this concept
could be consumer reluctance to hand over their money to a non-bank
company such as UK retailer Carphone Warehouse for a pre-paid short
message service- accessible account. However, Birch does not see
this as a big obstacle.
“The trust in the brand is the dominant factor, not whether it
happens to be a financial services brand,” said Birch.
He added Carphone Warehouse will be launching its own prepaid
card and thus customers will become comfortable with the idea of
obtaining payment services from them.
“It is a small step to move payments away from cards and into
phones,” said Birch.
However, he stressed the need for proper security to underpin
the brand trust.
“Translating trust in the brand into confidence about the
technology and services doesn’t seem insurmountable despite the
consumer concerns about security,” said Birch.
Indeed, he believes security provided by mobile payments should
be a “major positive.” Quite simply, he explained, if you lose your
phone, the MNO knows where it is and, unlike a credit card can shut
it down immediately, anytime, and from anywhere.
Concluding, Birch pointed to the importance of innovation.
“There is a need to develop a new generation of payments
products to exploit available mobile technology,” he stressed.
