On a sunny autumn day in Milan, Carlo Tresoldi, chairman of Italy’s messaging services provider SIA, opened proceedings. Tresoldi referenced a recent McKinsey report that quizzed around 1,000 executives as to where the biggest percentage increase of income could be expected in relation to digital business. The survey found that 31% of those questioned expected this growth to come through digital customer engagement, narrowly ahead of 30% who predicted that the increase in income would come through digital engagement with employees, suppliers and business partners. Less popular responses were the digital innovation of products, operating models and business models (20%), followed by big data and advanced analytics (19%).
The main takeaway from the McKinsey survey, according to Tresoldi, was that there are new opportunities in digital. He pointed to the European Commission’s (EC) planned revision Payments Services Directive – commonly referred to as PSD2 – describing how its objectives are very clearly identified as being:
Tresoldi declared that these objectives all present both opportunities in the digital payments world. He made the example that the concept of security is essential for central banks, and this is now moving into the digital arena. He went as far as saying that the stability of the entire financial system rests on security. Security was certainly taken very seriously at SIA Expo, as gtnews had to surrender its passport in order to take custody of headphones required for the English translation.
The recent slight improvement in the Italian economy, reflected in third quarter gross domestic product (GDP) was then linked to the importance of innovation. While domestic consumption was down, a rise in exports that was responsible for the slight uptick in GDP. Tresoldi warned that without innovation, both in products and service, the Italian economy would not be able to continue to rely on the strength of exports.
The keynote presentation in the morning session was provided by Dr Ennio Doris, chairman of Banca Mediolanum. Doris cited Warren Buffet’s recent pronouncement that the world is entering a new uncertain economic phase – asset purchases were made during the era of quantitative easing (QE) but as QE is winding down we are now moving into a period of asset selling, and nobody can confidently predict how the market will react to this. Doris put it to the audience that, while the future is always unexplored, innovation can create the unknown and therefore we should not simply fear what we do not know.
There are opportunities in the changing world and technological advances are essential in providing a quality service. Technology is changing the way that people think and it has also moved the balance of power in the transactional relationship from suppliers to consumers, by giving them the tools to easily compare the goods and services available to them in terms of price. For Doris, the focus must firmly be on the quality of service that the banking industry provides its customers.
Doris concluded by saying that, while technology offers many advantages, it is important for the future of banking to maintain the relationships that banks have with their customers and to ensure that they can always connect with banking experts when they need to.
SEPA Approaching a Big Bang
Unsurprisingly, the looming single euro payment area (SEPA) migration deadline of 1 February 2014 was on the minds of many of the delegates at SIA Expo 2013. In one of the morning plenary sessions Daniela Russo, director general for payments and market infrastructures at the European Central Bank (ECB), pointed to the security that SEPA could bring to payments in Europe. She included some research from the ECB that pointed to fraud attempts in SEPA transactions being less than half those of non-SEPA payments.
Russo shared this information during a discussion focussed on the evolution of payment systems, where she described how the promotion of electronic payments (e-payments) as a secure and efficient way of making transactions demonstrated the way that central banks were focussing on themes that were not traditionally within their jurisdiction.
Russo was joined in the central bank discussion by Emerico Antonio Zautzik, managing director of central banking, markets and payment systems area at Banca d’Italia. On SEPA, Zautzik said that Italy had a lot to gain from SEPA migration, partly because the country is lagging behind many of its fellow euro nations in the process of converting to SEPA credit transfers (SCTs) and SEPA direct debit (SDDs). When it was put to Zautzik that perhaps some of the smaller and medium-sized banks in Italy could be doing more to move their customers onto the SEPA instruments, he disagreed. Rather, he suggested that it was a problem with the Italian banking system, citing current conversion rates in Italy that less that 20% of credit transfers and less than 1% of direct debits are currently made using the SEPA instruments.
The eurozone as a whole is further down the road of migration to SEPA, but not by as much as could perhaps be expected, bearing in mind the rapidly approaching migration deadline. Russo said that in the most recent ECB report on migration, 58% of euro credit transfers were via SCT, while just 7% of euro direct debits were via SDD. She emphasised the fact that this would be the ECB’s last report on SEPA migration, and stressed that there is absolutely no intention at the ECB to postpone the migration end date.
This leaves the eurozone facing a ‘Big Bang’ scenario, where everyone will migrate to SEPA at the same time. Russo described this as being dangerous, as it means that there will be minimal time for testing. However, she did add that conversion services are viewed by the ECB as acceptable, but that these should only be temporary solutions.
Innovation for all Stakeholders
Innovation was one of the key themes at SIA Expo 2013 and this was highlighted in an afternoon panel discussion that examined MyBank, an e-authorisation solution that was launched in March 2013. The panel was made up of a variety of stakeholders in the solution, including a bank, a clearer, a merchant and an e-commerce consortium.
Chair of the panel, Antonella Vanara, head of the MyBank project at SIA, described MyBank as highway that connects European banks to customers. She pointed out that the solution is not just a business-to-business (B2B) tool, but will probably be at its most visible in the business-to-consumer (B2C) area, and even has peer-to-peer (P2P) potential, allowing consumers to manage transactions between themselves.
John Broxis, director of STEP2 Services at EBA Clearing, the organisation responsible for MyBank, explained that there are currently around 50 banks supporting MyBank, and that this should rise to over 300 by the end of the year. Anticipating around 15 million customers of MyBank by year end (the current figure is closer to 10m), Broxis described the solution as a simple collaborative tool that can help restore trust to consumers making payments online.
On the subject of trust, Roberto Liscia, president of Consorzio Netcomm, made the point that banks are still the most trusted player in the Italian system. As trust is critical for payments, Liscia welcomed the involvement of banks in MyBank as a way for merchants and customers to feel safe in online transaction environment. He made the point that while 40m Italians use the internet, just 14m of them shop online. Building the levels of trust in the system is one way to aim to improve this figure.
Providing the merchant’s perspective on the panel was Giovanni Vattani, head of Payment Systems at Enel – Italy’s largest power provider. Vattani suggested that customers evaluate the methods of payment available to them when making online transactions, so merchants need to take this into account when thinking about the payment options they want to offer. He also pointed out that invoice tracking could be problematic with some payment methods, creating a lot of manual work. Any solution that makes this process easier will be popular with merchants.
One of the main messages that came out of this panel session is that all stakeholders in the payments community need to come together to promote the visibility, efficiency and security that e-payment solutions can offer. For the vendors involved in the market, the additional services that they can offer around the standard payment solutions will help to differentiate their offering.
There was a lot of talk about the near future at SIA Expo 2013, from the growth of e-payment services to the SEPA migration end-date. It will be fascinating to see just how the payments landscape in Europe has changed by the time SIA Expo 2014 comes around.
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