But could these developments have presented opportunities for players in the Spanish payments market (and beyond)? PaymentEye spoke to Gustavo Medina, general manager at TNS in Spain, to find out.
How has the Spanish payments space evolved since the financial crisis?
Spain has been through a very challenging few years, both during and after the crisis.
We have witnessed drastic change in the banking sector, including many mergers and acquisitions that have changed the landscape forever – where before it was very fragmented, with more than 100 banks, we now have a handful of very large banks. We saw the same kind of consolidation in the processing arena – today we have what you could call a processing powerhouse which controls a majority of the processing market in Spain.
Since the crisis, we have also witnessed interesting penetration of mobile commerce – today we have a 28 per cent penetration – as well as significant growth in ecommerce, creating an increase in non-cash payment methods, something that in Spain we have been lagging behind on for years, but are now catching up on.
Are there any untapped opportunities for fintech providers in Spain?
We’re seeing the beginnings of the Spanish fintech ecosystem, but what it needs now is some kind of trigger, an “Uber” for the fintech ecosystem if you will, to help it develop.
In other countries the driver behind the rise of fintech has been a large technology company, like Nokia in Finland, for example. My view is that the large Spanish banks will play a role here. There will be an association between the largest banks in Spain – the likes of Santander and BBVA – with the fintech companies that have been growing very fast in Spain for the last few years such as Kantox, LoanBook or Comunitae.
However, the large banks in Spain can be intimidating, which could be challenging for fintech companies. While the smaller firms may meet resistance in the beginning, I’m convinced Spain will follow in the footsteps of the US, where large banks like JP Morgan have acquired fintech companies like On Deck Capital.
So the large banks are still risk averse?
I think they believe that they’re still at threat, but that shouldn’t be the case. There has to be cooperation between the banks and the fintechs, which I believe we’ll see eventually.
TNS is getting ready to support fintech initiatives as well. We are watching the evolution of the fintech space closely and willing to participate, though I do feel regulation needs to be more flexible to allow these small companies to grow and gain their presence here in the Spanish market.
How is this rise of innovative payment tech having an impact on TNS in Spain?
So far the impact has been limited for TNS. That doesn’t mean we are not paying attention to its evolution. We are keen to see how it develops in the short term. We see ourselves as a facilitator for such evolution. Some of the solutions we are developing today will definitely help the rise of fintech companies.
What payment-related challenges are unique to Spain?
Our challenges are related to the way the Spanish banking sector has evolved. Historically Spain has been a very cash-oriented country, but that’s been changing lately – in fact, I learned recently that in the first quarter of 2016, card payments exceeded the amount of ATM cash withdrawals for the first time in Spanish history. The embrace of ecommerce has helped a lot.
However, while there are many credit and debit cards in the market, card transactions are still quite low in Spain. There are 47 card transactions per capita in Spain, compared with 80 in the EU15 area, so we still have a long way to go.
Probably another of the biggest challenges in Spain is the underground economy. The unemployment rates in some regions in Spain are severe, which will have caused certain underground practices to flourish. This is obviously something that is not good for any country, and the government has been trying to create new laws to curb it.
How has the introduction of the European interchange fee cap had an impact on the Spanish payments space?
Spain is more prepared than other countries for the European interchange fee cap – from 2006 to 2010 it experienced its own interchange fee cap intervention, when the Ministries of Economy and of Industry, Tourism and Trade agreed with the bank networks to gradually decrease the fee during those five years.
While that reduction in the interchange fee was intended to lower the prices of goods and services in Spain, we didn’t see that happen, so we’re not sure what the outcome of this further initiative from the EU would be. We believe it’s important that the EU space plays with the same rules so I guess that Spain will have to adjust further, and we will see if this reflects finally in better prices for the consumers.
Will the cap make cross-border trade easier for merchants?
TNS has an extensive network and this change should make it easier for banks and other financial institutions to compete in other territories. The banks and the domestic players have had enough time to increase their muscles, and now it’s time for them to get into the arena and try to conquer other territories. What will happen? We’ll see. As mentioned above, we’ll definitely be a player and facilitator for that, which we’re looking forward to.
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