Interview with Skrill CEO Martin Ott
Mobile payments is a burgeoning market, with everyone from Google to Visa looking to get in on the action. But Skrill has a headstart in Europe , launching an online payment service in 2001 as Moneybookers, just as PayPal was beginning to gain traction in the US . It offers a digital wallet service and claims to have signed up19m customers and 90,000 merchants. Following a recent rebrand from Moneybookers to Skrill, it is now looking to the US , with CEO Martin Ott saying he wants to “tackle PayPal on its home ground.”
- What was the state of the online payments market when you started?Credit card penetration was even lower than it is now. At the time most transactions were done through banks. We started out early on to build up the e-wallet. We were actually the first e-money issuer and we built up this network of over 80 plus banks so customers can upload funds from their bank account and credit it into their wallet, to turn it into e-money and pay with their digital cash.
- How has market changed since then?Rapidly and quite fundamentally. We see consolidation on the card side, but at the same time we actually see a big fragmentation of payment types and options – local schemes that have evolved. For example in the Netherlands, over 50% of the customers pay with a system called Ideas, which is an online bank wire where they confirm the payments with a pin and a transaction from the bank.
- We’ve also seen the rise of PayPal and e-wallet customers because they don’t want their payment details flying around the web. This is because more and more fraudsters are going online.
- Why is there huge interest in mobile payments at the moment?It’s because for the first time we have smartphones and the general public understands what it means to browse the internet on a mobile phone. This is where it becomes a compelling instrument where you can start in the medium term bridging the online with the offline world.
- What effect does the entry of firms such as Google have on the space?We see many big guys trying to go into payments. Google – they tried to launch their Checkout service but at least in Europe they haven’t got anywhere. Google will now try to do it via Android, which makes sense, but still they don’t have the capabilities to do the merchant underwriting in an efficient and scalable way across all those countries. Similarly Yahoo! tried to launch a wallet with HSBC years ago and they failed.
- Many are trying to go into the NFC payments world. But you have this chicken and egg problem of educating the customer, giving them a use case, building out the offline infrastructure, and that’s a whole different game really
- Could you outline what Skrill offers?A variety of digital payment products both for the end user and for the merchant. One thing is the digital wallet with nearly 19m customers who can, just like PayPal, pay with email and password and get paid and send money to each other or to merchants.
- For merchants we offer a wide range of payment services that they can offer at the checkout. It takes one contract and they have access to over 100 payment options that we settle in over 40 currencies in 200 plus countries. It’s key to understand that the majority of people still don’t have credit cards so in order to monetise the customer you need to offer them different options. We have a bit over 90,000 merchants including the likes of Skype, Electronic Arts and even eBay. And then a big part of our merchant base is SME merchants because we offer them a one-stop shop where they can start, within 24 hours, accepting credit cards, debit cards, all those local payment methods.
- How do you plan to compete against PayPal?We’re different from the likes of PayPal because we have many more local payment methods. And we offer our merchants protection, like a fraud insurance, so we guarantee payment irrespective of whether the customer has initiated the charge-back, whether someone has a stolen credit card.
- In the US it actually helps that PayPal is there, it’s not PayPal or us it’s PayPal and us. Even eBay integrate us next to them because we have a very different customer base. The US is actually quite a fragmented market: you have to get a money transmitter licence for every state. We’ve done that and so we’re tackling PayPal on their home ground.
- What are Skrill’s future development plans?Mobile payments is the big thing. What we had in the past was walled gardens – operator portals that charged 30% to 50% for premium SMS billing. And then you had walled gardens like [Apple’s] iTunes. But now the customer is starting to browse the web with their smartphone and on that side it’s even more painful to type in your name, address and 16-digit numbers. So we see the mobile wallet as a rapid growth area.
- We are also focusing on the whole micro-payments area and we have clients including Bigpoint and EA. For these people don’t want to dig out their credit card, and it’s not cost efficient to do that. So we see customers going to their digital wallets because there they can do it economically.
- Why did you pull out of your planned IPO?The market. What we’ve learnt is that Europe at the moment in terms of the tech IPO market is very different field than the US. In Europe investors didn’t make a lot of money on tech IPOs recently and the market became quite fickle. But we’re keeping that option open – it’s nothing that we would focus on at the moment. But an IPO is really an opportunity to stay independent and continue on our high-growth path.
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