Making an impact in a cash-obsessed market (Interview)

Giovanni Miste TNS ItalyMore than 70 per cent of payments in Italy are still made by cash, meaning there’s ample opportunity for alternative payment players to make a splash.

PaymentEye spoke to Giovanni Mistè, regional vice president at TNS Italy, to find out how players can make an impact, and the obstacles to look out for in this unique market. (sponsored)

How has the Italian payments space evolved during your time at TNS?

The Italian market is quite singular and different in certain ways from other European markets. Over the last 15 years I’ve been working in this market, I’ve seen it go through cycles.

For a long time, the market was regulated by the national debit scheme, but now, all the other regulators have an important role – the PCI Council, for example – so where once Italy was a very closed market, it’s now becoming much more competitive.

Over the last few months, we’ve seen some strong M&A activity which will change the market in the future for sure. For example, CartaSi and Setefi, which are two of the most popular credit cards in Italy, are now owned by Mercury, a corporation owned by Advert International, Bain Capital and Clessidra.

How has non-bank competition disrupted the Italian market? Has it affected TNS’ strategy in any way?

There are a few players on the Italian market but I don’t see them being as strong as traditional Italian banks. They did acquire  market share, with CartaSi and Setefi, but traditional banks will remain  the main sales channel for any payment solution.

However, the non-bank players are bringing more competition, which requires any players to raise the standard of their proposition.

In recent years one of the most significant disruptions to the market was posed not by competition, but by law, as the European Parliament placed a cap on merchant exchange fees (MIF) last December.

What unique challenges are faced by payment players in Italy?

There is a trade-off between the commission, or the profit that acquirers are making, and the cost of technology. Until December last year, when the MIF cap was placed, the revenue per transaction was much higher in the Italian market. Now it’s not easy for Italian players to invest and focus on new payment technology, because the commission related to payments is not high enough.

Of course, the total value of transactions is growing every year which does support the business. But the main challenge now is creating an incentive to invest in new payment technologies in Italy.

Is that likely to change?

I doubt it. To me, this is the main reason why alternative payment methods are not doing as well as many experts forecasted – because of this revenue constriction, there aren’t many companies willing to invest in alternative payment methods.

Do you have any advice for players looking to enter the Italian market?

Define your target and find the right sales channel. The Italian market is a mature market. There are still a lot of cash payments – 70 to 80 per cent of payments are still made in cash in Italy – so there is a lot of space to grow for electronic payments, card or non-card. The question is how to win share in a mature market.

For sure, the market is more open now than it has been in the past. Only a few years ago, if you weren’t an Italian banker, you couldn’t play any role in the Italian market. Now you don’t have to be an Italian bank to have Italian customers.

The first change was brought by ecommerce – ecommerce broke the barriers set by the national banking association in Italy – so now it’s a much more competitive market, and much more open. Whether it is a more attractive market is another question.

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