How Brexit will shape the payments landscape

Originally published on bobsguide.

Brexit stunned financial markets.

As regulators in Paris were in the midst of establishing the largest set of rules to define European markets ever – in the second Markets in Financial Services Directive (Mifid II) – the UK’s determination to leave the European Union caused uproar across the continent, raising a multitude of questions for financial market participants everywhere.

And as the Brexit negotiations continue uncertainty waivers through the markets, with financial service providers screaming out for signs of stability. For some, however, it’s a matter of making the most of the situation, traversing the hazards, and continuing to provide innovative solutions.

None more so than Camilla Sunner, managing director of Valitor. Here, Sunner discusses Brexit implications for wider markets and the next steps in payments solutions.

How did you come to Valitor?

I did a Masters in Chemical and biochemical engineering in both Lund and Berkeley, but quickly realised that scientific research wasn’t my cup of tea and moved on to my first job out of university at McKinsey.

I’ve always had that business to business background and I’m quite cross functional. I have a history of coming into situations where the business needs to get back on track and a problem needs fixing. I did a big project for a Swedish manufacturing company in France, spent a couple of years with a not for profit consultancy in Africa.

I then moved to London and spent 7 years working for an IT solutions company, and took it to new heights in terms of market perception. I’d vowed never to work in financial services but, as luck would have it, I met someone who introduced me to Barclaycard where I worked various roles, ending up as Payments Network Director.

That’s when I was approached by Valitor. I felt the Valitor story was one I could really buy into and particularly influence, having seen the difficulty that large companies have in taking advantage of new opportunities.

What is the Valitor story?

I always call Valitor the Barclaycard of Iceland. They’ve been around for 35 years and do everything across the value chain – issuing, acquiring and gateway. Whilst the Icelandic market is tiny, it is incredibly technologically advanced and 5 or so years ago the decision was made to take those skills to Europe.

We came to the European market with the realization that it was impossible to do from Iceland with Icelanders, for various reasons, least of all the different business cultures. My hiring was one of the ways they looked to internationalize.

We then looked at Valitor’s value proposition as a unique payments solution company. Whilst most companies do issuing or acquiring or gateway, Valitor is one of the few that can provide end-to-end payment solutions. A strategy that I’m increasingly advocating is catering to customers who use the entirety of that whole chain.

We approach customers in a different way too. We like to see ourselves as having a layer of consultancy which we can include in customer conversations whilst being small enough to understand the value of each customer. It’s very much the Icelandic mentality that if someone has a problem, people drop stuff to get that problem resolved.

In terms of the current European payments landscape, where does Brexit leave it?

I find this topic hard because it affects me personally as a Swede in London. Personal stuff aside, any change or disruption (such as Brexit) is going to present an opportunity to some group of people who can see above and beyond.

From a business perspective, I’m not worried about the uncertainty because it has good as well as bad commercial side effects. Valitor is in good shape as we have a UK licence and an Icelandic licence. If we get a hard Brexit then we’ll have to look at a third licence as we won’t be able to operate in Europe from Iceland, but that’s a preference not a necessity. We’re keeping our ear to the ground to make sense of the uncertainty. Hard or soft, I don’t think Brexit will be good for the UK as a country.

People always talk about the business implications of Brexit but seldom think about the people implications; the Brexit question isn’t necessarily one of business-to-business but employee-to-employer.

If there are more restrictions and worse jobs and the attraction of a diverse London is gone, then young, educated Europeans will leave; job competition is healthy for growth. If global companies begin to find that they can no longer find the right people in London, they’ll start to recruit and expand other offices and London will suffer as a consequence in the long term. The brilliance of London is the ability to attract a workforce of varying age, experience and culture; that diversity fosters innovation and new approaches.

That’s a very honest answer. What sort of innovation can we expect to see in payments?

Let’s take a step back to frame the question.

Everyone talks about innovation in the payments landscape but I think we’re just scratching the surface. It’s similar to what’s going on in your field, in written journalism. Back in the day, you used to buy physical broadsheets, read it front to back and be done with the news. The next wave was that those broadsheets are being digitized and turned into PDFs and put online; that’s simply translating a format online. The next wave has been an evolution of how we view information online, do we now go to only one provider? Do we read a handful of articles or look for specific questions? And so news aggregators are the latest trend, not necessarily for good reasons if the Facebook situation is anything to go by.

To bring that analogy back to payments, we’re still translating those initial broadsheets to PDFs of the broadsheets. It’s exciting times because no one really knows what that will look like. I was at Money 20/20 and when you’re going around, 98% of the startups build their innovation on top of the existing four party model. That model is problematic as it’s based on processing cash payments which is evidently little basis to develop new digital models.

My perspective about what’s coming next – or the news aggregator wave – is that it will be a high technology pipe which will be essentially highly sophisticated and direct plumbing between payer and payee; it’ll be putting greater autonomy into the hands of those two parties and using emerging technology in the intermediary plumbing to facilitate that.

PSD2 and Open Banking mandate the creation of that pipe and the fluidity of the payment chain. From that perspective, a lot is going to happen and it’s really what the payment market needs. We know that someone is going to come in and find a way to disrupt. I heavily suspect that the eventual disrupter will have a proposition so enticing to the consumer that they’ll see mass consumer-driven adoption that will force other market players to play the same game.

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