Regulations drive payments growth

The EU’s second payments directive (PSD2) and the UK’s Open Banking initiative are encouraging competition and opening access to payments services, according to a panel at Money 20/20 in Amsterdam, while personalization across geographies will be a key factor to the success of “super apps” like WeChat or Amazon.

“What PSD2 is doing is increasing competition, driving innovation and opening access. I think the consequence of emergence of AISPs and PIPs is a really positive thing,” said Ron Kalifa, vice chairman at Worldpay. “Prior to that, access to the payments networks were restricted and basically held by the banks.”

Melinda Roylett, European head at Square, added that the payments firm was excited about the potential of PSD2. “Being able to access real-time banking information will be incredibly powerful in making Square more seamless for our customers. It’s really interesting some of the developments that are happening in the marketplace now.”

For Simon Black, CEO of PPRO, the regulation has had a positive effect on the industry. “We’re dealing with consumers money, but we’re also consumers, right? From that respect we’ve been able to serve people much better. We should also bear in mind that merchants need to be treated fairly, too. That’s where interchange fees have been regulated, because frankly at the moment they’re paying too much.”

In December the European Commission invited comments on commitments offered separately by Visa and Mastercard to address competition concerns relating to inter-regional interchange fees. Both card schemes committed to reducing inter-regional exchange fees by 40%. Domestic interchange rates for Mastercard range from .20% to 1.70%.

“If you look at interchange and what’s happening there to some degree, it’s the right thing happening for the consumer,” said Sanjay Saraf, chief product and technology officer at Yapstone. “That can put pressure on members from a business model perspective, so we’re looking at how we can create more value-added services both for the merchant and for the consumer.”

On super apps like WeChat and Amazon, Worldpay’s Kalifa expected their growth to continue. “What companies like WeChat and Amazon are doing is bundling a while bunch of services that typically would take up multiple apps into a consolidation. Payments is increasingly becoming invisible, it’s no longer something at the forefront of the mind of the consumer. They load up a wallet and think more about the service they receive.”

Saraf said that global brands are at risk of losing out to local rivals who can offer a more familiar service. “The biggest trend we’re seeing in the marketplace is that global brands start things off – your Ubers etc – but then very quickly a more regional variation.

“Having a culturally local solution which resonates with the buyer and the seller definitely creates a sense of trust in the platform. As you go into new markets you need to think about what payment methods work in which markets and then build those connections. User experience tends to be more generic in the larger marketplaces versus smaller ones. I think we’ll see an emergence of regional players in almost every field of payments.”

Square’s Roylett added that payments can be situational. “If you’re buying some spring rolls from a vendor in China you’ll use the QR code to pay and that’s the only vendor type they accept. When it comes to ecommerce you very much have to have the payment types that your buyers are demanding. If you’re a UK retailer and you’re selling globally you need to have Afterpay for Australian customers and US customers, you have to have Klarna in Germany and in the Netherlands you need Ideal so it very much depends on the use case.”

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