Are Visa and MasterCard about to be forced out of Poland?
The recent news of six Polish banks teaming up to develop a common standard for mobile payments has led observers to question whether this model could rival that of Visa and MasterCard's. Imogen Rayfield asks SIX Payment Services about this collaboration and why banks are best placed to provide a solution
The recent news of six Polish banks teaming up to develop a common standard for mobile payments has led observers to question whether this model could rival that of Visa and MasterCard’s. Imogen Rayfield asks SIX Payment Services about this collaboration and why banks are best placed to provide a solution
The system, which the banks intend to have in place by Christmas this year, will be based on PKO Bank Polsk’s IKO app which controls eService, one of Poland’s top payment companies.
The banks, including Bank Zachodni WBK, BRE Bank, Bank Millennium, Alior Bank and ING Bank Slaski have a combined customer base of 16m, which equates to 70% of the Polish market.
Smartphone customers will be able to make in-store payments and cash withdrawals using a code generated by the app. The ability to make online payments and money transfers will also be available.
Similar collaborations are said to be happening in the UK and Spain, however the Polish banks have said their project is the first in Europe to be backed by financial institutions, and this will encourage take-up among customers and retailers.
Philippe Eschenmoser, head of business consulting at SIX Payment Services speaks to Electronic Payments International about this development.
EPI: Do you think this system will rival the business model of MasterCard and Visa?
Philippe Eschenmoser (PE): The banks are basically aiding a local payment scheme and using mobile payments as the entrance. If we have understood the mechanism correctly, the Polish customer will be able to not only make P2P payments with the e-application, but will also be able to make face to face payments, on the e-commerce side further down the road.
EPI: What do you expect Visa and MasterCard’s reaction to this will be?
PE: Its difficult to say how Visa and MasterCard will react. What we’ve seen in the past and what we’ll continue to see in the future is that local banks quite often try to have local payment schemes, so for MasterCard and Visa this is a challenge. There are advantages of course that the two companies have, such as their international spread, their existing customer base, they are trusted and well known, they have strong marketing behind them, they have security, and everything is already in place. They have clear advantages but of course are not a local initiative. A local initiative with strong banks backing it and local knowledge will be a rival in the market.
EPI: Do you have any kind of prediction of the take up of the service? Do you think all 16m customers of the banks are going to use it?
PE: I think this depends on several critical key success factors. For example, the local Polish banks have an important amount of local customers, they have the trust of the customers, they are secure and they are used in the local banking and payment business. On the other hand, there are some disadvantages that may pose problems in the future; as the banks are local, there’s no international spread or options for international usage, which Visa and MasterCard can provide. We have seen quite a lot of initiatives adopting new technologies in other markets, where you may have said, "this will be a success", but then it has fallen through. On the whole though, I think with the power behind these six banks, the service has a good chance to be a success.
EPI: Why is collaboration key for the roll out of mobile commerce?
PE: I think cooperation and standardisation are crucial. As new technologies enter the market you see a proliferation of players and services, which is quite a normal development. Everybody wants to be part of it, everybody wants to expand. However, with so many players this creates a big disorder in the market and this is something you see everywhere. I think the only way to have sustainable success is to have an open system, one that is supported by other players. The addition of new players in the market like PayPal, iZettle, and Square, has complicated the ecosystem. When you do not cooperate, you will not reach the volumes and you will fail. To be successful, you must standardise and you must work together.
EPI: How do we know that PKO Bank Polsk won’t just decide they don’t want other banks using their technology after a while?
PE: There is no guarantee, but as far as we can tell they are aware that standardisation and cooperation is key, and that the more open their system is the more success it might possibly have.
EPI: Where will we see this next?
PE: I cannot say whether the exact application we’re seeing being launched in Poland will appear in other markets. The markets in Europe differ from each other with different initiatives in all countries. It is very much dependent on who is the ‘leading guy’ in which market. You see a lot of development, for example in Switzerland we are cooperating with the banks to establish an open standard P2P solution. Whereas in Austria, a mobile NFC payment solution at ATMs is to be launched soon. So I cannot say if the Polish model will be applied in other markets but I can assure you that there are different initiatives in all markets.
EPI: Why are banks best placed to lead the way in providing a solution?
PE: The payments process must be convenient and secure. I think banks are best placed because of the level of trust they have from customers in the security of the payment services they have been providing.
Regulation is a big part of it. Quite often a lot of new entrants in the market are not regulated. However, once their mobile tools are implemented more and more, security becomes an issue and they will need to be regulated. Banks are best placed to provide a solution because they have shown they are secure and able to do it.
EPI: What does this mean for SIX Payment Services?
PE: Speaking on behalf of our home market in Switzerland, Austria and Luxembourg, we at SIX, are currently cooperating with our customers and banks in leading the way in the market. Similar to the collaboration in Poland, we are striving to work with banks and to standardise, in order to influence the developing market and position ourselves as an infrastructure provider for banks and merchants. We want to be a provider of all these mobile services, including mobile payments, P2P payments, mobile coupons and loyalty programmes.