Chairmen Summaries 2008
ECAF 2008 Summary by Peter Jones,
Chairman of the Conference Day 1, Managing Director, PSE Consulting
The theme of the afternoon was deriving business benefits from chip acquiring and from SEPA. The various speakers addressed this in quite different ways: TAFMO presented his company's proprietary model for terminal applications, which has been successful in Australia. Avis and Barclaycard described the benefits of central acquiring in the card hire business, and they were followed by Yapi Kredi Bank in Turkey, which leverages both acquiring and issuing propositions to deliver a package of instalment payments and loyalty. First Annapolis Consulting then compared the Mergers and Acquisitions scene in Europe with that in the USA, to help give participants a sense of where the value lies in their business.
These different examples were enough to give the lie to the often-heard complaint that both chip and SEPA yield costs but no benefits.
This was followed by a panel discussion in which MasterCard, Equens, Ogone and IKEA discussed the impact of SEPA, the introduction of Payment Institutions under the PSD, and the future of scheme ownership.
There was widespread agreement that the momentum behind SEPA is slowing and the current timetables will not be met, and this was echoed in the audience: a show of hands found no-one who felt that SEPA was gaining momentum and a large majority who felt it was losing momentum and support.
I was surprised that the group thought most likely to become Payment Institutions was retailers - to give them direct access to clearing and settlement systems.
Inevitably, I suppose, each player felt that his own business model was likely to thrive in the face of the coming changes. Although there is still room for growth in payments generally, the suggestion in the room seemed to be that little will change in the structure of the business.
A member of the audience did dare to point out that a similar revolution in the structure of the telecoms industry had resulted in many more losers than winners, but was quietly forgotten in the rush for the bar and coming dinner ...
ECAF 2008 Summary by Mike Hendry,
Chairman of the Conference Day 2, Payment Systems Consultant
The EU acquiring market is going through substantial change after many years as second cousin to the card issuer business. Over 32 billion transactions per annum are processed, growing at 9%. Gross turnover is almost €2 billion, and commissions represent €13 billion per annum and the number of POS is close to 9 million. Acquiring now supports many business models, not just physical world, including remote and e-commerce.
But times are also changing. Only 6% of payments are by card, leaving enormous opportunities for acquiring growth. During any one year PSE Consulting carries out 20-30 acquiring and processing assignment. Looking back over the past year we suggest the following key challenges the acquiring sector need to address.
- No.1 How to make acquiring business more market and merchant facing? Europehas the typical bankers’ problem of designing products for themselves!
- No.2 How to better understand merchant needs and add value to their payments processing for their customers?
- No.3 How to build compelling propositions in market that is moving to utility for basic services? How to develop VAS, DCC, MTU, revenue sharing, non card payment services?
- No.4 How to make every merchant, every transaction, every POS – at a minimum make a contribution? There is a great need for improved pricing models and the analysis of merchant portfolios and use of analytical processes.
- No.5 How to match, keep ahead of competitors, including non banks, new players (PayPal and others)? Non banks will potentially win up to 20% of market in 3/5 years time!
- No. 6 What market positioning (universal/niche) and developing new market entry strategies for larger players including M&A and sale of acquiring portfolios?
- No.7 How to manage the business and implement best practice governance, particularly for pan-EU/CEE/multi country operations?
- No.8 How to distribute the acquiring product, build and operate an effective salesforce and utilise ISO partners – the most important activity?
- No.9 How to implement best practice and consistently reduce costs in operations, terminal fulfilment, network management, call centres, exception item processing?
- No.10 How to manage change, the card scheme mandates, EMV, PCI, PSD, SEPA?
- No.11 Finding/building a best of breed IT platform, to support multiple business models, IT in-house, outsourced delivery platforms?
- No.12 How to manage regulation at both pan-EU and national market level? SEPA for cards is now half way through its development. In the pipeline (EPC’s Card Working Group) are standards for the four acceptance levels of thePOS. In addition SEPA has stimulated the development of EAPS which now has some significant supporters and
is likely to be a growing force and an alternative payment scheme within Europe over the next three years. Merchants, on the other hand, are uncomfortable with the progress being made under SEPA, and don’t consider the project is yet delivering. Around the world and within Europe, interchange and MSCs remain a constant source of friction between regulators, banks and merchants. In America rates continue to rise and become more complex. In Europe there is strong pressure from the European Commission and the merchant sector for interchange to decline and for the eventual
introduction of common rates for the Eurozone and eventually all Europe. Several speakers speculated on the outcome of the D G competition’s investigation into Mastercard and Visa interchange fees. The general conclusion was that changes in MIF will not have a significant impact on the structure and basis of most merchant pricing. The merchant sector on the other hand made a strong case for fairer open pricing and for rates that were much closer to the cost of processing.