Simon Black, PPRO Group: "Cash will become obsolete in many countries in the next 10 years"

How are acquirers affected in the light of the new PSD2 framework and what changes will its requirements trigger in the industry?

With the reduction of the interchange fees from up to 3% to around 0,3% (rates vary from country to country) many acquirers will need to find new business options simply because their stream of income has been cut off. Many acquirers may find the increased scope of PSD2 a threat or challenge to their incumbent market position. However, on the contrary it should be viewed as an opportunity to create new business opportunities for them.

What are the challenges that the credit card acquirers are facing when it comes to reduced interchange fees, nearly 18% credit card penetration globally and cross-border ecommerce growth?

When looking at the world as a whole no other payment method is so readily accepted than the credit card when shopping online. But in many parts of Europe, Asia and Latin America, the credit card is nowhere near as popular a method of paying online as it is in the US. In these regions local “alternative payment methods” aka APMs – real-time bank transfers, e-wallets, cash-enabled payments, direct debit payments - are the norm. Credit card acquirers should aim to integrate these payment methods into their portfolio to offer merchants important means for cross-border e-commerce and to expand their own revenue channels. However, offering APMs is much more than just signing up a payment scheme. Acquirers need to navigate the various scheme rules and functionality and the very different local regulations and processes in each country that need to be complied with – or they partner with experts in this area.

Do you think that the 18% credit cards share in cross-border ecommerce payments will increase or decrease in the future? Why?

My prediction is that cash will become obsolete in many countries in the next 10 years and cashless, mobile payment method will gain traction as they already do in the UK or Scandinavian countries by now. Many of these new ways to pay still use credit cards as their backbones, let it be Apple Pay,  Android Pay or many other general purpose payment or retail specific apps. Therefor the credit card will certainly not become obsolete, and there might even be the chance that its penetration is going to grow over time. On the other side huge e-wallets like alipay or WeChat work with direct financial links instead of additional credit cards, and there are many countries like China that simply do not trust (Western) credit card schemes. So in short: I do not think that credit card penetration will grow extremely over the next year, at the same time I doubt that it will decrease.

Have you identified any interesting credit card payment alternatives with lower cost and less fraud risk? If so, can you give some examples?

All of the card alternatives are actually cheaper than credit cards and most of them are also are more secure. Merchants and payment service providers will be coming to realise that offering a range of non-card payment options with more advanced security features may be the best way of avoiding fraudulent transactions without reducing sales and at the same time reduce cost of payment. An example for a very successful non-card payment alternative is the Dutch online bank transfer method iDEAL that nowadays accounts for more than 55 per cent of all online transactions in The Netherlands.

Are we facing a paradigm shift in the financial services industry, now given that the PSD2 opens the doors for non-bank financial institutions to innovate the overall payments infrastructure? How is it going to transform the way consumers pay?

PSD2 heralds a new direction in payments regulation by expanding its scope to include financial technology companies that do not enter the flow of customer funds yet, a development that some industry players will welcome while others will strongly oppose. Despite the additional compliance overheads associated with operating in the regulated sector, innovators will be brought into the regulatory spotlight. This should open many doors in terms of creating awareness within markets and improving customer uptake and therefore will offer a lot of opportunities for disruption of the way consumers pay.

About Simon Black

Simon joined The PPRO Group as CEO in March 2015 following a decade with Sage Group PLC, for which he held the position of CEO for 7 years. Since joining PPRO Group, Simon has led the company to become one of the fastest growing fintech companies in Europe. Since joining in 2015, Simon has supported PPRO Group to expand its alternative payment hub, connecting PSPs and financial institutions with the increasing number of national and international payment methods. Simon has an MBA from Georgetown University and has extensive experience in consulting and business, and in his early career founded a marketing software start-up company as well as holding senior strategy and brand consulting roles both in the USA where he lived for six years, and in the UK. Simon has provided expert commentary on live TV and radio, has been published widely in payments and ecommerce media and has spoken at events such as Money 20/20, Moneyconf and Transact.

About PPRO Group

Cross-border e-payment specialist, PPRO Group, (PPRO) removes the complexity of international ecommerce payments by acquiring, collecting and processing an extensive range of alternative payments methods for Payment Service Providers (PSPs) under one contract, through one platform and one single integration. PPRO supports international payment methods across more than 100 countries, allowing PSPs to expand their merchants’ ecommerce reach, arrange hassle-free collection and achieve higher conversion rates.