“The fragmented payment landscape leads to more complexity and security concerns for consumers”

Paul Jennekens

Manager Marketing

18 October 2018

“The fragmented payment landscape leads to more complexity and security concerns for consumers”



Five years ago, visiting a physical banking branch for cash or advice was a given. In a short time, however, mobile payment solutions have largely replaced these visits. Not just banks, but also third parties have created new mobile payment solutions, often in the form of apps and digital wallets. The result: multiple wallets and apps operated by various types of domestic and international entities are now competing against each other as well as banks. Niklas Killström, Head of daily banking, product management and development at the Finnish OP Financial Group, gives his personal vision on why the customer is challenged by a fragmented European payment landscape.

Paypal, iDEAL, but also McDonald's and Amazon compete for the favours of digital paying customers by offering a new purchasing experience. A prime example is Starbucks, the global company famous for its coffee, which recently introduced a prepaid app with no monthly, annual or reload fees to challenge payment by card or cash. Killström: “And an increasing amount of companies are developing applications that possess tools with which you can pay. These new players do not rely on the banking system, but use their own payment methods.”

With PSD2 new parties will appear

The use of different apps and tools from multiple players makes the situation increasingly complex for the customer. “And that only gets worse”, Killström refers to the PSD2, the legislation that requires banks to make their customer data available to third parties. “With PSD2, more new parties will enter the payments market, introducing new solutions. The market is not yet a mess, because new players are currently focused on niche markets. When the battle for the customer becomes mainstream, the situation will become more complex. Customers might feel overwhelmed and look for ways to simplify the way they manage their money.”

Killström foresees a world in which customers use more and more different apps and tools from multiple providers connected to different payment transaction processes and gadgets. There are many disadvantages to this, he says. “Your money will be divided over different wallets. Can you imagine having dozens of apps and gadgets, all with a different purpose and all with a different way of managing your money or your transactions? Some transactions are made via card scheme, some are direct account transfers, and some are prepaid. You won’t have a complete overview and won’t know where your money or payment information exactly is.” Killström also argues that security plays a big role, because how do all these payment providers handle your personal data and money? He continues: “Every app developer wants a slice of the value chain, but each has a different ambition and sense of moral obligation. It’s a real risk for the consumer.”

Much is built on customer base and customer trust

Killström dismisses the suggestion that banks could act as gatekeepers. “Being a gatekeeper is a job for politicians as they need to set the rules. I think banks should focus mainly on how they can serve the customer in the best possible way providing the best customer journey and experience they can. Banks shouldn’t wait for the customer to come to them. They should innovate and build financial services to support customers where ever and whenever they are. And yes, that's possible. Take a look at our bank: we now have a mobile app that is used by more than a million customers. We are already in the game. The key advantages we have over new players is the customer base and, even more importantly, the customer trust that we have built up in over a hundred years.”

Killström is clear about what exactly customers want in the future. “They do not want a jumble of different payment solutions, but a few tools or applications that work securely, simply and effortlessly and can also be used in the right context. By the right context, I mean that if you order a taxi, you don’t want to hassle with different payment methods. You want to ride from place A to place B and know that the payment will be done the way you want. As far as simple and effortless payment is concerned, Uber has set a strong example. With this service, payment has become virtually invisible, it is something that happens automatically.”

The pace of change is speeding up

According to Killström, it is difficult to predict what the payment landscape for consumers will look like in the distant future. “Previously, a major change could be foreseen ten years in advance, but the most recent disruptions happened over the course of only a couple years. The pace of change becomes faster and faster. I expect that in the long run, there will be a new wave of payments in a completely different way from the current one. How exactly? No, I don't dare to predict that.”

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