5 August 2019
Chris Skinner calls for action: ‘Without a united Europe, an integrated European network is decades away’
Fintech expert Chris Skinner is not only known for his books on financial technology and his commentary on the BBC, Sky News and Bloomberg, he is also the Chairman of the Board of the Nordic Finance Innovation (NFI). Worldline and equensWorldline have recently signed a strategic partnership with this industry network that aims to strengthen Nordic countries’ global position and boost Nordic innovation and collaboration.
In a two-part interview we asked Skinner about his view on the future of payments. Today the first part in which the financial expert explains why, according to him, we need to work towards a united Europe. Because without a united Europe it will take decades before collaboration actually leads to pan-European payment solutions.
Collaboration is a buzzword nowadays that sounds all around the European financial market. Skinner acknowledges that collaboration, partnerships and co-creation between banks, fintechs and bigtechs is more important than ever before: "Banks were originally built for the physical distribution of paper. They need to reinvent their business model and to do so they need fintechs and bigtechs that can offer digital distribution of data and a globalized network on the internet."
Skinner also sees an increase in the demand from European consumers for cross-border payment solutions. So far, this demand has not led to the creation of pan-European payment schemes with global reach. Skinner: "Instead, fragmentation is now occurring in the market. Each European country focuses on its own market with its own payment solutions."
Billions of potential users
According to him, this fragmentation stands in the way of European success at a global level. "This is because all these European payment solutions lack one important element: scale. Only with global scalability it is impossible to compete with a major platform like Alibaba, who has billions of potential users. It is for a reason that German internet bank N26 expands into the United States. It's much easier for them to scale up and grow over there."
In Europe, large-scale collaboration is possibly the outcome. At EBAday in Stockholm, a large number of experts agreed on one conclusion: financial stakeholders from different European countries need to work more closely together in order to create pan-European payment solutions. Skinner agrees that the foundations have been laid with the introduction of real-time gross settlement (RTGS) system TARGET2 and SEPA (Single Euro Payments Area) so that each country has the same transactional and processing guidelines. He states: "The structure is in place, but the network is missing."
Does the fintech-expert believe that Europe is able to work together to create a pan-European payment solution that can compete with the innovative solutions of bigtechs such as Alibaba or Apple? Skinner nods: "Yes, but for that we need a harmonized Europe. At the moment, that is not the case. Ideally, as a European citizen, I should be able to seamlessly transfer money from Britain to Poland, for example. In reality, however, this takes a lot of effort with different exchange rates and slow bank transfers. If Europe is not united, it can take up to twenty, thirty or even forty years before pan-European payment solutions can be created. We as Europe should work on that."
Integrated European network
The political differences between European countries are increasing and, according to Skinner, this is standing in the way of successful pan-European payment solutions that actually do operate at scale. He refers to Brexit as an example, but also the current situation in Poland. "Three years ago, through the Financial Services Club networking group, I noticed that Poland had the ambition to be part of the eurozone. When I now speak to Polish executives in financial services and ask them about an integrated European network, they laugh at me. They no longer want to be part of the eurozone as they do not feel connected with our continent. It's a political problem, Poland is now the fourth fastest growing economy in the world."
When Europe approaches the future in a united way, fragmentation can be overcome and new pan-European solutions with scale can be developed, says Skinner. He states that the European fintech market is leading the way and the infrastructure is in place. "You could say that the momentum is there, but can we hold on to it until the time is there that we are able to build a network in Europe in a unified way? I think it is possible, but we need to move in the right direction."