Interview with the vampayer

I just had an interview with a journalist via email. It was quite interesting, and wanted to share it with you. The key point being made is that everything we have today - apps, online, cards and more - are going to disappear. Are they?

Mobile payments, BNPL, open banking, artificial intelligence – these are the areas in which currently the banking sector invests. Do you foresee any other emerging trends that the banking sector should be paying attention to in the near future?

There are a number of emerging trends, in particular in the areas where artificial intelligence is being applied. Right now artificial intelligence is being mainly used in areas of risk and fraud and reducing costs but, in the near future, we will see much more integration of intelligence with payments to inform customers of their activities. In other words, intelligence integrated with financial transactions that is now customer-centric. We are also seeing many technologies to allow financial intelligence to be embedded, invisible and everywhere. I call it intelligent money. Intelligent money is when money thinks for you, rather than you having to think about money.

I was recently reviewing the annual reports of the largest European banks. All of them seem to be investing in fintechs related to payments or acquiring these companies. Is this the future of fintechs? To develop new technology and then be absorbed by a bank?

Most fintechs start with a view of becoming a mature company that can go to an IPO. I don't think they start with the ambition of being acquired by a bank. However we have seen the maturing of the fintech community and, as it matures, the banks start looking at whether these companies could add to or improve the banks’ internal systems. This is why I often advise fintech firms that they should fix the things that banks do badly and many have achieved this, because they specialise in just a single area of focus such as making a payment or matching peer to peer for lending. Because they do this so well as a new company it's obvious that, as they have matured, banks get interested and some get acquired. After all, if you get an offer you can't refuse you have to take it, don't you?

What do you think is the future of traditional online banking? In Poland, mobile banking is becoming increasingly popular – my research shows that banks already have 15 million 'mobile only' customers (those who do not use PC banking). Is this a natural direction of development, and will online banking become obsolete?

Traditional online banking is not going to become obsolete, because it's a customer decision as to which service they choose to use. Equally, an awful lot of mobile banking is actually linked into traditional online banking systems, and therefore they can't just be taken away. But when we talk about embedded banking and embedded payments, what's actually happening is the movement towards contactless connections that are all around us. You may find that you will be able to make payments through any device that you own, whether it be from your car, your fridge, your front door, the clothes that you wear. In fact, we have that already. Yet when we move to an embedded system then it could be touching a window or anything that has network connectivity. Payments could be made using an action such as the wave of your arm, the smile on your face, the blink of your eye. These things are already out there, but I think they will become much more pervasive. The result is that you won't need to use online banking because, as already mentioned, if money thinks for you and is intelligent, embedded, invisible and everywhere, then why would you want to go online? Yet the online service is probably going to behind a lot of that embedded functionality in the back office, supporting all of these different ways of transacting and communicating with the bank.

On the other hand, there are opinions suggesting that the days of traditional banking apps are numbered as well. They are expected to be replaced by various 'mobile wallets' provided by fintech companies. In one app, customers would be able to hold cards from different banks, and this solution would be much more functional than an app provided by a single bank. Do you agree with this theory?

That's an interesting question because it already is actually implemented. In fact it's a new feature that Apple have implemented using Open Banking in the UK. Open Banking started in 2015, when the second Payment Services Directive (PSD2) came into force in Europe, but the UK widened its impact to regulate that banks should share more than just payments information with third parties. This is why Apple has been able to extend Apple Pay so that, within Apple Pay, users can connect their accounts to their debit and credit cards in the Wallet, to view their up-to-date debit card balance, transaction history, and more. As we see more countries and companies developing these functionalities then yes, apps will become less used, but they still will be used by some. Again, it's a customer choice as to which they prefer and it's a bank and payment company’s choice as to which they support.

How do you assess the prospects for the development of biometric payments (e.g., iris scanning)? Do you think such a solution will become widespread in the future and replace the ubiquitous smartphones? How many years might this take?

We already have facial recognition in many countries, and it is developing rapidly. The leading company in this space is Ant Group based in China, who run the world's largest payment system Alipay. In the late 2010s they introduced facial recognition for making a payment. It's a really interesting technology because you can literally just smile at a window, and the payment is made. Smartphones also have biometric payments using facial recognition and fingerprint. In fact, having worked in this area for a very long time, we were predicting that this would happen in the last century. So yes, as the financial infrastructure becomes embedded in everything then of course we will see far more usage of biometric payments and, going back to Ant Group, they call it Smile-to-Pay which I think is a great idea.

In Poland, the credit card market is rapidly shrinking. There are opinions that this is due to the growing popularity of BNPL (Buy Now, Pay Later) payments. Do you think BNPL is a 'killer' of credit cards and that such traditional card solutions will not return to their former glory?

I was one of the first to actually present the idea that card payments would end in the near future. This was a presentation from 2005, where I was talking about the death of cards. The presentation was not predicting the end of credit and debit cards, but the end of the use of a physical card as a payment system. In fact, I have been telling MasterCard for years that they should be called MasterChip. This leads to the really big development which is not BNPL, but the embedded payments and financial system in everything around us. Everything is being tokenized too. Your card becomes a payments token, embedded in whatever and wherever you want it. So, the real question is who operates that payment system that is all around us, embedded everywhere, intelligent and invisible? It is most likely it will still be operators like Visa, MasterCard, China UnionPay and possibly new providers, if the European Union gets their way with the introduction of the European payments initiative (EPI). What I find interesting in this conversation is your questions seem to be predicting the end of online banking, the end of financial and payments apps, and the death of cards. My concluding remark is that all of those things will have a life through into the future, as long as customers want them and, of course, as long as the financial providers want to provide them.

 

Postscript:

I called this the vampayer as I felt that the interview was quite dark, almost as though it was talking with a payments vampire, on the basis that the interviewer seems to believe we can suck the life out of everything we use today in payments.