Today, global payments player Ixaris, and financial services investment and advisory group Anthemis released a report identifying global trends in payments innovation. The report, which compiles the results from the Global Innovation Jury – a panel of 25 leaders in the payments sector from 14 countries and 5 continents who meet every two years – discusses innovations in different regions of the worlds, the effect smartphone technology has had on payments innovation (including mobile payments), as well as the potential “hype” that online payments has had recently.
The reports results touch on several interesting features; however, nothing struck me more than the result that Western and Eastern Europe were the two regions which are anticipated to produce the least amount of innovation in online payments in the future.
“Europe is so weighed down by standardisation initiatives such as SEPA and by the banking crisis that there is little energy left for innovation compared to Africa and Asia”
The reports sites the “stranglehold of regulation a fragmented payments landscape and the overhang of the banking crisis” as the reason for the predicted lack of innovation, as well as its lack of innovation in recent years. I interviewed John Chaplin, who chaired in the Global Innovation Jury
Do you see any specific trends in the French market?
France is a difficult market for payments projects to be successful. While France has a history of creating cutting-edge payments initiatives, many of these fail to gain real market traction. Typically two or three rival projects based on new technologies will be created by different groups of banks, none of which can attract the volumes to reach critical mass. Different products on the market (with no interoperability) can create a confusing picture for merchants and consumers.
If, on the other hand, the French payments market tries to go for industry-wide projects, the situation can become political and time-to-market takes too long. Reaching a compromise from different players in the industry takes precedence over providing a good offering for consumers and merchants.
France has developed some of the finest payments technology in the world – the first chip card came from France, for example. However, many of France’s best payments entrepreneurs do not deploy their ideas in the home market and push their solutions in emerging economies – typically Francophone countries in Africa and South East Asia.
The report mentions that Europe is being held back by strict regulation: how do you this manifesting itself in the French market?
In our study, the majority of respondents said new market entrants are best at driving payments innovation. This is as true in France as in the rest of the world. Much of the innovation in payments will not come from the traditional players such as the banks and card schemes but from start ups.
Payments regulation in France is quite in favour of the status quo – the banks, schemes and processors. While this may be desirable from a risk management perspective, it does not help France to foster a climate of payments innovation. The banks and card schemes try to innovate but as the Payments Innovation Jury Report highlights, internal innovation is usually difficult within large institutions.
Who do you see as the big players (both international and local) in the French market? Is there room for new companies to enter this space, or is it too difficult to navigate?
France is home to some global names in payments technology, notably Gemalto, as well as a raft of other vendors, who are responsible for driving innovation in a number of areas, particularly security.
In terms of international firms, it is unlikely that the US tech giants making forays into payments – Amazon, Google and Apple – will see France as a first port of call in Europe. They are more likely to make moves in markets perceived to be more open to payments innovation.
Any other comments related to the French market that you think would be relevant?
France has led the charge on payments security and this is likely to continue. France is home to a host of top payments security vendors, and historically has tended to prioritize security above ease of use for consumers. The trade-off is that this has reduced potential transaction volumes in France compared to say UK or US where there are more internet or telephone transactions but also more fraud.
You can download the entire report here.