SEPA and the Creation of a Cashless Society
A (Manfred Schuck, general manager marketing & sales, Equens): The basic change will be that previously protected domestic markets will open up for competitors. This will take some time because of existing contracts, current local practice and protective behaviour. But after a while, new players will enter and start to compete on price, performance, quality and functionality. As a result, every company in SEPA has to decide what role to play.
If you do not have the qualities or quantities to remain an independent player, you will have to choose between a number of scenarios that anyone can understand. It will be hard to continue operating in your own home market without international growth. Only a handful of successful niche players and maybe one or two large players from Europe’s biggest economies will succeed. If you are here to stay, you will have to prepare for international competition. Ultimately, only true added value based on open European standards will help you survive. Protective behaviour in order to retain customers will deter new customers, and existing customers will eventually be lost.
A (Schuck): In principle, better security does not have to mean less convenience, as security can be provided transparently through technological solutions. The migration from the magnetic stripe to the EMV chip is an example of a huge increase in security without any impact on convenience. Only the simultaneous migration to PIN in some markets affected convenience, although in the end it is questionable what is more inconvenient – needing a pencil or having to remember a four-digit code. It is probably only the change itself that is considered a problem.
Besides the migration to EMV, many security enhancements were implemented over time without any impact on convenience, as the changes were not visible for the consumer. It is reasonable to expect that technological evolution will have a positive impact on both security and convenience, although every change will initially seem inconvenient.
A (Schuck): It is reasonable to expect that the market share of cashless payments will continue to grow, partly because of the convenience for customers, but probably even more so because of the convenience and lower total costs for retailers. Cheques were an expensive payment tool, and it is now becoming clear that cash payments are more expensive than cashless payments because of the extensive logistics and risks of theft or fraud.
SEPA will result in a more competitive market. Due to overall costs, cash handling will become more expensive for retailers and cashless payments cheaper. In the end, retailers will promote cashless payments and may even expect their customers to only make cashless payments. Although the market share of cashless payments may eventually rise to 80-90%, there will always be a need for cash in certain markets for reasons of lack of trust or traceability.
A (Schuck): Over the years, a huge variety of new and updated payment products have been introduced to facilitate payments in the online environment. After a steep learning curve, a perfect balance between convenience and online security has almost been achieved.
Meanwhile, the e-commerce playground has evolved into an adolescent market, ready to leap to maturity. The product design and risk management challenge is to meet customer and market requirements. Nowadays, successful products are tailor-made for their respective environments. They are transparent, fast and flawless, and give customers control over their payments, establish the authenticity of the parties involved in the transaction process, prevent repetition of the same transactions, and are based on the’to have’ and’to know’ principle. Despite the many technical solutions, customers must take note of the fact that cautiousness in providing personal information on the Internet remains key to security.