Italians are Reluctant Converts to Payments Revolution
Compared with progress made in some neighbouring European countries, the journey towards a cashless society in Italy is making relatively slow progress. That was one of the messages from the SIA Expo 2012, the annual international payments summit mounted by Italy’s SIA Group, which was held in Milan on 9 October.
In recent years the event has regularly had the single euro payments area (SEPA) as a main focus. This year it featured a little lower on the agenda although speaker Daniela Russo, director general payments and market infrastructures for the European Central Bank (ECB), said that SEPA migration remained the ECB’s top priority as the 1 February 2014 deadline approached. She added that relatively few countries were advanced in their migration process, with Italy among the laggards.
An afternoon session on the SEPA end date also attracted a sizeable audience. However, the chosen theme for 2012 was ‘the next payment generation’, although more than one in five Italians still relies exclusively on cash.
As conference speaker Emerico Antonio Zautzik, managing director of central banking, markets and payments systems at Banca d’Italia, noted, it still accounts for the bulk of payments in Italy and some retailers have still yet to install point-of-sale (POS) systems to accept cashless payments.
A SIA-commissioned survey, conducted by market research firm Istituto per gli Studi Pubblicia Opinione (ISPO) and released at the Expo, suggested that the Italian public’s professed readiness to abandon euro and embrace the technological advances represented by electronic money (e-money) and contactless payments hasn’t yet translated into action.
“Pensioners, the elderly and housewives are the groups in Italy particularly reluctant to abandon cash, with other European countries probably reflecting a similar pattern, “ said ISPO’s president, Renato Mannheimer. “Young people in the 18-34 age group are those most ready to use credit cards.”
ISPO’s national survey of 800 Italian consumers found that nearly four in five possess at least one debit, credit or prepaid card and 62% used payment cards. However, SIA’s chief executive officer (CEO), Massimo Arrighetti, noted that plastic has not supplanted cash for buying everyday items: “Italians typically use their credit card for larger purchases only, whereas in much of Europe they have largely replaced cash.”
The survey also indicated that while Italian consumers are familiar with credit cards, fewer know about contactless cards. There was also a high level of awareness about payments using a mobile phone, but as yet only a low level of usage. More than one in three respondents (36%) agreed that mobile payments (m-payments) are useful in reducing the need for cash, but only 19% described themselves as “well disposed to using m-payments”.
However, SIA was heartened by the fact that 30% of those surveyed stated that they were ready to abandon cash entirely and switch to e-money, which they agreed was fast and convenient and particularly suited for smaller purchases of €50 or less. The survey also indicated that this percentage could nearly double to 50%, if POS terminals were more widespread in Italian stores and retailers were more ready to accept card payments.
Hopes Pinned on Mobiles
Despite the lukewarm response indicated in the survey, SIA believes that the popularity of mobile phones in Italy can pave the way for much greater use of m-payments. Ownership has risen steadily, with around 21% of families possessing at least one mobile in 1997 growing to 91.6% by 2011.
“Our research has confirmed that new generation payments represent an important driver for the country system and can contribute to making up Italy’s gap at a European level,” said Arrighetti. “When we talk about payments, what emerges is a three-speed Italy – that of cash, of cards and of m-payments, which calls for a series of specific actions.
“The young, with their desire for innovation, represent the future where the dominant instrument will increasingly be the mobile phone, which adds to and integrates with payment cards. It is therefore imperative to identify the actions needed to promote the use of e-payments and speed up the process already underway.”
At an Expo 2012 session focusing on m-payments, Alessandro Perego, co-director of the information and communication technologies (ICT) and management observatories of the school of management at the Politecnico di Milano (Milan University), reported that mobile proximity payments (MPPs) and services were developing rapidly in Italy.
“In many cities your mobile can be used to buy products and items such as your bus ticket,” he said. “However, there is as yet no clear-cut winning model among the hundreds of solutions being developed. The market has yet to deliver its final verdict on which one will win through.”
Perego added that two elements, circularity and value, would determine which models proved successful.
“By circularity, I mean services that can be employed by all types of user and mobile operator and where the value attributable to each stakeholder is evident. If there is little or no circularity, then both merchants and consumers will quickly lose interest.”
Value would be based on the automation of payments services, he said and it was important for each party to know exactly what value they are getting from an m-payment. “So additional services will provide a bigger source of value.”
The role of banks in these developments was important, added Perego. They could opt to play a passive role as they stand to benefit from the greater use of m-payments regardless of which system wins through; however, it was in their interests to adopt a more positive approach as some mobile wallets (m-wallets) are likely to be sponsored by the main telecom players. Many of these issues have yet to be resolved, he admitted. “In Italy, there are still more questions and answers.”
Mandatory Measures versus Incentives
Ultimately, what is needed to speed up Italy’s transition to the next payment generation? At an Expo 2012 roundtable debate, speaker Valerio Zappalà, managing director of IT firm InfoCamere, favoured more dramatic measures. “Changes in Italy can come about only if they are made mandatory,” he suggested. “For example, back in 2007 we began talking about electronic invoicing [e-invoicing] but no framework or guidelines have been established in Italy over the subsequent five years. Having a proper framework would stimulate competition and drive costs lower, but if we continue along the same avenue Italy’s slow progress will compare humiliatingly with other European countries.”
Giorgio De Rita, managing director of the government’s Agenzia per l’Italia Digitale (Agency for Digital Italy), agreed that the country had made little progress, due largely to bureaucracy and conflicting interests. The agency was attempting to change this by tackling the issues and outlining a vision of a fully-digital Italy.
“E-trading is of the utmost importance and that requires a better infrastructure, both for individual transactions and for the exchanging of information,” he said. “We aim to have a new system up and running by 2014.”
Roundtable speakers even floated the concept of a financial incentive backed by the government, such as offering Italian consumers a 5% discount if they switched from cash to e-money.
However, one telling detail in the ISPO survey received only brief attention. Seventy-four percent of the Italians interviewed agreed that the use of payment cards helps to combat tax evasion. But in a country where, according to reports, the ‘black economy’ was thriving even before the economic downturn and eurozone crisis, could that be a major reason why so many still prefer cash to m-payments or plastic?