More anecdotes

[Dave Birch] Erik van Winkel from our friends at Edgar Dunn as a nice piece in the current Journal of Payment Strategy and Systems (vol. 3, no. 2) looking at the potential for new entrants in the European payments sector in response to the arrival of the Payment Services Directive (PSD). At our seminar on this topic earlier in the year, I asked the panelists about the likely categories of new entrants, and we spent some time discussing whether telcos and retailers might be prime candidates. Erik sets out his own thoughtful classification of potential new entrants as follows:

• International organisations already providing processing spaces for acquirers;
• Large pan-European retailers who might immediately benefit from self-acquiring and synergies with loyalty and CRM schemes;
• E-commerce businesses such as PayPal, Google and Amazon who might be able to offer European consumers some modern, customer-friendly options;
• Mobile operators. Erik thinks that if banks and telcos cannot agree on common business models then telcos may well decide to launch their own initiatives. Some operators (eg, Vodafone) already have successful m-payment systems running outside Europe and may decide to try them out inside Europe given the right conditions.

An excellent analysis. I think Erik’s point about mobile operators is a particularly good one. We’ve been told over and over again that “mobile operators don’t want to be banks” and I’m sure they don’t. But a Payment Institution (PI) isn’t a bank. The point of setting up a PI is not to compete on banking services to run payment services more efficiently. Saying the mobile operators don’t want to be banks is one thing, saying that they don’t want to get into the payments business quite another.

Talking about the PSD, I saw Forum friend Dominic Peachey from the Financial Services Authority, the person in charge of regulating e-money in the UK, give a typically excellent talk at the Mobile Payments and Commerce in Brussels. He was covering the potential impact of the PSD on mobile payments in Europe (Dominic was also on the expert panel discussing the potential impact of the PSD on business as a whole at our free seminar on this topic in London back in March).

One very good point that he made was the part of the PSD’s muddled approach to mobile payment can be attributed to “regulation by anecdote”. What he meant by this was that regulators hear about a new service — let’s say paying for a taxi by mobile phone — and then make an essentially arbitrary determination of the regulatory category and outcome. What they should be doing, of course, is setting out principles and then sticking to them. People in the mobile payments world might not agree with the principles — if the principle is, as in the Indian case, to defend bank oligarchies from competition — but at least they would be able to plan future services in confidence. I heard an analyst make a similar point to one of our financial services customers recently: it’s not clear what the overall purpose of the PSD actually is, nor what the underlying principles of payment regulation in general are. I’m sure it will a get much clearer later in the year, when the PSD comes into effect.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]