With the arrival of the smartphone, tablet, smartwatch, etc., consumers already have a direct link with their bank in their pockets or even on their wrists. It is therefore essential for banks to facilitate ‘digital’ payment transactions in order to remain the trusted partner in this field. They need to do so without compromising on cost price and security.
Banks are facing competition from other players in the field, such as Google, PayPal, Apple, etc. . Even though, each of them seems to have different reasons for getting a piece of the payment transactions market.
Today we see that each bank has one or more apps to interact with its customers as seamless as possible. All banks seem to be well aware that the rules are changing when it comes to payments transactions. For example, online shopping and payments are not bound to any opening hours. Moreover, Belgians are becoming more and more demanding. Not only do they decide where and when to buy, they also want to decide how to pay. A significant number of online transactions are thus done at home on the tablet while other members of the household enjoy their favourite soap or series. We also see quick response (QR) codes popping up everywhere to make ‘shopping’ easier and more mobile.
It is obvious that both e-commerce and m-commerce are growing exponentially and that even goods and services that traditionally were harder to sell on the internet, now have found their way online to the consumer. The public sector being no exception in this regard. Briefly put, the market is changing and traditional payment methods by which your organisation pays or is getting paid are coming under pressure.
Looking for an equilibrium
It is more than likely that a number of payment solutions will fall into oblivion over time thanks to smartphones. Meanwhile, computers, payment terminals, credit cards and cash still shape today's payment landscape. A bank is therefore obliged to keep alternating between two ideas:
- improving its existing range of payment options
- gradually expanding its e-banking and m-banking
Choices. That is what it is all about. And these choices need to be made based on the digital payment landscape of today and of tomorrow.
E-banking: more than just cash management
Electronic banking focuses on the question: how will organisations organise their interaction with the bank?
Organisations are adopting the same approach as consumers to e-banking: digitisation will cover an increasingly broader segment of the relationship with the bank. Until now, that has generally been limited to cash management: consulting account statements and payment transactions.
Peter Pollaert (Head of Cash Management BNP Paribas Fortis): “Banks work on portals on which organisations and companies will be able to digitally handle almost all their daily banking transactions. This includes taking out loans, requesting bank guarantees and placing money in a term deposit account. At BNP Paribas Fortis, this portal is called ‘PC banking Business’.”
At the same time, that portal must also digitise paperwork and so reduce the paper chase.
“A consumer commits to the bank”
Peter Pollaert: “If the accountant, CFO or treasurer of an organisation or company goes to the bank, they are not making a personal commitment, they have a mandate to bind a legal entity. The larger that legal entity becomes, the more mandate holders are appointed. That makes e-banking for large organisations increasingly complex. Mandates need to be requested, given and checked, for several mandate holders.
Briefly put, the paper chase is growing. That administrative burden will be largely eliminated in future through digitisation. What we are referring to, is all types of e-contracting. That obviously requires the further expansion of the electronic signature, designed to replace signatures on paper.”
Gunter Uytterhoeven (Head of Marketing BNP Paribas Fortis): “Take the purchase of a new delivery van, for example. That must run smoothly and digitally, without too much paperwork or the need to keep going to the bank.
We note in the bank that the expectations of people in charge of financial policy are changing. These are increasingly younger people, digital natives who have grown up with digital technology. They expect to be able to perform a number of actions on their smartphones or tablets, for instance signing transactions or checking exceptional situations, such as an unusual account status. That is becoming the next challenge: how do we clearly translate something that is so complex for a mobile applications dashboard?”
Classic card payment processes are speeding up
Belgians are using their bank cards to draw cash at ATMs more often than to pay by card.
Together with Germany and Italy, Belgium is one of the last countries in Europe where cash is very frequently used as payment method. It is a bizarre phenomenon: people receive multiple plastic payment cards from their bank, but use them to rather draw cash at ATMs than to pay by card. Even so, Belgium has always been a progressive country when it comes to payment methods. The first ATMs, the first digital card, Proton for small purchases, etc., Belgium has always been at the front of the pack.
Why so much cash?
Gunter Uytterhoeven (Head of Marketing BNP Paribas Fortis) says that the use of old-fashioned cash has different reasons:
“Our country traditionally has a close and extensive network of accessible bank branches and ATMs. Withdrawing banknotes is therefore not a real problem. Especially if you compare us to a country like Sweden, where branches and ATMs are far more scarce. Around 97% of payments there are made electronically. Perhaps the Swedes are also somewhat more rational than us. Both consumers and vendors actually benefit from electronic payments. It is more convenient and secure and creates extra business for companies.”
In many places, Belgian consumers do not have a choice. You simply cannot pay with plastic, as there is no payment terminal available. Is that because digital payments make doing business too transparent? Peter Pollaert (Head of Cash Management BNP Paribas Fortis) suspects that the low number of electronic payments is equally connected to the price of a payment terminal:
“Perhaps that market has not been competitive enough. The high annual cost of a terminal still discourages merchants. But I would like to make an important observation here: the cost of cash is being kept artificially low. The logistical cost of banknotes and coins is high for banks. However, we have not as yet succeeded in passing on that cost to consumers who withdraw or organisations that deposit cash. As long as the price of cash remains artificially low, it will be difficult to overcome the perceived difference in price with electronic payment systems.”
To summarise: the classic card payment still has plenty of potential in Belgium. However, the degree of coverage of payment terminals must urgently increase.
BNP Paribas Fortis recently launched alternatives that should put downward pressure on the price of payment terminals and increase their penetration rate.
The payment terminals market is being opened up
BNP Paribas Fortis launched alternative payment terminals in September together with the Swiss Six Payment Services. That signifies competition for Worldline (previously Banksys), the company that processes Bancontact/Mister Cash payments (BC/MC). What will change in practice?
- People will not notice much difference when making payments: the new type of payment terminal strongly resembles the existing devices and accepts both the existing BC/MC bank cards and current credit cards.
- In addition to these alternative terminals, BNP Paribas Fortis also provides the accompanying processing services (daily transaction summary) on condition that the current account and cash management are placed with the bank.
- ‘No discount pricing, just an attractive pricing policy’, is how Peter Pollaert (Head of Cash Management BNP Paribas Fortis) describes the new service's pricing policy. “Relatively speaking, it is the smaller organisations and SMEs that will gain the most benefit from this. They often have no terminal as yet. Will we also attract the big players? That will become clear within a few years. We don't expect them to make the switch from one day to the next.”
- For the technical aspects behind payment terminals, the bank is joining forces with Six Payment Services, which operates in 33 countries at 180,000 merchants. The Swiss company will remain in the background in this story: the 900 branches of BNP Paribas Fortis will become the point of contact for organisations that show interest in the new system.
The mobile payment terminal
A second alternative to the classic payment terminal is the mobile payment terminal. That is a useful solution for people who work on the move and must collect payments. But how does this system work?
- The mobile payment solution consists of two parts:
The smartphone and the device are connected to each other via Bluetooth.
- Customers of other banks can also make payments on it.
- The device costs approximately €125 a year, which is significantly less than the €800-1,000 you would normally pay for a card payment terminal.
E-commerce and m-commerce: a smoother system ahead
Even though there is significant interest in e-commerce and m-commerce, making payments is often perceived as cumbersome or as insecure.
E-commerce considerably increases ease of use. You can calmly consult information about services (training, holiday camp for children, etc.) and then pay for them straight away. The trend shows no signs of stopping, yet Belgium is not leading the way here. In our country, for example, only 2-3% of the total retail turnover is made with electronic sales. The figure in our neighbouring countries is already 8-9%. Gunter Uytterhoeven (Head of Marketing BNP Paribas Fortis):
“One of the reasons for lagging behind is that Belgium still does not have a good payment solution for electronic transactions. Many people perceive online payments to be complex, cumbersome and not adequately secure. Almost one-quarter of all transactions are interrupted at the time payment must be made.”
The most common way of online payment is the credit card, which is being used increasingly with the card reader and PIN. The payment requires several actions. A system that is making considerable progress is the virtual wallet or e-wallet. The customer opens a wallet on a website to which an amount can be transferred or on which payment is made by credit card. The advantage is that you do not have to release any personal details on the internet. The disadvantage is that you can only use this system in affiliated web shops. A well-known example is PayPal. The customer only needs to provide his bank account or credit card details once and can pay after that with an e-mail address and password. This also requires a number of actions that can form an obstacle for many e-shoppers.
M-commerce (buying and paying via mobile devices such as smartphones and tablets) is still in its infancy. Apps are very popular, but they are not yet used very frequently for mobile trade. Paying in the app often does not work, merchants have problems identifying customers, and there are still doubts about security and privacy.
However, there is a solution in sight to make both e-commerce and m-commerce work more smoothly and securely. BNP Paribas Fortis is currently working on a new system together with other Belgian banks and major telecom players: Sixdots.
Sixdots: smooth and secure online and mobile payments
Sixdots is a system designed to make both payment cards and card readers superfluous. These are to be replaced by a secret code that is typed into the smartphone. Online mobile payments will be smooth and secure. The system is aimed at the Belgian market and will be launched in 2015.
- Sixdots refers to the six-figure PIN, which together with several other elements is designed to ensure the security of the system. Sixdots will be an open platform that is accessible for all organisations/companies and their customers/consumers: the app can be used by anyone with a smartphone, a payment card at a Belgian bank and a mobile data subscription with a Belgian telecom operator.
- Sixdots offers attractive benefits to vendors, both for e-commerce and ‘in-app’ commerce. Sixdots can be seamlessly integrated into the organisation's own app. You pay a small fee for each transaction.
- Using Sixdots is free and convenient for the payer. Payers no longer have to leave behind their card details during the payment process and the card reader also becomes superfluous. All that they need to pay for goods or services is a smartphone.
Gunter Uytterhoeven: “For commercial organisations, more is possible than just shopping and paying. The entire retail process can be combined in Sixdots, including loyalty cards and discount vouchers. Discount vouchers would then automatically appear on customers' smartphones, for example, when they are at the shop rack height of the relevant product. The till will also recognise the customer's smartphone and automatically deduct the discount vouchers from the bill. The current buzz word for this in the retail world is ‘fidgetal’, the combination of finger and digital. The aim of this is the convergence of the physical and e-commerce world, using the smartphone as the ideal binding agent. These types of applications will also prove their usefulness in the public and social profit sectors.”
Digitised reporting coming soon
Large organisations and companies are already one step ahead with e-banking and have mostly already integrated their accounting.
In larger organisations, banking details are requested automatically and processed in the accounting department. In the case of a smaller company, accountants are increasingly taking over this task. These can be obtained from their customers through various channels in order to process digitally.
Peter Pollaert (Head of Cash Management BNP Paribas Fortis):
“Banks must also respond to this with their new e-banking applications. Previously, there was a bilateral relationship between the bank and organisation, both at the level of transactions and reporting. In the future, other parties, such as the accounting firm, will make this a triangular relationship.”
Where does Belgium stand in that domain?
It seems to be doing well. The great benefit is that bank reporting in our country is standardised, via the well-known CODA-protocol. CODA (Coded Statement of Account) is an electronic file that contains the data of account statements and their attachments. Each transaction is assigned a unique code, which an accounting program can use to accurately identify and record the transaction.
“Thanks to that common protocol, nearly all accounting software packages used in Belgium can upload CODA”, says Peter Pollaert. “A foreign online accounting firm may therefore venture into the Belgian market. The firm just asks for a channel to receive CODAs securely, efficiently and electronically and to finalise the accounting of companies online.
More than just CODAs are needed for this purpose: banks must also be prepared and have the necessary technical capabilities to establish a link with the accounting package provider. This can be done the old way, by which a company gives its bank the instruction to send the CODAs to the accountant. But it can also be done completely digitally, with mandate holders and digital signatures.”