Mobile Payment Apps in Europe — Part 3: BLIK and Twint

The first part of these series was analyzing successful solutions from Nordics — the forefront market for digital payments globally. The second part looked into Benelux players — Tikkie and Payconiq. The third part is devoted to the two bright cases of national alternative payment methods development in Poland (quite successful) and Switzerland (rather a failure).

BLIK

BLIK is one of the brightest examples of bank collaboration to tackle digital payments on a country level. Launched in 2015 by a consortium of Polish banks, BLIK entered already well-served and overcrowded Polish payments space, offering POS, Online, P2P payments and ATM withdrawals. Poland did (and still does) have one of the highest contactless terminal penetration in Europe, along with high contactless cards penetration. In online space multiple bank proprietary transfer buttons were dominating with >50% share, card transaction accounted for the other 35%. Nevertheless, united bank support for the new payment method as well as smart marketing and a good selection of use cases with the highest potential value-added allowed BLIK to scale up quickly on this well-served and crowded market.

Reach in 2019: >6M users (20% of Polish population) with at least 3.2M active users

Pricing: 0.2–0.4% POS transaction, 1–2% online transaction.

Key success factors:

1. Strong bank support — uniform and united backing of all major banks (who also dominate POS acquiring in Poland) significantly facilitated BLIK go-to-market in POS, ATM and P2P
2. Negotiated PSP support — concentrated PSP market with top 4 PSPs (PayU, P24, Dotpay and eService) maintaining >70% of e-Comm market and concentrated e-Commerce market (with Allegro marketplace controlling ~50% of sales), it was quite easy for BLIK to get high e-commerce acceptance quickly by just striking a few partnership deals
3. Well-rounded value proposition package with strong monetization potential from the start — unlike Nordic peers that normally first aimed at getting scale in P2P and only after several years were moving into other payment domains, BLIK from the start supported all 4 payment worlds — P2P, POS, Online and ATM. Therefore, it was a much more compelling value proposition from the beginning, stimulating user sign-up and app usage. At the same time monetization areas come into play from the beginning, without a money-less P2P scale-up period
4. Playing everywhere, winning in certain segments— the highest scale-up was achieved in Online and ATM space, where BLIK the highest value-added potential. In Online environment, BLIK allowed for a higher convenience compared to traditional bank buttons (more below) and in ATM (with the absence of contactless withdrawal possibilities in Poland) BLIK only competed with Chip&PIN - offering customers the luxury of cardless withdrawals which turned out to be of high demand
5. Historically, a stronger focus on authentication security over convenience in online payments in Poland — high usage of 3DS requirement on cards and clunky multi-step online bank transfer process (also requiring 3DS) made Polish customers used to long multi-step authentication processes. And although BLIK can cut 1 authentication step out of 5, it is still in some cases considered as a more convenient online payment method
6. Software-enabled POS integration — BLIK at POS integration did not require any separate hardware and was implemented as a software patch to existing terminals. This allowed BLIK to save costs and quickly scale up POS acceptance. However, BLIK POS usage remains low mainly due to complicated multi-step authentication, as customers prefer much faster and simpler contactless card payments.
7. Well-designed promotion campaigns — BLIK promotion game was big and multi-channel. First, it launched a heavy online and offline advertising campaign to raise awareness, followed by advertising and promotion through the participating banks (offline and online). Agreement with all major PSPs raised BLIK button to the top of the (long) payment methods list on online payment pages. Multiple promotion campaigns with retailers offered a small discount or additional bonus to customers paying with BLIK. Main campaign messages were around the method speed and “requiring only a mobile phone”.
8. Very unique technology and transaction authentication flow— BLIK remains unique on the European market when it comes to transaction flow, security and customer experience. BLIK authentication relies on codes generated on mobile and is fully SCA compliant. The solution is efficient and elegant enough to be potentially scaled across other European markets.

Potential and Challenges ahead:

1. There is a very high potential of pan-European expansion, especially given BLIK scale-up figures in Poland, uniqueness of the underlying technology and upcoming PSD2 XS2A regulation. BLIK already partnered with Mastercard on this matter.
2. The unique technology behind BLIK could be licensed or white-labeled for export to other countries (first deal with UAE buyer already signed in May 2019)
3. Adding contactless mobile payment functionality to conquer POS segment and compete against Apple Pay and Android Pay (that are already present in Poland). BLIK announced launch os this feature for second half of 2019.
4. One of the most obvious potential improvements is a creation of separate BLIK payment app serving as a customer payment hub (currently BLIK is still embedded into bank apps, which limits marketing potential)
5. The main challenge is still relatively complicated authentication flow which requires manual code type-in, with limited improvement potential (e.g. it is hard to replace manual type-in with biometric authentication, etc. without changing the whole underlying technology)

Twint

Twint is one of the most expensive national wallet scale-up attempts which managed to achieve a certain scale, but still is seen by many as a failure. Twint was launched in 2016 in an attempt to replicate the success of Nordic solutions in Switzerland. From the start, it got a strong backing of all major Swiss banks, including local ones, as well as SIX and Worldline. However, after this Twint story become a series of scandals: technical problems immediately after launch, low user-friendliness of the app, the cartel accusation from Apple Pay and Samsung Pay and Swiss watchdog investigation against participating banks. At the end, the development cost is rumored to be as high as 500mn CHF, which is inadequately high especially given all the technical problems and low customer adoption rates. Finally, in 2018 UBS started offering the possibility to 1,000 CHF for anyone downloading Twint app — which might be seen as an ultimate sign of despair.

Reach in 2019: 850K total users (~10% of Swiss population)

Pricing: 1.3% per transaction

Key factors:

1. Strong banks and acquirers backing — which provided development funds, technology and a protective shield against global competitors (Apple Pay, etc)
2. The relatively high cost of payment acceptance service and hardware in Switzerland creates a business case for alternative payment methods. At the same time, generally low merchant price sensitivity lowers opportunity for price differentiation
3. Standalone payment app from the beginning — allowing for better, more centralized and focused marketing
4. Merger with competing Paymit in 2016 (developed by UBS, SIX, Zurich Cantonal Bank), consolidating the efforts only on
5. The well-rounded capability set — POS, online, P2P capabilities offered
6. Parking payment use case — possibility to pay parking fees with Twint though integration with Swiss parking system — one of the most appealing Twint use cases (and unique on European arena)
7. Targeting flea market sellers and farm shops for cashless payment acceptance — which is a large underserved market in Switzerland
8. The well-rounded capability set — POS, online, P2P capabilities offered. POS payments operate through QR codes and physical acceptance beacons (sale of acceptance beacons potentially provides additional revenue stream)
9. Twint started offering white-label wallet technology for wallet providers abroad, which potentially can be an additional revenue stream

Potential and Challenges ahead:

1. The weak start is the bad public image is going to be very difficult to reverse
2. Scale-up to neighboring countries (Austria, Germany, Italy) make little sense without domestic success
3. Swiss customers are generally known as relatively more conservative compared to rest of Europe, which limits the potential for new payment methods
4. Credit Suisse opened the market for Apple Pay in 2019, which may significantly damage Twint position (especially as other banks have no choice but to follow)
5. Twint is currently stuck in their local market scale-up, most likely paths forward involve: a) transform into niche use case provider (e.g. parking payment app, recurring payments app etc.); b) try to expand abroad; c) become a white-label software provider or d) shut down the project altogether.