Visa CEMEA Annual Regional Summit — Dubai, February 2019

Some interesting topics about the future of commerce as navigated by banks, merchants and capital — all redefining the role of payments.

DISCLOSURE: This is a summation of trends voiced at a regional summit of Visa where all sensitive material shown is omitted, all numbers hidden and facts are backed by existing open world newsreel.

For quite some time, yours truly have been assisting a major international payment scheme, Visa that is, to illuminate the scene with bold fintech innovations, smart and eloquent speakers and actionable ideas: for them to select Dubai as the stage for its annual regional summit, the setting has never been better.

Dubai is an upcoming regional trade and finance hub, buoyed by Silk Road, yet at the moment dented by re-enacted Iran sanctions and real-estate glut. It is a spark of entrepreneurship, a desert oasis that fights the currents of today’s world by attracting international entrepreneurs to solve meaningful problems.

The same characteristic can be applied to the payment market and financial technology in general:

• Faced by global challenges, fintech is a way to find answer to perennial problem of matching financial pipework capabilities to the demands of the new interaction between a buyer and a seller;
• It is pushing companies like Visa and the rest to redefine it’s roots — and once again establish as a provider of meaningful solutions — delivering them often into the hands of customers rather than just banks, or working alongside merchants to help them achieve a new level of operational efficiency in the world of constant online connectivity.

It was a great pleasure for the organisers (with yours truly) to highlight these challenges-turned-opportunities with a plethora of great speakers like Bianca Lopes, Matt Dooley, Bradley Leimer, Tobie from Bettr, laurent le moal, Boris Kim and several others.

Opening the event, Visa’s Andrew Torre (now leading CEMEA region) covered in broad strokes the changes that are happening in the industry: while people love buying things online — so much that volume of online payments rise 2x the growth of offline —the experience of doing that is not that great. On a PC the experience is even worse than on a mobile yet overall the experience of paying with a physical token is inappropriate. Hence the focus of the payment industry is in:

• Standardizing the payload — standardizing the data that is used, tokenise the actual experience, probably use the biometrics from the device to make the process even more seamless, reinventing the customer verification method based on options used;
• Seeking to move alongside real-time payments and doing several time pushing payments between member banks now;
• Expanding its work with a number of 3rd party service providers.

While the company mentions the ability of users to now employ the capability to fund transactions from bank accounts gratis a Open Banking (something that MasterCard is now developing for the UK as it bought FasterPayments), there is presently lack of user understanding in terms of how to use it and how secure it is.

Mobile integration is better actually and probably it will be the merchant or a PSP who would implement this better than a bank acquirer or an incumbent acquirer.

The competition is supported by both activist governments pushing for better availability of commercially appealing ways to pay and be paid — supporting this with faster payment systems.

This is also supported from acquiring side with neo-acquirers: most coming from fintech domain. Wallets did not die: they have adapted around the marketplace / ecosystem model — sometimes offered by non financial companies (for example Grab).

According to some estimates, there are over 70 wallets in SE Asia ( yet FT recently did a good analysis of many of them eating the same lunch with investors money in Malaysia). Still, the activity sometimes implies interest and a foundational player like Visa can’t ignore this and looking to partner / cooperate to redefine merchant / user interaction with the help of financial technologies.

Talking about regional activity, in Russia, for example, RU POS per 1000 nearly doubled from 2016/2017. Leading in terms of tokenized transactions among other countries. Volumes were compared to mountains, number of planes that can be bought.

The consumption drive is underpinned by a global phenomenon grasped by Visa economics team: company’s principal economist talked on stage about new spending opportunities for the global population — USD 15 trillion of new spending pushed by middle class by 2030 (Link to the report). Building new services (some of them around shareable economy domain) to allow these new classes participate in new channels of consumption is a major topic for the global commerce.

Especially for these new participants in the consumption drive, trust is important. Trust is so much more than security — it’s about Expertise / Reliability / Social validation / Reassurance / Transparency.

The panel about neobanks gathered some good experts on the subject representing regional players either developing these platforms, or funds supporting them. The talk really progressed from all lauding the new world of cookies and design sessions imagining the best possible experience — to discussing the substantive changes that should move the overall industry. Neobanks should not just promise free to customers but make it work in terms of returns, since they are backed by investors who can chose among several projects getting them the best payout.

Arrogance and complacency can irradiate and infect both fintechs and banks. From investor perspective, the key indication of health is not present profitability, as scalable tech platforms proved several times profitability is marginal. The core is ability to cover a representative network of customers to either build a healthy business model through subscription or data.

Investors see that some services can be provided for free if they drive adoption of other services that have in them a better margin — thus creative a net positive effect. A neobank can become a platform. It can become a part of platform or disappear as a invisible set of rails inside a businesses.

Laurent from Naspers told the audience that neobanks, while having the rosy perspective of getting, through low-cost tech, to 20 million users or more and thus justifying the valuation, getting the data to built the internal scoring to make their own lending decisions (at least the pre-scoring). The panel diverged on seeing the future — because participants see different users that their businesses try to amass.

AI and context panels were somewhat similar: institutions around the globe are increasingly employing the smart use of data and apply algorithms to sift through the disparate assets they now collect to deliver near-magical services (booth-based AI doctor services, image scanning to understand what food is taken by a student and facial recognition done to debit his account). All these are redefining boundaries of how commerce enters the living room of a human and what incumbents should be ready for.

The outlook for the future is not so rosy and the pie in the sky can be eaten by a sentient AI and future portends not just opportunities but stresses out savings from users, getting them through a combination of behavior modification, nudging, information theory approach — leading the world by a well known path told by Aldous Huxley, or Jeremy Bentham.

Payments rendered invisible and instant leaves the user defenseless against the power of the machine: probably only development of personal bots on the user side — managing implicitly user interest and not of the bot developed by merchant platforms — the balance can be saved.

Either way, this is a contested ground for the brave of this new world.