From transaction to a whole country digitalisation

From transaction to a whole country digitalisation

Swansea, UK: December 07, 2016: Close up of the new 2016 polymer five pound note with enhanced counterfeit resilience, showing the head of Queen Elizabeth II.

By Marco Marocco, Head of Digital Payments, Intesa Sanpaolo.

Marco, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

As Head of Mobile Payments and Commerce, I am currently responsible for developing and positioning strategies for digital payment solutions of Intesa Sanpaolo, the largest Italian bank truly committed to its digital transformation path. This role has exposed me and push me through several challenges every day in leading my team, dealing with a highly competitive market and negotiating with third party players such as Payment networks and fintech, in addition to fostering the digital culture within a territory-anchored giant. Today I rely on over 13 years of experience in the banking industry as well as in management consulting. I have been previously working within the CRM dept, where I was involved in the design and deployment of the bank’s Real-Time marketing platform, and within the Marketing dept, where I had to play a pivotal role in the reshape of Intesa Sanpaolo’s offering for Mass Market and Affluent customers. On a personal perspective, I am an enthusiast skier and love spending time with my wife and my daughter.

At the Payments Forum, you will be giving your insight on payment experience. Can you please provide an example of how financial institutions should streamline payment processes?

Payments has always been a commoditized product for banks, given its high entry barriers and infrastructural and regulatory cost. Nevertheless, payment transactions account for 80% of the relationship between the bank and its customers. Only recently we are facing an increasingly competition among new comers such as OTT (e.g. Apple pay) and fintech (e.g. Circle, Venmo) putting at risk both the customer ownership as well as the fee’s revenue structure. Given the transforming context, financial institutions have however the chance to play an active role in the new battlefield by:

  • Leveraging a collaborative approach with new competitors, via a partnership based model: for example, Intesa Sanpaolo recently signed a partnership with Samsung to bring their payment product, Samsung Pay, into the Italian Market.
  • Building experience-driven digital payments products: for example, Intesa Sanpaolo recently introduces an ultrasound based payment features directly embedded although maintaining high security standard into the mobile banking app that simplifies dramatically the payment experience to a single push notification (easily approvable with fingerprinting)… as easy as using cash.
How can FIs overcome a commoditized, crowded and competitive arena?

Along these last few years we have been witnessing undisputed mayor changes in the banking industry. New services have spread, new players, from huge actors like GAFAs to fintech attackers, have set foot in many areas considered inaccessible to anyone but banks. Plus, customers’ expectations are growing fast and might represent the key factor to consider in order to predominate the battlefield in the next five-ten years. Incumbent banks, and Intesa Sanpaolo with its leading position is a proper example, have the chance and the duty to leverage their massive customers’ basis: their existing current account holders, their business customers and (most of all) their merchants’ network. When it comes to payment we all agree upon the importance of a comprehensive and widespread acceptance of the payment tools. According to our researches, a mayor barrier faced by our customers in adopting new mobile payments solutions is given by merchants not being able to accept these innovative solutions or even just some of them. For this reason, Intesa Sanpaolo believes in the crucial role of merchants, as the actual enablers of innovative payment solutions’ adoption and success. As further proof of this, the bank is investing in a holistic and omni-comprehensive acceptance solution; a check-out suite, that has been conceived to aggregate several existing payment solutions launched in the market, even by other players. By pursuing the approach, Intesa Sanpaolo wants to leverage its leading position in the market to overcome competition offering an intuitive and smart service to merchants.

Can you give an overview of Intesa Sanpaolo’s solution to bond online and offline transactions into a unique user experience?

Intesa Sanpaolo’s recent efforts reflects a deep commitment in defining and creating value for its customers through consistent and solid experiences. An ambitious and customer-centric vision that has guided the bank along its digital transformation with mayor impacts on the renewed digital properties, both online and mobile. Talking of payments, Intesa Sanpaolo is pursuing these same logics in the definition of a unique payment experience for customers when making either in-store and e-commerce purchases. The bank’s aim is to combine the deep knowledge of its customers and its tech capabilities to convey multiple solutions into a single and intuitive moment. To do this, mobile push notification has been identified as a powerful tool that is getting extremely common among mobile customers in dozens of activities. Customers have now the chance to confirm a payment via fingerprint as a result of a push notification while purchasing in-store with JiffyPay (the bank’s account-to-account solution) as well as finalize an e-commerce transaction when making shopping on their favorite online stores with the renewed Masterpass and 3-D Secure solutions.

How do you see the payments industry evolving over the next 6-12 months, particularly in relation to the current and upcoming political landscape?

Bill gates once stated about fintech that “Most people overestimate what they can do in one year and underestimate what they can do in ten years.”, and I strongly believe that the payments industry and the overall banking one are changing fast, thanks to the digitization of our lives, but not that fast. We see an incredible number of new initiatives in the market but very few of them are likely to succeed in the long run. Moreover, soon we will be able to measure and detect the impacts of the new Payments Services Directive (PSD2) in Europe, and how banks are going to act in order to assure their leading role in the industry. In conclusion, some bold facts, we will be definitely witnessing in the next 6 to 12 months:

  • An increasingly global rollout of OTT solution such as Android Pay, Samsung Pay and Apple Pay as well as the rise of new GAFAA initiatives such as Facebook P2P recent launch and Amazon Pay.
  • A substantial rise in the number of Fintech initiatives driven by VC investments, which, in terms of Payment, account now for more than 30% of overall fintech investments given its easier go-to-market affordability (lending and other banking services requires higher regulatory standards and licensing.
  • A fundamental shift in the incumbent banks’ perception of the strategical importance of payments, that already started this year with the launch of Zelle in USA: a comprehensive collaborative strategy pursued by major banks in the country to fight back the P2P fintech phenomenon (the market leader Venmo processed more than 12 billion transactions per year and grow its volume 25% YoY ), with a competitive zero fee payment service only easily embedded into mobile banking apps.