Conference report: PayExpo Europe 2016

The world of payments descended on east London last month, as the Excel Arena played host to PayExpo Europe on 7-8 June. Chris Lemmon reports from day one of the show.

The banking world is getting to grips with the fact that a digital revolution is on the horizon, and there is a potential market of 2.5 billion people worldwide who are financially unconnected. The dated nature of legacy systems, the changing consumer expectations of banking, and the emergence of ease when completing previously difficult tasks have all contributed to a “perfect storm” for banking disruption. Record-breaking fundraising campaigns for challenger banks Mondo and Tandem also prove that consumers are interested in new digital banking models, while the fragile nature of trust in banking remains a hot topic. All of these issues and more were up for discussion at PayExpo 2016.

Over the course of the first day of the show, delegates were offered a range of sessions, split into four separate streams. To complement the exhibition between conference speakers, visitors gathered around the in-house boxing ring which hosted four different ‘Payment Punchups’ – a boxing bout-come-debate between two payments experts, dressed in headbands and boxing gloves, covering topics such as biometric verification and the future role of social media in payments.

The conference itself began with a keynote discussion on whether the payments market is on track, which set the trend for the course of conversation throughout the day. Panellists, including representatives from Lloyds and PayPal, discussed the changing nature of payments and the recent switch in consumer expectation about how their finances should be managed. The ease of completing a payment through contactless cards and the introduction of Apple Pay and Android Pay, coupled with the rise of frictionless payment apps from firms such Uber and Starbucks, has undoubtedly paved the way for innovation. Claire Maslen, financial services relationship manager at GSMA, highlighted this change in consumer appetite, noting that taking your mobile out to pay for a product or doing your shopping on the tube has now become the norm in the UK.

The discussion’s moderator, Fiona Ghosh, partner at Addleshaw Goddard, claimed that banks are struggling to integrate with startups, despite partnerships for intellectual property and data shares becoming increasingly common. Ghosh added that there had been a mindset shift from both the regulators and the banks – with regulators more open to new technologies and methods such as social media than they were 24 months ago. But she argued that banks are being dictated to by companies such as Apple when it comes to new payment methods.

The panellists agreed that the route to payments innovation lies in collaboration. Senior manager of digital payments at Lloyds, Aaron Baker, stated that the bank is seeking out more partnerships with startups, with a view to strengthening its relationship with FinTechs and its customers. Rob Harper, director of mobile commerce at PayPal, cited the recent partnership between his organisation and Vodafone, enabling the use of Vodafone Wallet to pay for goods and services at the point of sale with a mobile, as an example of how collaboration is pushing forward the innovation of the market. The consensus among the panel was that communication between companies is key when driving forward developments in financial technology.

Continuing the future of banking and payments theme, the ‘traditional vs challenger vs bank lite’ debate raised the question of whether banking startups actually have the capability to disrupt the traditional banking market. Suresh Vaghjiani, executive vice president of card services at Global Processing Services, spoke of a “perfect storm” for disruption as consumers are becoming increasingly impatient with the traditional banks. True disruption of the banking market, however, still seems a long way off, the conference heard, with traditional banks unable to make many significant changes due to the enormity of their customer bases. The point was raised during this panel session that if a challenger bank manages to scale effectively, would they then not encounter the exact problems that traditional banks experience now? Challengers must come up with something truly innovative, building a totally inclusive service that the banks do not currently offer in order to gain a significant stake in the banking market – otherwise they will fall by the wayside, delegates were told. As pointed out by Aaron Baker, senior manager of digital payments at Lloyds Banking Group, “only two per cent of people change bank accounts; with these statistics you are more likely to get divorced”.

A number of speakers throughout the conference expressed their apprehension on how new FinTechs will be able to scale their business successfully. In the afternoon, the ‘start-ups to scale-ups’ session debated whether the role of traditional banks will become redundant in the digital age, with representatives from startups Monese, Mondo and Revolut coming under scrutiny about how they will be able to generate real revenue in the near future. Revolut COO Laurence Krieger kept his cards close to his chest when questioned on how the mobile account startup will start making money, while the CEO of Mondo Bank, Tom Blomfield, stated that each of his 20,000 cardholders is currently costing his firm an average of £40 a year, but explained that Mondo aims to generate revenue once it has a banking licence granted and can begin to charge customers for overdraft lending. The 30 year old CEO suggested that society is now approaching a “cliff moment” in banking. In a similar way that Kodak and Blockbuster failed to adapt to the new technological age, Blomfield believes that banks are on the same path, stating that two banks would have failed already if it was not for the government bail-out in the financial crisis of 2008.

The rest of the panel generally disagreed with Blomfield with regards to the fate of banks, believing that traditional organisations will be able to adapt to changing consumer needs and will not just roll over and die. FinTechs remain reliant on banks, as does the global financial system, it was pointed out. And as Revolut’s Krieger noted, although the younger generations are looking more at the potential alternatives, “change will take a long time due to the older generations being stuck in their ways.”

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