Visa: Innovation Helps Shape Thinking

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28.12.2017 12:21:44 Page views 681 views

PLUS Magazine discusses how the development of fintech is influencing the payment industry, the transition to a non-cash economy and the creation of a new payment ecosystem, as well as the prospects for using biometrics, machine learning and blockchain technology with Karl Tlais, Senior Director, Innovation & Strategic Partnerships, CEMEA, Visa. Anton Krasnenkov, Senior Director of the Department of Innovations and Strategic Partnerships at Visa in Russia, also took part in the conversation.

PLUS: How do you assess the overall development of the fintech sector? How big and diverse is the startup market today? Would you say that the approach to creating accelerators and sandboxes is still effective?

K. Tlais:The fintech sector at themoment is very healthy. I think there is a really broad focus right now on how the corporate world engages and collaborates with the fintech to help digital transformation. And for us in terms of the dynamics of the market, we see huge potential in working with fintechs to help us solve problems with our top tier clients, whether it be issuers or merchants. I think it’s very important for Visa that we have very strong engagement with accelerators and today we have partnerships with fintech accelerators and incubators and that’s really an important avenue for us to help mentor, coach and potentially support through investment opportunities down the track.

PLUS: What innovations excite the modern consumer? How does customer experience help Visa develop existing products and offer new ones?

K. Tlais:So if you think of today, for us, consumers are looking for efficiency in how they make payments and transactions. And the way that we achieve thatis to innovate at the point of sale and to solve the problems for consumers around the acceptance area. So not only for consumers but also for merchants. So I think if we get that right and allow for the use of technology to help solve those problems, we can then achieve excitement and satisfaction with clients and consumers. I think today with the proliferation of mobiles (there are about 5 bln mobiles out there on the market), that’s the initial sort of area of entry to leverage. Over time it’ll become contactless, seamless. I think for us, innovations help us drive solutions towards solving those problems. In terms of developing products and enhancing products, we do this day to day at Visa. So we are always looking at enhancement opportunities.Innovation helps us shape thinking towards new products and services that may enter the market.

PLUS: How do you generally assess the development of digital channels? What trends can you highlight in that area?

K. Tlais:I think first and foremost, it’s really taking the consumer experience and looking at how that is going to look and feel in terms of the journey of the consumer in future cities. So if I take what we’re doing around digital in terms of transformation with the merchant experience with consumers, there are various different channels of engagement that happen through that experience. So whether it’s an e-commerce platform or whether it’s using messaging or whether it’s using mobile wallets, we have to think about it from the context that there are multi-channels.

I think if we take these discussions today around what WeChat has achieved in the Chinese market and the impact that has had from a mobile messaging aspect on the local players and taking a huge amount of market share from a digital transaction volume point of view. I think that’s something we need to be conscious of. That is one trend thatwe can’t ignore.

A. Krasnenkov:The emergence of digital channels ushers in a true revolution in banking. While before acceptance was limited to physical infrastructure, i.e. there needed to be a point physically connecting to the bank and making it possible to put the payment through, now digital channels, in essence, make payments omnipresent, with no practical restrictions in terms of physical location in the majority of the world. So payments stop being an “action” and are becoming part of the things people do every day. So certain payments can become automatic given certain actions. Take taxis as an example. You provide your card information once and then for each subsequent journey the system checks that it was your journey and then debits the amount from your card, thereby doing away with the need for you to be distracted by making a routine payment each time. This is a trend that has emerged only fairly recently and, if we think about, the Uber model appeared very recently and is now being scaled en masse to virtually all other businesses.

Another trend is the emergence of wallets that allow the same purchasing experience. Visa CheckOut(not available in Russia at the moment) gives you an identical checkout experience when shopping online. There is no need to fill in a profile in each store. On the one hand, our solution speeds up the process and makes it more convenient for clients, and, on the other hand, it boosts sales for the merchant.

PLUS: Speaking about the internet of things and machine learning. How quickly will these trends shape the new financial ecosystem?

K. Tlais:I think that in the short term or medium term that will be the trend. If you think of the concepts around Internet of Things and projections around connected devices – upwards of 20 bln plus connected devices by 2020 –now, for us, where we see the opportunity is, each device, whether it’s a wearable, whether it’s a mobile or whether it’s a ring, it doesn’t matter, if it’s connected, it can be ready to process a payment or at least at the point of sale, allow for a payment transaction to be made. So we have a program called the Visa Ready program, which allows us to onboard different players to certify them for being Visa Ready. So I think for us it’s a big focus and in medium term, that is going to be where things are moving.

PLUS: What are the prospects of using biometrics? How will this technology change the payment market in the future?

K. Tlais:I think biometrics is becoming, let’s just say, more readily available to the payment market. And it will eventually be there. And there’s a lot of dependencies behind it, because at the moment the hardwareOEMs, whether it’s an Apple, whether it’s a Samsung, they are releasing their mobile devices with the embedded iris [and]facial recognition software and hardware. So by default, that’s already there now. The question is, are the applications able to allow for you to process payments backend through that. So single sign on - “yes”, but in terms of biometric identification for whether it’s mobile or whether it’s what we are showcasing here today, there are other dependencies: is there a national ID concept that exists for example?Who owns that data and where is it sitting? Is it sitting with the relevant government agency or is it sitting with the issuers? Where is it actually sitting?That’s the key. And is it being made available? So, what you are starting to see is that over time that will probably be made available if there are countries where this happens. So whether it is in countries which have national ID cards or not, I think, eventually we are going to get there. But there is a lot more involved. There is the public-private sector working together to make it happen vs.us just trying to push it from a technology angle. You do need regularly supportand probably multiple areas within the government to support.

PLUS: Market experts say that the development and implementation of blockchain technology in different spheres of the economy could become a real problem for international payment systems. To what extent are these fears justified?

K. Tlais:Blockchain is certainly a buzzword that is out there, I think, earlier today you would have heard people calling it even a bubble or in other cases I know David on the panel with me was saying it could solve all the world’s problems. I don’t know if it could solve all of the world’s problems, but it could certainly solve challenges around key processes where you have a number of digital signage opportunities vs. going and doing things through a paper-basedprocess. SoI think its implementation in the economy will gradually take effect over time. I think a good place to start is through the government services area. I think that’s really where there’sa lot of processes to be followed. I think that’s where you basically begin. Nowin terms of the payment industry, it’s already starting to happen. There are fintechs out there like Ripple, who are already working with banks on cross-border. And I think there’s a lot of opportunities there that will start to evolve through that. We see blockchain as being a technology which we need to be a part of. So we have made investments in fintechs around that. We made an investment in a company called Chain (chain.com) and that investment is something which we are obviously reviewing in terms of how that will impact the blockchain space for us. But it’s also a recognition that we need to be part of that, in order to be able to innovate and support the industry now. And I think the financial sector itself, in general, will digitize a lot more rapidly in certain areas by adopting blockchain.

PLUS: What are the key reasons for Visa to participate in Finopolis?

K. Tlais:If we are not present, if we are not part of events such as Finopolis, which bring together the fintechs and the corporates and government, in a way we can all better understand what we all bring together to the table as an ecosystem and learn from each other, it’s difficult then to innovate. And I think for us, we are there engaging and very closely aligned with our strategic clients.And we’re there now and we’re developing huge engagements with our fintech communities here and abroad. And I think a forum like Finopolis brings it all together. And the relevance itbrings to the Russian and regional market here, I think, cannot be underestimated. And I think that needs to be something that remains constant for us and obviously for you guys.

A. Krasnenkov: At FINOPOLIS 2017 we announced the launch of an innovation studio in Moscow, in Russia, and spoke about how we plan to operate. Such innovation centers have been set up and are operating around the world, in Dubai, London, San Francisco and Singapore. The main focus will be on developing innovative solutions. At the forum it was noted that there is a shift from the project-based approach to a client-focused one. From the side of banks and merchants, there are some fairly challenging requests that today it is does not make sense for one group of specialists to tackle. Big tasks need to be broken down into several small groups to resolve them together. This is things like using artificial intelligence, the internet of things, biometric technologies and so on. Alone, or even together with a payment system, this is not doable because you will need to involve a large number of external partners anyway. Also, coming up with ideas and building user cases for new concepts of how to use certain technologies requires openness. Here we are ready to work with fintechs and universities to involve students in developing solutions. We are focused on looking for new interesting and promising user cases and plan on our innovation center becoming a platform for creating such solutions. It will be an end-to-end platform – from identifying a problematic area or opportunity to formulate a certain concept or prototype, through to creating a solution. Naturally, when needed we will draw on the expertise of other innovation centers and also share our own knowledge, given that we have one of the most developed markets in banking and that there are probably cases that we have developed in Russia that would also be interesting abroad.

Journal:  PLUS Journal 10 (245) 2017

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