Nowadays, everyone’s talking about innovation — about how important it is for the development of society and what a useful tool it is. But, what is innovation? There are many definitions, but they all have one word in common: change. We are so immersed in the state of constant transformation in which we live that we have lost the fear of reinventing ourselves. This, in turn, has allowed us to naturally integrate new technologies into our lives. Fintechs are a clear example of this — technology companies that have changed our way of understanding and providing financial services through original ideas, mobile apps or big data.
The Fintech revolution opens a world of possibilities for sharing economies, offering new ways of trading goods between individuals with multiple advantages for both parts. Such is the case of Bizum — a project based on innovation and collaboration that was born in an environment of digitalisation that has accelerated the process of transformation of people into digital users and that is strongly linked to the cultural and social trends.
Angel Nigorra, Bizum’s CEO, is here for the first edition of Executive Mornings, “The Fintech Revolution in Sharing Economies” —an EAE and APD collaboration—, to explore these ideas a bit further and explain to us how this digital transformation has affected the banking sector.
An idea with a long way to go...
Bizum is currently the app of choice for 13 millions users since it allows them to easily carry out money transfers through their smartphones and it’s available for all the big banks.For CEO Ángel Nigorra it’s very clear: “Cash is still broadly used, especially in Spain, which means that electronic payment platforms still have a long way to go and a lot of room to grow”.
Check-EAE: a statement that has been double checked (viewed and verified) by Alejandro Casero, Professor at our Digital Marketing and E-Commerce Master’s Degreeand founding partner of Houser & Houser. He agrees with the notion that electronic payments have a long way to go: “The use of cash is a matter of habit that is rooted, to a higher or lower degree, in different layers of the population. It’s interesting to study society’s behaviour in something as common as making payments”. It’s true that there’s a tendency to think that Spain is lagging behind regarding payment digitalisation. But, as Casero explains, it all depends on which country you are comparing it to: “In Germany, there are payment dynamics of large sums of cash that here in Spain would be unimaginable. On the other hand, in Estonia they have been using credit cards to make very small payments for 15 or 20 years now, while here we used to think it was crazy not to pay for a coffee using coins”.
Indeed, regarding electronic payments, Spain is a leading country. And when it comes to immediate money transfers, the world leader — not just thanks to Bizum, but also because of its infrastructure, as Nigorra confirms: “There’s no other country in the world that has its banks connected to instant money transfers”.
Check-EAE: check (viewed). Alejandro Casero explains that this is a trend that will only continue to grow in every country: “Banks can’t afford to stay out of this revolution in the core of their business — which is money management”.
Nevertheless, we must remember that people tend to be more conservative when it comes to payments. Ángel Nigorra states that “changing habits is difficult when it comes to our money. Therefore, patience is crucial”.
Check-EAE: double check (viewed and verified). Alejandro Casero agrees that it’s hard to change a habit as rooted and as common in daily life as making payments, even when it has come a long way very quickly in the past years. However, he underlines the fact that “human beings are both easily adapted and a creature of habit — even if it sounds contradictory. Those two sides of human nature anticipate success for these kinds of initiatives in the long run: once there’s a change in mentality, there’s no going back”.
According to Nigorra, there’s no doubt that “payments that are made using cards from banks —the choice for retail payments up until now— will start to decrease and give way to other payment methods that will probably be outside the realm of banks”.
Check-EAE: double check (viewed and verified). Casero insists on the fact that this is something that has been going on for years now —and on all sorts of services, even before the digital era— although it was taking place in very well determined sectors of society and population segments: “The battle is fought on the expansion of these models to the general population that is still using cash for most of their retail payments”. It’s clear, as Casero explains, that the services that use this technology will permeate quickly through all the layers of society: “Startups that are leading these processes will inevitably end up in the hands of banks or large corporations. It will be interesting to see who wins this battle — I put my money on the latter because they are much more global”.
… and with a glass ceiling.
A good idea may have a long way to go but this doesn’t mean that its journey has an end. Ángel Nigorra knows this: “It’s true that with Bizum we have a sort of glass ceiling in Spain, but it doesn’t worry me because we also have a long way to go with operations like, for example, displacing cash or spreading across electronic commerce”.
Check-EAE: double check (viewed and verified). Casero assertively states: “Right. It’s a long, long way. But just by getting a reasonable percentage of the layers of society that, because of age or habits, haven’t changed to electronic payments, we would be talking about millions of users carrying out tens of millions of payments per week”.
It's a journey that started with the simplest of ideas and that won’t stop growing now. Because it’s not necessary to make things complicated in order to reach the top: “Sometimes, the simplest innovation is the best one —explains Bizum’s CEO—. As for us, we only have a client database”.
Check-EAE: check (viewed). While simplicity is always the best option, Casero points out that privacy will be one of the central issues concerning the expansion of these new payment methods: “With that in mind, I think it would be smart to create a business model that doesn’t centre around commercialising the delicate data of its users. The value of the data that is generated by cross checking users and their payments is enormous, and its good use will be decisive to define the success of these sort of initiatives”.
On the other hand, it’s important to take into account that the european Payment Services Directive, PSD2, has regulated and opened the way for new competitors in the payments market by providing tools that make it easier to carry out this endeavour. In spite of this, Ángel Nigorra keeps his spirit intact: “Everyday, I see news of a new payment method that has come up and, in reality, the market isn’t going to absorb all of it. Users will have to filter and decide which one to choose”.
Check-EAE: double check (viewed and verified). Alejandro Casero explains that it’s in the initial stages of any upcoming technology that different models fight each other until one prevails and practically sets a standard until the next technological leap comes along: “Payment methods are in a state of emerging revolution at the moment and the market will end up choosing the most convenient one. The user, increasingly at the centre of this revolution, will be the one who will tip the scales in favour of the payment method that we will be using in the coming years”. Regarding the new Payment Services Directive, Casero thinks it’s good news: “It’s the democratisation of the financial market and that can only bring benefits for the users —and, ultimately, to society—, although it’s by no means a risk-free process”.
After all, and according to Nigorra, “Bizum is a reference model to keep in mind in the European Payment Initiative (EPI), even if my opinion may be a bit biased”.
Check-EAE: check (viewed). Casero agrees that Bizum is in a leading position, but he stresses that there’s still a long way to go: “There are many interests involved in this sector and two extremely large industries (banks and technology) lurking. It will be interesting to see how this works out”.
Whoever wins this clash of titans, one thing remains clear: in this ever evolving environment, Fintechs are here to stay — especially if they make such an impact as Bizum has.
An idea that, without a doubt, will have an impact on history.
