Did the disintermediation train leave already from Platform 9¾?

September 2016 by Brian Cunnington

We commiserated with a colleague in the office last week after him rushing to get on a departing train and ending up 50 plus miles past his station and then having a rather tortuous journey getting home over 4 hours later than expected. It looked like the right train, was going in the right direction, leaving around the same time, but wrong platform and not stopping at the right stations.

Are we on the right platform? (no, not a play on words for payments platform – but maybe a future topic)

So what has this got to do with Payments? After reading some recent articles, I started thinking about the ‘tsunami’ of payments regulation that are setting currently parked, ready to depart off down the track at varying speeds. The industry is focussed on PSD2, APIs and Open Banking et al, with an increasing concern that the dates are somewhat, let’s say, challenging for incumbents. Arguably the newer PSPs will also be in a similar place as they are probably no longer working to a blank sheet of paper. A good summary blog here from Dave Birch echoes my own views about the dates and probably those of my colleagues and many others.

So, and continuing the analogy, everyone is looking to getting onto the right platform and grabbing these trains assuming they get to the right station at the right time before anyone else gets there.

At the centre of all these regulations and changes is the desire to enable straightforward access to customer’s accounts be opened up, with the resulting risk that PSPs could become disintermediated. The high level nature of the principles and lack of detail so far look like giving these new 3rd party providers, and other players, a headache, but it won’t take them long to work out how to work within the new environment. Indeed, a number of them are already out there (see Meet my new private banker.. Cleo) making a good effort using existing tools like Yodlee and Saltedge.

Has a train already left the station?

However, as an Apple fanboy, I was drawn, like millions of others to the recent Apple iOS and similar (forthcoming) MacOS upgrade. If you believe the PR noise, then Apple Pay (and the Android equivalents) is growing spectacularly.  Apple Pay is now being extended to web browsers.

The Naysayers will point at the simplicity of card etc etc, but where else do you get such an instant and informed transaction experience consistently? Extending Apple Pay (and presumably others soon) to web browsers (beyond the ‘in app’ route) and the Apple Pay proposition gets a whole new opportunity to further disintermediate the back end players. See here for a ‘how to’ article. It also seems to address the secure authentication requirements.

Of course, we’re still reliant on that experience being as good, if not better, than a current payments web experience and you need merchants to sign up, but if the level of abandoned baskets is reduced it feels like volumes won’t be far away. Always assuming that a plethora of acceptance methods can be handled by a merchant – I guess you can be sure that Apple will have considered that or someone is thinking about it.

Some of the things that we’ll certainly be talking to clients about during our more strategic payments discussions.

So, without even thinking of the PISP push payment possibilities in the post PSD2 world, the sheer growth of mobile/tablet growth indicates that perhaps the disintermediation train may already have departed from a platform that we didn’t even know was there…… or did we???

Meet my new private banker.. Cleo

It’s strange how you meet people these days – someone follows my twitter account and within hours (minutes once I have the links) I’m introduced to my new private banker… Cleo

Meet one of the newer aggregators in town. With the name Cleo, the service gets a persona that encourages interaction via SMS or Facebook messenger. In the world of brands and names, using a first name is unusual. Most of the competitive offerings out there are sticking to the ‘normal’ brand approach such as Money dashboard, Love Money Plans (paid for), ontrees (Money Supermarket) plus the overseas equivalents elsewhere; Numbrs (Germany), 22Seven (Africa) and MINT (USA).

Mind you, not using a personal name does avoid the challenge for a different name to say nothing of a gender challenge. Maybe the Atom Bank approach allowing you to name ‘your’ bank is a better bet?

Set up and initial access to your accounts is very quick and once completed the dashboard is updated very quickly. Clearly there will be the doom-mongers who worry about the security aspects, but I’m encouraged to see that the mainstream banks don’t appear to be blocking the services any more like they used to. So either confidence is rising or the background service (Yodlee, who support so many of these apps) is getting too clever to be stopped.

Either way, the implementation of PSD2 compliant access should provide both the confidence and framework to enable such a service (getting over the T’s and C’s issue of disclosing logins) – I say should as the EBA’s RTS proposals are being pitched at a much higher level of detail than I think most folk expected.

So how does Cleo work? The neat bit is the interaction through SMS and Facebook messenger. Very simple and quick.  Ask a question and an answer comes back… Do I like it? Yes I think I do, but I want it (or is it her?) to do so much more – with my data that is..

 

The potential for creating that something different with a form of intelligence to respond to a specific query is particularly interesting. Still a little way to go, (as have all the others) but it’s certainly on the right tracks. Of course, Facebook messenger may not be to everyone’s tastes and FB may be considered too passé these days?

The core features behind the innovative delivery are familiar and show that the fundamentals are in place with balances, transaction summaries etc. There are a few rough edges, for example faster payments are all categorised as transfers. The ability to ‘self-learn’ and develop will be super critical to Cleo’s success (and others for that matter).

Folk that have been in payments for as long as I have, will know that aggregation and the art of throwing everything into one basket has been around for a long time and is just one step.  It just hasn’t gained a lot of traction over here in the UK.

And this is where I might struggle. Not withstanding the need to change behaviours, I really cannot see how customers will get on with it, even with the simplicity of access through familiar points such as Facebook/SMS. “I can see all my accounts in one lump… Great!…  But, there was a reason for opening a separate account in the first place wasn’t there?”

So the next step has to be the ability to create the intelligent aggregation that really supports the slice and dice that some folk will want from their different accounts, but critically seen from one login. I’m tempted to remember the days of the now defunct Microsoft Money and their equivalents today – clunky because of the need to transfer everything in, but all in one place. The excitement is the potential of easily seeing everything together, if it is presented in the way that I want and need.

Any payments ‘person’ worth their salt will be able to rattle off the different pushes (EU and UK) that will aid or hinder these solutions – mostly they will aid – with flexibility and access being just two of the buzzwords that feature in the tsunami of regulation that is coming down the wires at the moment. These services, are in pole position for when that tsunami hits. Decoupling and disintermediation are another couple of buzzwords that also fall out..  Let us not forget the added potential to initiate payments.

Most PSPs are thinking about this of course, and some have even declared their intention to play.  For challengers, there is an obvious opportunity to get traffic and data. But this will only make sense if the customer sees the benefit and is prepared to get out of their current habits – “Why is this good for me and how is my life better because of it.”

Will customers warm to it? Well I remember well how contactless was received when I led the first UK debit card roll out.. Interest technically from early adopters but a largely luke warm customer base. A great deal of effort was required to get to where we are today. This will be a similar process I think. Trust will also be key. “Who is Cleo?”

Customer needs, how they are recognised, serviced and the value that they drive is what I and my colleagues talk to clients about on a daily basis so I for one am looking forward to it how this develops.

Feel free to chuck your tuppence in!

More power to your elbow Cleo… or whatever your name is.