Finextra’s Emily Horler speaks with Kriya Patel, The Bancorp’s Managing Director, Payment Solutions – Europe, at Money20/20 Europe about the differences between and the challenges faced by prepaid in both the United States and Europe.
EMILY: Hello, and welcome to Finextra. I’m Emily Horler and I’m here with Kriya Patel of The Bancorp. And we’re at Money20/20 in Copenhagen. Thank you very much for joining me, Kriya.
KRIYA: Thank you for the invite.
EMILY: Europe is building strong momentum in the fintech space. What needs to happen to sustain that momentum?
KRIYA: I think there are two or three signigicant items that come into play as far as I’m concerned. I think that one is there needs to be support from a regulatory point of view. Europe has created a great foundation, especially if I look at my sector, which is fintech, broken down into the payment sector, specifically. There’s a lot of incubators, hubs operating out of the UK and spread out across Europe now and it’s very much around putting subject matter experts and mentors in front of these businesses to help accelerate their growth. And I think tapping in to that key expertise - people who already understand the regulation and the importance of it and how best to facilitate that in terms of new product streams in the financial services sector - is key. The second thing is investment, because these guys, in order for their businesses and fintech strategies to grow, need money to help drive that forward. At the moment it’s great to see that Europe is genuinely looking like a great hub for supporting fintech, and what we do as a business very much help facilitate that. So we’re working with MasterCard, for example, in London, where we’re working on an incubator called The Catalyst, with the Emerging Payments Association, and that’s really driven around bringing in payments-specific technology companies and solutions providers and helping them with 250, 300 payments experts to mentor them, give them good advice, help them with their strategies, connect them for business opportunities and things like that. So I think that the money piece is a key aspect; the second thing is having the right support structure to take advantage of the favourable regulations here in Europe.
EMILY: What are the key differences between the US and the Europe financial tech industries?
KRIYA: It’s an interesting one. If you think about the acceleration with investment in fintech - that’s always been at the forefront in the US, especially on the West Coast and the Silicon Valley area and there’s a lot of funds that have been set out specifically to invest in and develop that out. But actually, from a technology viewpoint, Europe has been pretty much accelerating in its growth, again from my field of awareness, which is predominantly the payment space. We’ve had chip and pin here, we’ve had contactless, the adoption to move towards cashless, the elimination of cheques – a lot of those aspects have been here and been well established - and people are building solutions on the back of that, especially in the fintech space. The technology, I think, is far more advanced in Europe than the US; the investment is far greater in the US. But actually, I think, it will be interesting to see how those companies cross the pond into Europe. I think that generally that’s where the significant opportunities arise, because the technology is still in the catch up phase as far as I can see it in the US: the terminals for payments, and the infrastructure for payments need to kind of mature over there away from the traditional mag-stripe piece when you think about card payments. There’s still a large cheque market there and all of that’s disappeared here. Most of the partners that we work with, in particular in this industry, show a keen interest to say, “We want to fix the problems of the traditional banking structure - we can leverage off that because it’s been tried and tested. But we want to find innovative ways to find solutions to that, whether that’s in the B2B space whether that’s in the B2C space.” Where I think in the US, we’re fixing solutions but we don’t have the same level of infrastructure – we don’t have faster payments, we don’t have real time movement of funds. Regulatory-wise, I think there’s still an element of catch up, which our regulators here in Europe have been forced to do because the industry’s moved on at a rate of knots and they’ve kind of had to make sure that they provide a framework to support that. So I think that’s probably the key difference: the technology is probably more accelerated in Europe, but the investment and the opportunities and the sheer number of companies seem to be larger in the states.
EMILY: And how do payments habits among consumers and businesses differ among Europe and the US?
KRIYA: It’s an interesting question. I think behaviorally, if you look at it at a product level, if you’re meeting the same solution - whether it’s a payment solution or whether it’s an interaction with consumers - I think they’re very similar. If you look at some of the new entrants into the banking space or the people who are trying to do things differently like the Simples of this world or the Movens, what they’re trying to do is to build a different kind of relationship from a financial services point of view with the customer. And I don’t think that that differs greatly in the US and over here. What I do think is interesting is the types of relationships that you run - 90% of our portfolio in Europe today is B2B. Ultimately who we’re servicing is the ‘C’ but we’re doing it through a business to business relationship. I look at the US and we’re often doing as much B2C as we are B2B. So from my environment I’m looking at that and think that strategically we’ve made a desired approach in the US to go into that B2C market, but here in Europe, the way we operate is predominantly B2B. We want to do all the technical, the compliance arrangements & requirements and make sure that they’re sound and done in the best way and allow our partners to do the more creative aspects about the interaction - they understand that interaction with the customer far better than we will because they’re their customers. So I think that that’s the interesting thing - that that stands out. I don’t think there’s a significant difference between the two markets, but what I do think is there’s just the sheer different ways that in Europe, because of the technology and the infrastructure and the regulatory regime, that interaction can happen in so many more different variables than we witness in the states today. But it will happen in the states as well, I just think the infrastructure needs to catch up.
EMILY: Kriya, thank you very much.
KRIYA: Thank you.
EMILY: And thank you for watching.
The opinions, findings, or perspectives expressed in this content are those of the participants and do not reflect the official policy or position of The Bancorp, Inc., its affiliates, or its or their employees.