By Eddie Grobler, Executive Vice President, ACH Strategy, Integration, Products and Services, Mastercard
In recent years, the transformation towards digitising the payments industry has been all-encompassing, with the demand for immediacy and convenience being matched with advanced developments in safety and security. As our environment, behaviours and consumer expectations change, the payments landscape needs to continue to evolve with us.
Against this backdrop, and with our acquisition of the UK payments-systems company Vocalink now complete, I reflect back to when talks between both companies began in 2015 and look ahead to what’s around the corner. We have heralded a major milestone for the rapidly evolving international payments sector, providing a platform on which innovation in payments can thrive.
Combined strength
The Mastercard acquisition of Vocalink is the first true combination of a card-based payments network with a bank-account-based payments business. Together we will be able to deliver a number of benefits for our customers through best-in-class technology. Our aim is to give people, governments and businesses payment choices, so they can pay the way they want in any given scenario. Overlaying the product opportunity with additional services for banks not available today in the bank-account-based payments space, such as fraud analytics and data-driven consulting, marks a strategic deal that has both clients and consumers at its centre.
Shaping the future.
But this is more than a strategic acquisition by Mastercard. Rooted at the core of the union is innovation; the ability to be swift and create state-of-the-art technologies together that not only respond to customers’ needs but also shape the way that they manage their money with greater precision. While the public debate around a cashless society continues, Vocalink’s advances in real-time payment technologies continue to quietly shape a future beyond cash and cheques. Influences driving cash’s decline are a combination of smartphone use (there are enough smartphone subscriptions for nearly half of the world’s population), the growth of e- and m-commerce, biometrics, digital currencies, social media, the rise of P2P (person-to-person) providers and, most of all, consumers demanding faster settlement periods. After all, people live their personal and business lives transacting in real-time.
The coming together of Mastercard and Vocalink will provide consumers, organisations and governments across the globe with more of these options and opportunities to transact electronically—and transact fast. Imagine the impact as people from Asia to the Americas all pay bills and deposit monies instantaneously; as small businesses effectively manage inventories and their cash flows; as banks offer true added value to their customers; and as economies and governments benefit from fluidity and traceability.
Changing demographics
What cannot be ignored is the tremendous impact that Millennials have had, and will continue to have, on shaping the payments sector. We would argue that the payments sector has been slower to respond to Millennials than many other sectors such as retail and entertainment, but it’s a generation that will change the face of banking and payments beyond recognition.
We have already started to see this impact through the way that they have embraced online and mobile banking enthusiastically, doing the majority of their banking this way. In addition, we also need to recognise that there are international differences when it comes to financial attitudes and payment behaviours amongst this group. True insights and research must be continually woven into our design process, and this will govern future development of products and projects from the combined expertise of Mastercard and Vocalink. For example, there is no doubt that the US is behind other mature payments markets when it comes to the take-up of new payments technologies—even amongst Millennials. Other national differences include:
- Only 6 percent of Dutch Millennials use cheques vs 70 percent in the US;
- 15 percent of Germans use cheques vs 28 percent of Italians;
- Italian Millennials show themselves to be more open and welcome to advances in payments and arguably more willing to adopt mobile payments;
- 88 percent of British Millennials receive their salaries by bank transfer, with just 6 percent being paid in cash.
With behaviours and barriers shifting so dramatically among the world’s first truly digital generation, our combined insights into the payment behaviours of the Millennial generation will enable us to craft solutions to support tomorrow’s consumer and deliver new, relevant and engaging real-time payments ecosystems.
Unsurpassed global insight
For many millions of people, access to a faster bank-account-based payments solution couldn’t come any sooner. We have seen a surge in demand for real-time payments across the globe, and know that more people will now be able to access the technology and benefit from the knowledge and experience that we bring from our previous global work. For example, Vocalink recently introduced mobile payments in Thailand through our Immediate Payments Solution (IPS) to act as a strategic platform encouraging payments innovation. In Singapore, we introduced the FAST service—the first national real-time payments system outside of Europe to utilise the ISO 20022 standard and facilitate electronic-data interchange between financial institutions. These capabilities make Singapore one of the world’s most advanced payments markets because banks operating there are no longer constrained by processing limitations while competing in the payments-products space. And, at the end of 2015, The Clearing House selected Vocalink to help implement its plans to develop a real-time payments system in the US, which will eventually connect with other US-based systems to link all the nation’s bank accounts. It is poised to be the most comprehensive real-time payments system in the world.
Vocalink’s technology and track record combined with Mastercard’s footprint and near-ubiquity in delivering safe, simple and secure electronic payments brings limitless potential for other markets around the globe.
As we start a new journey in this union, we acknowledge that we are heading for an exciting future together with many unknowns, where the pace of change will only continue to accelerate. However, we believe that the newly expanded Mastercard can spur a level of innovation across the globe not seen before in this sector. As Michael Miebach, chief product officer at Mastercard, says: “This acquisition is a first for the industry, and it cannot get more boldly transformational than having two technological powerhouses combining their strengths to redesign the sector.”
References: United Nations’ International Telecommunication Union. It estimates that in 2015 there were 47 mobile broadband, or smartphone, subscriptions for every 100 people. https://goo.gl/lbuUsz Ipsos Millennial Research on behalf of Vocalink. https://goo.gl/ti5cdK