Payments Ecosystem 5/5

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As we can see every day, the payments ecosystem is in a state of perfect transformation. There are multiple payment solutions and numerous start-ups seeking to create new experiences to facilitate payment of commercial transactions. I have shared some examples of different solutions operating in different locations.

In this post I shall try to systematise the definition of the Payments Ecosystem graphically and to identify its benefits for the Digital Economy.

I return to the definition Payments Ecosystem as the system where payments are made (pay before, pay now, pay later), which includes the form (physical, electronic, digital), the means (cash, cheque, card, transfer, direct debit) and the channels used (Shop/Kiosk/Branch, Call Center, ATM, POS, Web, Mobile) with the ability to influence the economic actors involved in the economy.

I will present some real examples to facilitate the understanding of the figure.

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Note on acronyms: SEPA DD and SEPA CT (Single Euro Payments Area, Direct Debit and Credit Transfer); Ent/Ref MB (Entity MB Reference); the remainder were mentioned in the article.

We all know examples of payment with cash or prepaid cards, debit or credit for which I do not consider it necessary to present real cases.

We also know the electronic options referred to, associated with a bank deposit account.

In this context, we emphasise the initiation solution of an electronic transaction from a phone number, the service MB Way, provided by SIBS in partnership with the Portuguese banks. Adhesion and the association of the phone number to bank cards are performed via Automated Teller Machine (ATM). In this way, all of us, as customers, can make purchases in establishments associated to peer-to-peer transfers (P2P), via mobile (app), providing only the mobile phone number instead of using the physical card, or providing the same data in card not present transactions.

The TPP deposit (Third Party Payment Service Provider) referred to in the figure represents, for example, the virtual account provided by PayPal.

With regard to digital options, I refer to the solution MB Net, developed by SIBS with the agreement of the Portuguese banking system in September 2001, to mitigate the risk of fraud when using cards in web environment operations. This solution allows you to create virtual cards, with user-defined limits, for use in online shopping or parking in digital wallets or mobile applications.

To illustrate prepaid applications I refer to the Portuguese apps EMEL (Municipal Enterprise Mobility and Parking of Lisbon) and JSC (Jogos Santa Casa) and the American Uber (US multinational urban private transport).

Regarding the wallets, I mention the well-known Google Wallet, Apple Pay, Paypal Wallet, Samsung Wallet, the Chinese AliPay and TenPay, the Japanese NTT DoCoMo and the Portuguese MEO Wallet and MB Way.

I refer to NTT DoCoMo (“do communications over the mobile network”), a subsidiary of the leading mobile network operator in Japan (NTT) which launched a mobile wallet supported on NFC technology (near field communication) and SMS (short message service).

The advantages for the digital economy resulting from an efficient payments ecosystem are obviously facilitating the growth and development of countries and the world.

The dematerialisation of the currency as a means of payment, has accompanied human evolution from primitive societies – commodity money, to the current society – electronic money and digital currency.

Consumers intend to enjoy access to goods and services devaluing as far as possible the act of paying per se, which is always “annoying”. Pre-payment solutions – vouchers, currency buffer (e.g. consumer card in private hotel network, casino chips), pre-paid applications, loyalty programs  – points, miles, cash back or others, are all forms of “putting in second place the act of paying at the time you have access to the goods or service”. By the path of emotional management of this duality consume/pay, trade/the economy are boosted and greater happiness is provided to the consumers.

The GDP of a country improves whenever the payments ecosystem improves in the place where their economic agents operate. Enhancing, facilitating and financing investment in the new technologies available should be a concern of the national and international authorities (with responsibility for Legislation, Supervision and Regulation), the banking and parabanking system (traditional banks and new Players) and the market itself (Merchants and consumers).

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Another great opportunity of the payment ecosystem is the monetisation of transaction information. Identifying who, what, where, when and how much is spent is a unique opportunity to create business leads and to enhance the income of companies by way of customer loyalty.

I would like to finish by highlighting the purpose of the evolution of the payments ecosystem, which aims to allow the whole population, with bank accounts or not, to be integrated in the financial world of payments and transfers. It aims to facilitate cross-border payments as if they were a local payment. In this way, anyone can buy and sell online, perform Peer-to-Peer transfers (P2P) and prepare future Machine-to-machine transactions (M2M Commerce).

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