SIA Expo is regarded as the most up-to-date and informative event in Italy on the payment and financial system industry at a national and international level. Valentina Romeo reports on the current challenges and achievements in electronic payments from the peninsula
In its 8th year, SIA EXPO International Finance & Payments Summit in Milan couldn’t be more clear and insightful on the role Italy has been playing in the European payments and financial systems over the last few years.
Despite being a well-known pioneer in the payment systems, especially in cash and prepaid, Italy is still resistant to electronic payments. The necessary need of trustability, innovation enabling and supporting, and simplicity in electronic payments, were the core debates that SIA, the Italian financial infrastructure provider, brought to the table.
Never stressing enough on the key concepts of reliability, efficiency and innovation, all the discussions held in the one-day event opened up the question on how much Italy has done so far and what the country still need to improve in the immediate future to cope internationally, and with SEPA’s official implementation date around the corner.
In his opening remarks, SIA’s Chairman Carlo Tresoldi, stressed on the role of regulators and banks, a fundamental gateway to keep clients on the loop of payments’ innovation and security.
Tresoldi made it extremely clear that improving digital innovation will be key to economic growth. "We cannot rely on exports alone to bring about a recovery in Italy," he said.
"Central banks need to make users sure and safe about new payments instruments," he also said, also underlining the fact that users need to be well educated to make sure they fully embrace payments’ innovation.
A big remark on users’ education and change in the culture regarding electronic payments in the peninsula has been a central topic for Banca Mediolanum’s CEO Ennio Doris, who followed Tresoldi in a keynote address.
"We are in front of an unexplored future," he began, "We are facing a change and need to react in the short term."
What Italy is seeing now is not only a technological change, but a big change in people’s mind. Technology is like an Arab spring," he added.
Doris expressed his ideal vision of how e-payments and developing technology in general are set to succeed in the country. In a world where mass information is not always accurate, technology needs to be always accompanied by a quality in the service.
"I believe in the technology-human being dualism. It is the correct answer in this world," Doris said.
He stressed on how the Italian banking clientele is changing and becoming much more knowledgeable and involved in the technology developments, a revolution which implies a higher quality customer service.
As a support to his statement, Doris explained how vital the involvement and the professionalism of the call centres at Mediolanum is, a group of trained and informed staff, who has acknowledged the higher standards of customers’ needs.
"Clients are like on a stage. The importance of the relationship with quality and well-prepared professionals is something that will never change whatever the technological revolution might be" he concluded.
One of the core topics that also emerged from SIA EXPO 2013, especially in its preliminary sections, is the role the global financial crisis has had in the technology development and its contribution in accelerating and stimulating the change.
It has been suggested indeed, that the asymmetry in the payment industry creates, at the same time, new possibility and discoveries.
"In difficult times, businesses have always found great solutions and inspiration towards innovation," Doris commented philosophically. "
Internet has made the revolution in the relationship between customers and banks. The effort in solving the crisis cannot be unsuccessful at the end of the day," he concluded.
From stability to customers’ protection
The first panel discussion brought together a group of key representatives from the European Central Bank and the Bank of Italy to discuss ‘digital money’ and the transformation of the European financial marketplace.
Joining in a live video conference from Frankfurt, EBC director of general payments and market infrastructures Daniela Russo started the panel addressing the topic of e-payments’ security.
"It is not that e-payments are insecure, but that the risks they carry are different," she explained
Russo added: "E-instruments also provide better risk mitigants" than their paper alternatives. She mentioned Chip and PIN technology as a safer product that has dramatically reduced card frauds. However, since the investment in security around electronic channels is constantly needed, the role of central banks is going to evolve, according to Russo.
Although there are still some European firms not fully migrated – or slowly transferring – to SEPA, generating the so called ‘big bang’ issue, there have been positive outcomes in security matters. Even if there are not many figures related on frauds for e-payments, Russo said aggregated data reported that since SEPA standards have been introduced, international payments’ frauds have diminished from 27% to 12%.
Russo also said protection of personal information for online payments has seen great results especially with dynamic personal data through the use of interchangeable passwords.
According to Emerico Antonio Zautzik, Banca d’Italia’s (Italian Central Bank) managing director central banking, markets and payments system area, SEPA is a "completion of the single market at the service of the payments system," and it is going to facilitate competition in the Italian payment’s sphere.
"Italy must eliminate rigidity. The country is late, but this will be an advantage," Zautzik said. Adapting to common European standards will be benefiting consumers, whose trust in e-payments has historically been quite scarce, especially when it comes to costs.
"Cost of cash is not immediately visible. With SEPA, Italian consumers will still see costs but, thanks to technology, they’ll see lower fees," he said.
However, data related to Italian banks migrating to SEPA are still underperforming compared to the European average. Even if Italian banks are actively informing customers about SEPA with no particular problems occurred in the migrations, banks, for example, reported not even 1% of direct electronic debts, according to Zautzik.
Optimism is key, but new challenges emerge
In the following round table "From cash to smartphone -The digital euro that everyone likes," SIA discussed the results of a study conducted in cooperation with ISPO Richerche, founding a successful 94% of Italians liking contactless mobile payments.
SIA has been testing a near field technology (NFC) payments hub in conjunction with banks and telcos, allowing consumers to make contactless payments in a variety of situations, including shops, taxis and public services. The positive results of the study suggest Italians are willing to adopt mobile payments, especially with amounts less than 25, appreciating its added value in speed, practicality and convenience.
Still, the issue with Italians married to cash is ongoing, round table speakers outlined, since there is 400bn of cash in the country.
"The results of the experiments over the past year with various banks and Telcos confirm that mobile payments arouse great interest and can change behaviour and habits," SIA’s CEO Massimo Arrighetti, commented.
"The gradual process of eliminating cash is under way, also due to the new generations of users, and the mobile phone can certainly make an enormous contribution to the development of new payment methods and other services useful in our daily lives. However, it is necessary to create real situations in which to use them and to promote collaboration among all the players involved."
The study has pointed out the lack of technical knowledge from a large number of merchants, such as their limited training and familiarity with mobile payments (56%), and technical problems (32%). On the other hand, among the inefficiencies of the technology, the study also found a poor national distribution of contactless POS terminals (29%).
As a result, Arrighetti guarantees that 80% of shops will be equipped with the necessary technology in one or two years, against the 60% he predicted last year during the same event.
Marco Tarantola, head of BNL’s retail & private division, also urged for concretisation of contacless and the need of solid but homogeneous rules for every provider, especially banks, in order to thrive the ecosystem. After all, banks as institutions are the only players that create trust in Italy, he said.
"There is a great interest and desire to use mobile payments, but it is essential to find other uses," he suggested in his opening speech. "We need to define a larger ecosystem of added-value services for e-wallets and we need to define what is included in that."
With 2.5m contactless cards and 170,000 POS contactless in Italy, Tarantola also asked for aligned investments from institutions, in which technology issuing mechanisms should converge with added value mechanisms.
No more barriers
Electronic payments in Italy have definitely encountered some obstacles and others seem to be on the way. Apart from finding homologation in standards from operators, one other barrier is created by costs of transactions.
Coop Italia’s (a system of Italian consumers’ cooperatives) president Marco Predoni said that, although mobile devices costs are low, transactions’ costs on mobile payments are still too high (2-3%) for merchants.
"We need to show our capacity enhancing the dialogue between retailers and consumers. This is an occasion for Italy." "If we don’t do it, someone will do it for us," he also added. The only way to lower costs is to keep promoting electronic transactions: data from Coop say that 50% of transactions are made by credit or debit cards, but only achieving 80%, cost could be fixed, according to Predoni.
Interestingly, Predoni also said mobile technology could be a powerful marketing instrument, as it can map people on their most common transactions, tracking and evaluating consumers’ purchases and their market’s behaviour during their everyday activities. "The future of mobile payments will be the info interchange with customers," Predoni predicted.
According to him, operators are the ones who choose how much mobiles can affect their lives. "Mobile can be an ally or a dictator for citizens, it is their choice. There’s a clear need for more transparency in the relationship with the mobile tool, as well as going further to just connecting with it."
Quite unexpectedly, Predoni revealed that the average age of smartphone’s user among Italian consumers is 43, with women (55%) resulting more experimental in their purchases. This challenges the common view that only the young generation is capable and interested in using mobile technology.
The intervention form Italian Revenue Agency’s deputy commissioner Marco Di Capua was also centred on e-payments and their barriers. He said that tax issues and fiscal payments should not be a further obstacle, but leverage in promoting mobile transactions.
Because being complicated and time consuming in most of its procedures, revenue operations must be mediated by technology and by doing so, they will provide practical advantages for citizens.
"It is interesting to see that even the Revenue can contribute to this: we have a complicated tax system – the state and local authorities are willing to eliminate this complexity, saving money and boosting transparency," he explained.
CEO Francesco Caio from the Italian Digital Agenda, followed up Di Capua: "Digital identity is a fundamental pillar to increase trust identity".
He optimistically concluded the round table discussion by saying that if digitalisation is to make the country competitive using the right regulation, Italy is going into the right direction.
Summing up the panel, SIA CEO Arrighetti said: "Italy must go digital and there is no doubt that the country has all the skills necessary to achieve this goal."
By 2014, there will be 14m smartphones in Italy. A well managed and controlled ecosystem could just be enough to guarantee the country a higher more successful position among the other players in the industry.