EXCLUSIVE: ‘Pa¥ing in p€rf€ct harmon¥’ – Gabrielle Bugat, G+D and Andrej Vckovski, Netcetera in ‘The Paytech Magazine’
As we hover on the brink of the latest attempt to bring real-time settlement synergy to the Eurozone, we asked two leading industry players – Gabrielle Bugat, who heads up G+D’s Card & Digital Payment business, and Andrej Vckovski CEO and Co-founder of Netcetera – if it’s really possible to unite the world’s payment systems (among other burning issues!)
“I don’t see convergence coming any time soon,” says Gabrielle Bugat, who heads up G+D’s Card & Digital Payment business. Well, you can’t put it plainer than that.
She is referring to the likelihood of the world’s payments systems agreeing on a fully harmonious solution for real-time, cross-border transactions. And she’s sceptical, not because the technology isn’t capable of delivering it. But because, as she puts it, ‘we’re so different’.
“I was once in the same room as someone from Finland and someone from the US and, even though they were both speaking English, they were not speaking about the same thing when it comes to payments, because one country is credit intensive and, in the other, they say ‘we can’t spend what we don’t have’. Just with this sentence, you understand that convergence will not happen.”
Her comments come as the EU – on the face of it, one of the most homogenous payments regions in the world, ‘united’ by a common currency – is on the cusp of trying to achieve what the Single European Payments Area Instant Transfer (SEPA Inst), the Jean Monnet Project and numerous other payment alignment schemes have tried and failed to do in the past, albeit in a different way. The European Payments Initiative (EPI), due to go live next year, is just the latest attempt to create a one-for-all settlement network, compatible with all current and future transaction methods in every member state.
More than the well-known challenges – marrying up diverse systems, platforms and regulation – the fundamental barrier to harmonisation is culture, believes Bugat: the simple fact that the human beings who are the end-users of payment networks have very different needs, and deeply embedded views of what good looks like when it comes to meeting them.
That doesn’t mean we should all give up and go home. Rather, her vision is for global payment flows that, for want of a better phrase, talk the same digital language, while allowing for different accents.
“The challenge is to develop common platforms on which we can have local customisations, so that every country can keep its cultural specificities, while at the same time benefitting from the latest and greatest technology – particularly technology that protects against fraud because fraudsters will always be innovative in attacking systems,” says Bugat.
For her, payments are not just about the mechanics of a transaction; they have a more emblematic role – reflecting the nuances between geographical populations while enabling them to interact and collaborate. That is where the true innovation comes in, she believes.
“In the payment technology business, the world is our sandbox. This is what excites me, because every country is different and can bring a new set of challenges; it’s technology meeting culture and habits,” says Bugat. “You have countries that have leapfrogged from no infrastructure to a really advanced one, countries where the challenge is dealing with very old legacy, some might rely more on credit, others on debit.
“With G+D being international, I’ve worked on different continents, and seen the diversity of how people pay. It’s great getting everybody to rethink and transform the technology, bring new innovation to the field – sometimes, even, presenting an innovation that was thought of in one country to another, say the Philippines to Canada. This kind of collective payments intelligence is what really inspires me.”
So, how might a balance be struck between the uniformity needed to smooth transaction flows and the cultural differences we cherish? Andrej Vckovski, chief executive and co-founder of Netcetera, is more optimistic that we will see convergence of global payment schemes – but he agrees with Bugat that, instead of vanilla offerings, they will be more neopolitan.
“Countries want to be global players but then continue to have specialities and divergence locally, which is what makes our life interesting,” says Vckovski. Their two companies entered a strategic partnership last Autumn, with G+D becoming an investing shareholder in Netcetera. It will provide funds to fuel Netcetera’s global expansion while building on G+D’s own capabilities within its four core areas of payment, connectivity, identities and digital infrastructures, leveraging on joint offerings with Netcetera and its transaction security software tools.
Bugat oversees e-payments business and initiatives for G+D, a leading payments security provider. Her responsibilities include issuance of payment cards and digital credentials for digital payments, and technologies like authentication or identification, designed to ensure diverse payments requirements are delivered seamlessly and securely.
“G+D has been in this business of securing assets for over 160 years now. It started with securing bank notes, then extended to communication assets, cards and payments, and will eventually include the digital euro that we will have one day,” she says. “We want to be a one-stop shop for payments and are ready to expand our offering, partnering with technology companies like Netcetera.”
The software specialist was founded in Switzerland and is still headquartered in Zurich. It now employs 700 worldwide, providing B2B2C software to companies that then use it to interact with their customers in segments as diverse as banking, publishing and payments, the latter being a particular specialism.
Vckovski gives his take on the defining changes to the payments industry in recent years that are providing both companies with an opportunity for collaborative growth: “The obvious one is the growth in payments happening online,” he says. “Cryptocurrency is another. But, for me, the key thing is the introduction of tokenisation, because it takes the card number away from the payment process, which has been tedious, for decades, for everyone providing online security.”
Bugat agrees that tokenisation has dramatically improved the payment journey, while maintaining a high level of security that doesn’t frustrate the customer experience.
Simple is beautiful
G+D offers a number of unique tokenisation solutions in combination with solutions for Secure Customer Authentication (SCA) legislation under the revised Payment Services Directive (PSD2). Its joint offerings with Netcetera also enable them to implement 3D Secure (3DS) or its latest iteration, 3D Secure 2 (3DS2), for payments, by allowing users to provide two out of a possible three authentication requirements: something they are, like a biometrically collected fingerprint; something they have, such as a mobile phone; or something they know, such as a password.
With tokenisation, consumers can have as many surrogate, or tokenised, cards as they want, store them in digital wallets, or with merchants, and manage them dynamically, with the ability to turn them on and off at will. One solution enabling this is G+D’s recent innovation, Token Cockpit, which puts customers in overall control of their payments by giving them a single line of sight on all the disparate payment tokens they have stored with providers of retail goods, entertainment and services.
“The priority was to make transactions easy and smooth, safeguarding the customers’ payment credentials and also allowing them to authenticate themselves in secure, convenient ways when authorising payments,” says Bugat.
Tokenisation demonstrates that the most beneficial changes aren’t always the most dramatic, observes Vckovski.
“People say ‘disruption is the key, that’s where the big money is’, but tokenisation disproves the case,” he says. “It leverages a lot of pre-existing concepts and technology under the hood, which means it can go out to the mass market because there’s no need to roll out an entire new system to all merchants.
“Extending what’s already there with good, new ideas, is a path to success. That means not reinventing all the wheels within the machine, only those that differentiate. That’s what I really like about the new European Payments Initiative. It said ‘OK, the settlement and the clearing part of the transaction consists of a lot of steps. So, we’ll try to make things afresh that make a difference, but keep the legacy and tradition, to achieve a good mix.”
Bugat adds: “While it might be every payment technologist’s dream to create infrastructure from scratch, the truth is it would be way too expensive and people may not be ready to change habits overnight. It’s about building layers, adjusting, adapting on top of existing infrastructure – and, I agree, the EPI is a very good example of that thinking. It said ‘what are the habits of the infrastructure that’s already in place? We have point-of-sale, we have people used to having something in their hands, or a mobile in their pocket, so how can we leverage on that infrastructure by adding more software and design that can bring new use cases?’.”
She describes such a strategy as ‘disruption within evolution’. And, for her part, there is only value in an innovation if it gets used.
“At G+D, We’ve seen a lot of innovation, a lot of good ideas, but not that many that went mass market. It comes down to how customers use whatever we design. Sometimes, you might introduce innovations that don’t work, or which aren’t adopted, so it is a constant adaptation. The key, for a trust industry like banking, is to be sufficiently agile. Over the years, we have had to anticipate and stay ahead of customer habits, but, when it comes to payments, there are a few things that will never change. Yes, we want to make them easier, but we want to keep them secure. And at G+D we’ve been able to evolve, making the technology less visible, while maintaining security.” As well as tokenisation, she points to biometrics for mobile and card payments achieving the same aim. “The best kind of innovation is that which people don’t see, which fits their needs and keeps their money safe while they sleep at night.”
Breaking Down Borders?
Beyond the EPI, there is a more fundamental shift in payments infrastructure on the horizon – the possibility of a central bank digital currency being introduced in Europe – the so-call e-euro, one of many CBDCs being discussed. The first has already been given the green light in China.
“I’m sure we will see central bank digital currencies around the globe, because paper as security for your assets has to be replaced, or complemented by digital means,” says Vckovski. “But it won’t happen in a disruptive way. It will be part of the global payments ecosystem.”
Circling back to the cross-border issue, could this, finally, be a way to resolve it? Could CBDCs perhaps break down barriers if customers choose to transact in a currency not issued by their own central bank?
That’s unlikely, says Vckovski: “It’s important for a country to maintain its own currency as part of any political system, because controlling the amount of money in the market is a tool that national banks currently use to control inflation, or at least try to steer it. I think there is sufficient national interest within central banks to control their currency, and therefore also provide a digital alternative to it.”
While she agrees payment sovereignty – be that regional or national – will remain important, it will be up to the global payments ecosystem to work out a way to transact in CBDCs, says Bugat.
“The ecosystem has to find a way to make the transfer of digital moneywork, slowly adjusting, with new roles for everyone – but working together, because it’s all connected.”
This article was published in The Paytech Magazine #09, Page 24-25
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