Coverage by Matthew Dove and Charley Brooke Barnett
A veritable who’s who of payments tech turned out for last week’s Vendorcom conference in Marylebone. Compered by Vendercom’s chairman (and TFT columnist) Paul Rodgers, the day saw presentations and panels featuring delegates from all areas of the sector.
Legacy providers and fintechs shared the stage with hoteliers and outsourcing professionals which leant the occasion a holistic feel often missing from similar meet-ups.
Whilst the Chatham House rule was invoked by a number of speakers, discourse flowed freely in a room clearly concerned with the pressing need for cross-sector collaboration in the payments industry. Even Rodger’s opening words were less an introduction to the day’s agenda and more a call to arms, his sentiments echoing throughout proceedings.
Urging delegates not to allow insights gained at the conference to be squirrelled away but rather broadly communicated for the mutual benefit of the sector, Rodgers implored;
“Do take the message beyond these four walls because it’s important that, whilst we can get the benefit of all of this stuff, there’s a lot of people out there across the industry that need to hear some of the things that we’re going to hear today”
The other sentiment echoing around the auditorium at the Cavendish Conference Centre was one of slight foreboding in light of the impending issuance of FCA payments regulatory technical standards. The proposed standards, which will come into effect in the event of a no-deal Brexit and centre on “strong customer authentication and common and secure open standards of communication”, were described by Rodgers as an “economy damaging Sword of Damocles.” Good job then, that a regulator was in attendance to allay any uncertainty as to what would be expected of payments service providers when the standards come into force later in the year.
there’s a lot of people out there across the industry that need to hear some of the things that we’re going to hear today – Paul Rodgers, Vendorcom
However, such assurances would have to wait as the day’s first keynote fell to Julian Sawyer, Head of Banking Services at Starling. Sawyer’s remarks acquired considerable topicality given the pickle one of Starling’s main rivals, Revolut, has been getting into of late.
Not only has Revolut inspired the chagrin of former employees – who’ve charged the challenger with garnering a toxic working environment – they’ve been accused of “single-shaming” as well. The company’s Valentine’s Day ad campaign included asking customers who’d ordered takeaway-for-one on the 14th, “you OK hun?”. Furthermore, Nikolay Storonsky’s outfit find themselves the subject of an FCA probe (news of which unhelpfully coincided with the departure of CFO Peter O’Higgins) and reports of an “assessment” by Action Fraud.
Some commentators are arguing that the speed with which challenger banks and fintechs have taken the payments world by storm could now prove to be their undoing. Mr Sawyer’s exuberant turn at the conference will have done little to convince the doubters.
In a speech intended to dispel some of the myths surrounding innovative new financial solutions, Sawyer was eager to reassure the audience that Starling doesn’t merely inhabit what he calls the “Shoreditch fintech bubble.” In fact, Starling doesn’t even confine itself to the M25, outside of which it’s experiencing its highest levels of growth. In addition, the digital bank’s services don’t just appeal to app-happy millennials, as 35-40% of its customers are over forty.
It was only when Sawyer shifted from what Starling do to how they do it that those finding the pace of fintech development a tad alarming may have found cause for renewed concern. Challengers, it turns out, have “a very different way of working and thinking.”
With a “culture that’s closer to a Spotify than it is a Barclays”, it’s clear that Starling take their lead from the speed racers of Silicon Valley rather than the pleasure beach donkeys of Cheapside. Sawyer was keen to highlight the key distinction between banking norms new and old;
“by having a much more agile mentality, and that’s not just a technological agility but that’s about a business agility, then you can execute things a lot, lot faster.”
What followed was primarily related to, not so much the products and services Starling offers, but how fast they’re implemented. Take, for example, Starling’s partnership with the FitBit watch. Sawyer proudly exclaimed that it, “took us about five days with one software engineer to give us FitBit Pay.”
we’ve got a culture that’s closer to a Spotify than it is a Barclays – Julian Sawyer, Starling
He then pondered how the old guard (none of whom got involved with FitBit) would’ve approached the prospect of such a deal, “can you imagine how some of the incumbent banks were going into steering committee meetings about whether they should do it instead of just doing it?”
And what about SME banking, Julian?
“Let me tell you the story of SME banking at Starling. On January 1st or 2nd of last year, we decided to go into SME banking, a current account on a mobile phone. Twelve weeks later … we went live with that product…”
So, like a Ferrari Testarossa, Starling can do 0-60 in 5.3 seconds. Just picture it slaloming through some arid landscape in a widescreen promo to the thumping strains of Aerosmith! Sawyer even gave us the perfect tagline:
“Being a fintech isn’t about a regulatory status, it’s about a mindset”
To bring the advertising analogy full circle, the “just do it” philosophy may work for hocking trainers and sports cars but how well it stands up to the rigours of long-term regulatory compliance remains to seen.
One thing we should all “just do” is share the wealth and a panel featuring Pennies Foundation highlighted paytech’s central role in making charitable donations more accessible in an increasingly cashless world.
Pennies Foundation, represented here by Paul Seaman, enables retailers to implement point-of-sale (PoS) donation options across their entire operation, be it in-store, online, or app. Customers are prompted by the card machine, website or app checkout to donate a few pence.
It’s a yes or no choice, and no personal data is retained by Pennies or the retailer-selected charity. Serving as a paradigm for the implementation of innovation, Pennies Foundation, “have kept it simple all the way through and that’s to follow the most loved way of giving in the UK; dropping a few coins into the collection box.” Find a problem and solve it, it’s a win-win, enough said.
Once you’ve taken the Ferrari out for a spin, opened a Starling SME account, made a digital donation and gone for a jog in your Nikes, you’ll have worked up quite the appetite. Fortuitously, Mark James (Principal Sales Consultant of Oracle) was on hand to tell us about food and beverage paytech.
James framed his presentation on, “the age-old frustration of being in a restaurant when you want to pay the bill … You may have an important meeting or maybe you’ve been on an extremely good date and you want to get out of there!”
James argued that not only can the wait for the bill be inconvenient, it can be downright costly too.
“If [the restaurant] can save 5-15 minutes of that waiting time and get that customer out when they want to leave … get that payment processed and turn that table a little bit quicker … that could be 25% addition revenue we’re gaining at a difficult time”
Just to drive home the seriousness (or wait?) of the issue, James added that, “65% of people will not go back to a restaurant where they’ve had a really long experience trying to pay.”
When assessing the extent to which payment technology can be used to ameliorate operational problems in the “age-old” restaurant trade, James raised more questions than he answered.
- How do businesses incorporate complex and cumbersome tech solutions into already hectic working environment?
- Are customers ready for self-payment apps? Doesn’t it just feel like you’re leaving without paying?
However, the most pressing dilemma posited the man from Oracle was; can the myriad idiosyncrasies of hospitality be satisfactorily serviced by paytech?
The group discussion that followed explored these issues more thoroughly. In addition to James, the panel consisted of Ashley Arlott (Head of Sales, UK and Ireland – 3C Payments), Travis Henry (Business Development Manager, Pay360 by Capita) and Rajesh Vohra (Director, Sarova Hotels).
Being a fintech isn’t about a regulatory status, it’s about a mindset – julian sawyer, starling
James appears to have faith in the tech’s ability to revolutionise the business but less so in the customer’s ability to adapt to some of the more challenging innovations in the space. When asked what he thought about the possible implementation, in the UK, of the kind of facial recognition technology that can be found in some Chinese fast food outlets, James responded;
“There are cultural challenges, certainly … We’re very suspicious of things like that in our culture … I think from a technology point of view it’s more than likely to be available. The adoption, I think, is going to be the challenge … The technology will come quickly and I think the adoption will lag behind it significantly.”
As the sole representative of the hotel trade, it was left to Rajesh Vohra to speak for his entire industry. The disparity between what the techies told us and Vohra’s outlook illustrated nicely the need for robust dialogue throughout the value chain.
The technology will come quickly and I think the adoption will lag behind it significantly – Mark James, Oracle
When moderator Rodgers asked about the need for a cohesive industry standardised approach Vohra answered;
“Our space is notoriously bad at upgrading technology … there’s technology there that’s 15-years old and, frankly, we don’t change it because it’s not broken so we maintain it and we keep using until it falls apart.”
Therein lies the kicker, Mr Vohra is a hotelier. If you’re not improving his customers’ experience, then he’s not interested. He confirmed as much when he said;
“The idea of facial recognition at the reception desk to pay your hotel bill fills me with complete and total horror. It would be decades before we’d be ready to do something like that.”
Revisiting Rodgers’ original enquiry, Vohra bluntly concluded that;
“The truth is that standards can do what they like and be damned, that sort of technology takes a long time to catch up.”
Ashley Arlott of 3C payment struck the sort of reconciliatory chord that one suspects the conference was designed to encourage. In his response to Vohra’s concerns, he cited that tech shouldn’t enter the market with the intention of reinventing the wheel, but rather to optimise and improve its performance;
“One of the key things stated there relates to the utilisation of existing technologies and infrastructure. Market disruption doesn’t always come from a grand gesture, a complete change of things as they currently stand. Sometimes it comes from using the services and infrastructure that are already in place in a much more innovative way.”
Our space is notoriously bad at upgrading technology … there’s technology there that’s 15-years old and, frankly, we don’t change it because it’s not broken so we maintain it and we keep using until it falls apart – Rajesh Vohra, Sarova Hotels
However, at least one member of the audience had come to the Cavendish Centre intending to kick some arse and eat pancakes, and the last of the pancakes got snapped up in the coffee break…
Admirably blurring the line between monologue and enquiry the disgruntled delegate opined;
“Back to you, the hoteliers and the restaurateurs, you’ve really got to be pushing your payment services providers to grasp that innovation and bring it forward … it’s all within your grasp and I think, as vendors within the payments industry, we’re making those solutions increasingly available, so hopefully you’ll be receptive to taking it on … but my question is; how many of you are actually investing time and effort in investigating that, both from a supplier viewpoint, for say Oracle, and from the hotels and restaurants you deal with?”
The answer received was sparingly curt, “All that you say is there, is not there.” At the business end of the stick then, the world of paytech innovation may be neither as new or as brave as we’re being lead to believe. On the one hand, you’ve got the techies saying, “Use all our cool stuff!” and on the other, you’ve got the industry saying, “It’s not good enough yet!”
Could Travis Henry – whose operation, Capita, finds itself “caught in middle” – offer a viable compromise? [Spoilers: nope]
Capita’s challenges as Henry see them are with “our own guys, our developers and our roadmap” as well as lengthy consultations with providers like Oracle. All this leads to delays of, “a couple of years until we’ve got integration, so I get it from both sides…
I wish I had the silver bullet answer but… y’know?”
We do, Travis. After an hour or so of this back forth, we really do…
With delegates beginning to doodle on their complimentary stationary and hack journalists amusing themselves with potential mottos for next year’s event (“Non mea culpa, vestrum erit flagitium” is the best TFT could manage…), we broke for lunch…
Brexit – Deal or No Deal
In the afternoon session, collaboration was the name of the game once more, this time reiterated by Arnaud Crouzet, Secretary General, Nexo Standards. He emphasised that a “working together” mentality is paramount the continued progress of the payments industry. With everyone abiding by the same rules, Crouzet promised interoperability and reduced costs across the board.
The following panel was a veritable pAy-Team of industry big hitters discussing how standards create value for the payments ecosystem. Jeremy King, International Director, PCI Security Standards Council, pointed out the challenge of undertaking payments in a frictionless manner with the legacies that exist. These “legacy burdens dictate how we do certain things.” Nevertheless, community input of standards and the benefits of engagement with fellow members were lauded across the panel.
Non mea culpa, vestrum erit flagitium
Comfortably sheltered by the Chatham House rule, it was the regulator’s turn next.
After being told that, “payments should be boring” we were briefed on the new rules and requirements coming in from September 2019 around strong customer authentication. Trust, reliability, resilience, and security topped the bill.
Then we were told that firms should no longer rely on one-time passcodes (OTPs) as their only means of verifying identity, “the needs of all its customers must be taken into account, whether they’re in signal black spots or simply not using smartphone technology.”
The closing keynotes reviewed the uncertainty surrounding Brexit, and Toni Vitale, Head of Regulation, at Winckworth summarised its effects: “If we do a deal, the law will stay the same until December 2020 and in that time we’ll negotiate a new treaty with the EU. If we don’t have a deal, then the Data Protection Act 2018 will be our law.” Whilst it may be fashionable to jump on the doom and gloom Brexit bandwagon, Vitale was quick to assure us, “there won’t be queues at Dover” come deadline day.
With so many unknowns and misinformation, Vitale wrapped things up by urging the audience to seek out their own facts (from government sources) and to be wary of buying into “scandalous” myths such as those surrounding the WTO’s Article 24.
If its opening gambit espousing a harmonious and mutually beneficial payments ecosystem proves a touch optimistic, then at least the Vendorcom Future of Payments conference cast a bright light on the problems facing the sector. As the payments value-chain is broken down into ever more specialised increments, achieving the kind of balance whereby all parties, including the end-user, are satisfied is perhaps a loftier ambition than most attendees had first imagined.