Instant Payment – An Approach for Europe

Will we soon be living in a cashless society? At the BITKOM Congress in June, representatives of the industry discussed the latest developments in the payments sector. Med Ridha Ben Naceur, Principal Consultant at GFT, spoke about mobile payments and the person-to-person (P2P) approach Jiffy. He also went one step further: Europe, said Ben Naceur, needs a standardized instant payment solution. In an interview, he explains what this means and how a cashless society will look.

The subject of mobile payment is on everyone’s lips right now. In your presentation, you talk about a further development of this, namely instant payment. What exactly does this mean?

Med Ridha: Basically, instant payment means that I, as a private customer, as a consumer, will be able to make a rapid transfer of money in a straightforward manner. In other words, I transfer money to you today either via my smartphone or via online banking, or even directly at the counter in my bank, and it won’t take one or two days or until the evening before the money arrives in your account. The money is credited to your account in real time. Our Jiffy solution, which we developed conjointly with SIA in Italy, involves P2P payments. With this real-time solution, payments are processed via customers’ existing bank accounts and based on SEPA standards. Again taking Jiffy as our inspiration, we have developed an idea or an approach for instant payment. With this approach, we’re not talking about instant, mobile or precise P2P payments, but rather added-value services, extended services. And first and foremost, we need a standardized approach for the whole of Europe. Our approach addresses these requirements with the service and clearing layer construct.

What exactly is behind the terms service and clearing layer?

Med Ridha: The service layer is, if you like, the link between all participating parties in a mobile payment and the added-value services ecosystem. We need a standardized platform for this. To offer a very visual comparison: Let’s take a house in which all kinds of people live: A doctor, a banker, Mr Miller as an individual, and so on. In this multi-center, everyone has access to everyone. The baker receives information about the number of diabetics like Mr Miller (anonymized) and can adjust his production of diabetic sweet treats accordingly, so that customers can be served on the one hand, but on the other there is no production surplus. The service layer therefore integrates various services for all kinds of parties: For dealers, banks, authorities, etc. An example of extended services and the interaction of the various parties involved would be the new passport: The digital passport (digital ID). The bank sees this: The customer makes a request via the Internet and can check his details at the same time via E-Government. If the information matches, such as age and address, legitimation takes place automatically. This is not so much now the digital wallet, but rather the digital life. We need a bundle of services, not a separate service. This doesn’t mean that there is a service layer that handily provides an App for every service. There can easily be multiple providers, but the platform itself must be as uniform and easily accessible as possible.

The clearing layer operates a standardized clearing platform for payments from the online and mobile sector. One approach for this would be the SEPA transfers clearing platform, which is already in place across Europe. If we are talking about instant payment, the clearing process must also take place in real time. This, in my view, is where the challenge but also the advantage of a service layer lies.

From the digital wallet to the digital life then: It’s a month now since BITKOM published the first results of a survey on payment transactions – more than a third of Germans could imagine managing their everyday situations without cash. However a cashless society still appears to be a long way off. How long will this situation prevail in Germany?

Med Ridha: It would be easier to answer this question for a country such as Italy or a country in southern Europe. Cashless payment is already well advanced in these places, and the mobile payment trend has been widely accepted. In Germany, on the other hand, cash still plays a major role. I predict, however, that we’ll all be very surprised: Suddenly, someone will come up with a solution, an innovative story, that will truly be accepted by the customer – and then everything will happen very quickly from that point on. An Apple Pay approach, if you like, that also gains the approval of the customer. At the moment, I can’t see us having a cashless society within the next two to three years, however. That said, we shouldn’t forget that a generation of digital natives is growing up as we speak.

So digital natives will push development forward?

Med Ridha: In principle, certainly, since as immigrant natives, we haven’t grown up with these things and we tend to be fairly skeptical towards new technologies. We long, for example, and justifiably so, for a feeling of security. Among digital natives, however, I also foresee a problem since certain criteria simply need to be met. This includes the fact that the technology must be inexpensive and accessible to everyone. If you order an iPhone at the moment, you pay an exorbitant sum for it in your monthly subscription. And if we rely on digital natives for mobile payment, then they must also be able to afford the technology that goes with it. For both groups, immigrants and natives, the following also applies: If I’m paying with my cellphone, then I want to do it everywhere and most importantly I want to be able to do it everywhere. Technology needs to be integrated into everyday situations: Across industries but also even across countries.

So what happens next with the instant payment approach?

Med Ridha: The idea still needs to mature, however we will be following our approach further and we strongly believe it will generate tremendous interest. We’re on the right path. At the BITKOM Congress, people noticed that something is going on: Lots of representatives of banks, consultancy firms, corporate clients and politicians came along. The congress was very well-attended. The panel discussions created a stir at high level and the presentations were focused on the future. And yet I noticed one thing: In Germany, we always talk about the future. Mobile payment, digitization, the digital society – they all seem to lie in the future, but actually we’re living in the middle of them. In other countries, they talk of such things in the present – and rightly so! Jiffy, for example, is already up and running. In this country, we talk about security measures and about where it might not be accepted. All this is right and important, but we also need to make sure we don’t lose sight of the benefits for the customer and the customer experience. We also don’t talk about what we’ve already achieved, but only ever what we’re going to do in the future.

And that isn’t true in other countries?

Med Ridha: The classic example is Italy. Of course, the prerequisites for the introduction of Jiffy were already in place right from the start there: In Italy, you get the feeling that everyone does in fact own at least two iPhones and they take a very different approach to security concerns and data protection. And even though the conditions in Germany are different and certain concerns are justified, we can learn a lot from the way other countries approach the issue. In Italy, the USA, etc., they simply try things out. If it works, great. If not, then fine. In Germany, we always want to make sure everything is perfect first. the UBI Banca Group is Italy actually did it: Created added value for its customers, and only for its customers, offering P2P, and now the other banks are actually jumping on board.

Because customers are ready to accept it there too?

Med Ridha: Yes. This brings us back to the crux of the matter: At the BITKOM conference, some experts maintained that customers can already pay now. They don’t need a smartphone for that. So what we’re doing is making payment easier and standardizing it. But that’s nothing more than added value. Customers want more services when they pull out their cellphone. They want to have tickets in their smartphone and it must be linked to their wallet that they use for payment transactions. Acceptance, I am convinced, will increase if a more standardized approach is offered in which various services alongside payment transactions offer real added value.