In digital times, how can you make your business future-proof?
Why are mobile payment adoption rates of some African or Asian countries today ahead of those of America or some European countries?
When will our world be cashless?
At Wirecard, we are working on answers and solutions to theses questions on a daily basis. Recently, we had the occasion to talk about these and a couple of other current topics with Chris Skinner. Chris is best known as an independent commentator on the financial markets and fintech through his blog thefinanser.com, as an author of bestselling books and as a heavily booked speaker and consultant.
While he has been voted “Best Fintech Speaker in the World” by TMT Awards and Finance Monthly called him “a game changer”, he likes to describe himself as a “troublemaker”. Indeed, he is not only well known for his great expertise, but also for his often controversial views and provocative statements.
Hello Chris, let’s start with taking a look at what is going to change in retail. Already in 2014, you wrote: “Omnichannel is so last century, please delete it” – arguing that talking of “channels” is old thinking, because there is no such thing as a channel, which is only a “layer on a legacy”. So what advice would you give decision-makers in retail to make their businesses future-proof?
Well, I wish it was easy to resolve with some piece of advice, but it’s not. It is much more fundamental. When people still think in terms of omnichannel that proves they’re stuck in old patterns of thought. And trying to just pretty up old technical infrastructure that is inappropriate for the new world doesn’t work.
What most executives don’t get yet is that you have to change the fabric of your business. So you can create a new structure based on data – this is the lifeblood of the digital society.
I often talk with managers and ask them the question: Do you have a business that is fit for this century? In other words, do you have right structures, products, services – and also the right leadership, and culture?
Many answer with a “yes” – but most actually don’t have it, at least yet. This is because they lack the understanding of the fundamental role of data for business now and in the future. And the understanding of their customers’ digital lifestyle.
“People who think in terms of omnichannel are stuck in old patterns of thought. You have to create a new structure based on data, the lifeblood of the digital society.” – @Chris_Skinner
When talking about digital lifestyle, the way how people pay comes to mind. You recently wrote how surprised you were about how advanced the use of mobile payment is in some African or Asian countries but how far behind America and Europe are. What has to change to make mobile payment more mainstream also in the West?
This has to do with the completely different starting points. When we look at Asia and Africa, we find many countries who only developed a payment structure in the last years, and many still have weak or old structures. So in these countries like Kenya or India, people have strong incentives to bypass those structures and benefit from solutions that make their lives easier.
On the other hand, the problem we have in the West is that people are very committed to the old systems and well-established structures. Take Western smartphone users as an example – there are many mobile payment solutions available for them, but many still have not adopted them.
People need strong incentives to change. Discounts and loyalty programs would be a good motivation, it is very well done and works well in China, for instance. But when you look at the West, the incentives for changing to mobile payment are rather pitiful.
One thing is for sure: America and Europe will follow the mobile wallet revolution. But the East is leading.
And the forerunner of the East is China, considered the most FinTech-oriented nation on Earth, for example by EY in their latest FinTech adoption index. How did they achieve this leadership position?
China is a country with people that not long time ago had access to only few things – and now they have access to everything. It might be restricted here and there by the government, but China leads forward the world.
It is amazing how digital and mobile Chinese people are – they just jumped over night from a cash-based to a digital society. In many shops, if you want to use anything other than your mobile phone to pay they might tell you to go away.
When looking at Europe, do you think an initiative like PSD2 might help to promote mobile payment here – and speed up things a bit?
We’ll see. I rather see a different major trend that PSD2 will deliver: Large international Internet companies – like Google or Facebook – will eventually be able to leverage customer data, not only for sales and advertising, but also for finance.
I don’t see them moving to banking, but to payment. They will be able to offer users payment solutions to pay very easily – and PSD2 gives them options to do that.
So to give you an example, imagine I owe my friend 10 Euros for last weekend. He and I are users of the Facebook messenger. With a payment option I can pay him back very easily – no matter if my friend is in Germany, in the Netherlands, in France or anywhere else.
And this is the great advantage of the large Internet companies because in contrast to apps by national banks, they are not domestic. I travel a lot, so what I want and what many others want is a real borderless payment app on a global platform – this is what Internet giants like Facebook, Amazon or Google can deliver. This is what Alibaba delivered: It doesn’t matter where your friend is, you pay him quick and easy.
Eventually, the services might be expanded to adjacent products like credits or insurances. But as I said, the large Internet companies don’t want to go into banking – it’s all about making the digital lives easier for users, and then they will widely accept it.
Do you think something similar as PSD2 should also be realized in other parts of the world like e.g. in the US to modernize the payment infrastructure and to boost competition?
To be honest, I believe regulative structures are going to become more and more irrelevant. I know this is a controversial statement. But how do you regulate things that are global when you have national interests? The problem for every nation is for they cannot deal with global platforms and digital structures.
The US as a marketplace will try to manage customers’ data and their data access – but what if customers say: I don’t care, I am going to share my data access with this cryptocurrency?
Eventually, some organizational structure will take action on a global basis. But the thing is: Digital structures are revolutionizing how we deal with everything. Take me as an example: I travel non-stop and I am not supposed to have access to my national entertainment services by the BBC. But I know how to use technology and virtual private network, a VPN – so I can overcome these restrictions.
Not everybody is digitally savvy, of course. But the share of digitally informed people is growing – being informed is incredibly easy, just google.
So looking at the bigger picture, we live in a global network society that doesn’t recognize national borders.
“Cash is dirty, not a good payment system, the reason why it works is historical. We need to get rid of it – and we will.” – @Chris_Skinner
In some countries like in Sweden or in Singapore, experts are speaking about an almost cash-free society. When you think about the world in the future, do you reckon this will be the situation in most or all countries worldwide?
Oh, cash is something that I blogged about recently – cash belongs to the museum. And why? Cash is dirty, it is not a good payment system, it is very easy to use for things that are not desirable or even unlawful. The reason why it works is historical. We need to get rid of it – and we will.
The first countries to become cashless are China or Sweden, within the next ten years. In the rest of Europe it will take longer, about 20-30 years, as people are generally very much used to cash. But yes, eventually our world is going to be cashless.
To conclude, let’s look at the global picture again. In your most recent book “Digital Human”, you describe how billions of people connecting in real time through mobile technology, increased access and transparency will have the potential to finally tear down the walls of financial exclusion. Can you give a practical example what is going to change?
That’s right – today, once you get a mobile phone you can trade and transact! And this has a massively positive effect.
Let me just give you one example: Some years ago, Vijay Shekhar Sharma was struggling to make ends meet. Then he founded the mobile payment solution Paytm, and today he is the wealthiest founder in whole India, the only Indian billionaire who is younger than 40. And with his solution, he helps millions of people to be financially included and improves their lifes on a daily basis.
Isn’t this phenomenal?
It really is, Chris! Thanks very much for taking your time for this interview.
On a side note, it is interesting to see how not few of Chris Skinner’s – albeit often provocatively worded – assessments coincide with what Wirecard’s beliefs and with what products or services our company or our partners offer.
For example, “omnichannel” structures and thinking being replaced by digital retail that understands the digital customer lifestyle of today and tomorrow; fully digital financial products like boon, Allianz Prime, bankomo or TransferWise, to name only a few; the central importance of data and its smart analysis for retail; the tremendously positive effect technology has and will have for financial inclusion – and last but not least why and how a cashless world will become more and more reality.