The lowdown on Italy’s payments landscape; a slew of new product launches; the results of a survey on digital adoption in Italy and the future of digital banking in Europe- the annual SIA Expo delivered on all fronts, with the government being held to account. Anna Milne reports
"We want modernity and simplicity, not bureaucracy", said SIA chairman Giuliano Asperti, opening the conference and setting the tone for the day. "Why are digital solutions not being utilised, after so much effort has gone into developing them?" Good question.
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MP Stefano Quintarelli, in his keynote speech, called for digital payments to no longer be referred to as ‘virtual’ as this perpetuates the unhealthy attitude that they are not real and therefore under the regulation radar: "Digital payments are true payments. Money in cards is real." And Massimo Fracaro, cyber security panel moderator and economics editor of the Corriere della Sera, explained the benefit to be gained in moving away from cash: "A sizeable 83% of transactions in Italy are cash-based and the cost of cash management is 8bn euros a year, double the property tax revenue."
So why wouldn’t Italy go digital? Security concerns, for a start. In Coen Vermeulen’s compelling speech on how to deliver an effective cyber security strategy, he suggested a focus on three key ‘dimensions’: Governance, Scope and Range and, something we’re all going to have to get used to- a 24/7 approach. Vermeulen is chairman of CPMI, cybersecurity working group, Bank of International Settlement and division director of cash and payment systems, De Nederlandsche Bank.
Governance
"Get top management involved- it cannot be tackled solely by IT." He implored the auditorium’s bankers to enlist a professional hacker to ‘social engineer’ their top management- send them a test email containing malware, however much this seems like cheap trickery, to test them and show how easily attacks happen. "It takes just one person to open a cleverly set up email for attackers to access your system, and one of them is bound to open it."
Voormeulen also suggested tasking the marketing department with designing an engaging training and awareness programme.
"A sector-wide approach is necessary to combat cybercrime," he told delegates, including the implementation of longer or amended operating hours during an attack to cooperate across time zones in different regions. "This does mean, eventually, worldwide 24/7, yes. But one step at a time- start nationally, with debit card transactions, as the bulk of these is national, then address SEPA and then international transactions."
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By GlobalDataDifferent attacks require different strategies, and he categorised the main types, or scope of attack as Confidentiality, Availability and Integrity. For example DDoS (distributed denial of service) attacks, which can last several hours, require litigation services whereas ‘integrity’ attacks, involve manipulation of systems, and are "particularly nasty". These require software differences in primary and back-up systems.
Far too little attention is paid to recovery strategies in general, Voormeulen said, highlighting this as a serious oversight.
"It can be very difficult to resume service, especially after an integrity attack. The question is, was there a ‘golden point‘ at which the system was running fine and can you return to it- if so can you strengthen your position or are you returning to a vulnerable state? Do you need ‘clean’ data from other players and if transactions were compromised before final settlement, what then?"
Emerico Antonio Zautzik, director general for markets and payment systems, Banca d’Italia, agreed "the fallback attitude is to play it safe and not take risks by adopting anything new, thereby just continuing our descent into obsolescence".
"We have proven we can deal with serious, unexpected and unprecedented problems, most notably in the Genoa floods case- so we are well able to implement coping strategies rather than acting retrospectively."
Zautzik then spoke of EU directives, including PSD2 being at once encouraging and prohibitive regarding innovation due to its security stipulations. "There is a pressing need to protect systems beyond firewalls so that if someone enters, there is stronger protection inside," he urged.
Getting to the crux of the problem, however, Zautzik blamed public authorities for not promoting awareness, leaving people unsure as to whether their card will even be accepted when paying bills, resulting in continued cash payments. Italian public authorities have been set a deadline of 31 December 2015 to accept electronic payments.
Poste Italiane’s ubiquitous prepaid card has done a lot to move people away from cash- the card now includes an IBAN and clearing mechanism so salaries can be paid directly onto it. Loyalty rewards and a simple, easy to use coupon scheme has encouraged e-commerce transactions, said CEO Francesco Caio, as he told the delegation 25% of e-commerce transactions in Italy were made through Postepay and there were 12m users of the card, making up 20% of the population.
Aldo Bisio, CEO of Vodafone Italia, told the table Italy was not at all lagging in terms of mobile penetration and, as mobiles are becoming "the keys for today’s world", Italy was well-placed to be at the forefront of mobile and digital banking. The mobile players have a strong desire to be interoperable, thanks in part to SIA’s infrastructure, "and GSM has not yet been attacked- we need to inform citizens they’re protected and safe to move forward in this environment."
A presentation of vox-pops showed people want to use mobile payments for paying taxes, buying newspapers, travel, groceries, school fees and paying fines- the latter instigating bellows of laughter around the hall. I wasn’t so sure whether it was the thought of actually paying one’s dues in the first place that provoked such hilarity or whether doing so on a mobile phone was so preposterous a concept that peals of laughter were the only appropriate response. Either way, the subject of fines seemed to strike a chord with everyone in the room.
CEO of SIA, Massimo Arrighetti, then asked Bisio whether Apple had scuppered Vodafone Italia’s NFC plans by putting its secure element on the phone and not the SIM, as Vodafone has done.
"It’s 80% opportunity and 30% threat. Apple has always been a catalyst for new markets. In Italy we have 5m SIMs active on NFC and it’s constantly increasing. Next year we’ll issue SIM-compatible NFC. Tokenisation was invented by companies like MasterCard and Apple created a strong user experience. This cannot be adapted to a Telco or a bank."
SIA Survey: ‘Attitudes Towards Digitalisation and Electronic Payments’ results
(sample included 1,000 Italian adults; 50 public administration executives; 150 teachers)
- 35% were considered low users, ‘reluctant to make digital payments and unconvinced of their security’
- 23% were considered heavy users, keen to see a further increase in opportunities to use digital payment means.
- The differences between these two were defined as the result of two key factors: cultural attitude and degree of awareness.
- 39% of heavy users had fallen victim to electronic fraud compared to 13% of low users, yet heavy users still rated digital as more secure than cash
- 88% of heavy users and 62% of low users believe "we are witnessing an unavoidable change in payments"
- Only 36% is aware that by 31 December 2015, all Italian public bodies must accept electronic payments for fines, taxes, healthcare fees, etc
DIGITAL TRANSFORMATION IN PAYMENTS PANEL
"It’s the buying experience that counts- the mechanics of payments should not be in the customer’s radar, these should be seamless, reliable and secure. The customers’ focus is on the product they’re paying for and where they’ve seen it". Kicking off the afternoon session, Bruno Degiovanni, MasterCard’s head of business development and product sales for Southern Europe, stressed the importance of streamlining services before and after payment, paraphrasing Square’s Jack Dorsey.
"Cards will continue to play a fundamental role in the digital world," he concluded.
Visa Europe’s general manager, Davide Steffanini, agreed- "The message today is cards and POS. Consumers are no longer what they were and they want the purchasing experience replicated across all channels with bespoke, integrated security and more control. That should be our polar star when developing mobile commerce."
Exclusive comment
Catching Alessandro Perego, director, digital innovation, Politecnico di Milano, before the event, proved interesting indeed. He said the need to undergo a significant transformation is unanimously accepted, "but if you listen carefully to the only representative from the public sector, Mr Quintarelli, it’s clear that they don’t know how to go about it".
"The second issue is the fear around main players of digital transformation. Apple, Google, Amazon are seen as competitors but nobody tries to compete and win the customer first. If they go on speaking about these possible threats and not taking action they will see what happens. I will speak to them this afternoon about how time is a critical variable. They cannot continue at the same pace as the past three or four years. Banks and telcos in Italy have mobile payment solutions but they are not promoting them. It’s disturbing- the public sector should be a key player in digitally transforming a country but it does not know how to govern the change or how to act according to a common strategy and a common list of priorities."
He explained NFC could win round merchants who are deemed to be the sticking point in the adoption of mobile payments- the very world that is resistant to electronic devices could benefit specifically from this. "And I personally think consumers are keen to use the mobile as a wallet, I really think that people are keen to do that. But they need the infrastructure to be in place and be told how to do it, they don’t know at this stage how to do it and how it’s all set up".
The significant problem with tax evasion in Italy amounts to more than 150bn euros a year and the government could easily incentivise people, he says, to adopt digital payments because they stand to recoup 20-30% of that tax evasion, "that is big money, very big money". This, in turn, can bring taxes down and retailers’ charges down and everybody can benefit.
Product launches- best cases
SIA- Jiffy
Available to all banks in SEPA, the app lets users send and receive, or ‘Jiff’ money to each other on their smartphones in real time. The transaction is carried out via the user’s home banking account. The user needs to have a current or prepaid account, anything with an IBAN code and SIA say the service works exactly like WhatsApp, allowing the user to select from a list of contacts also using the service (these are marked with a Jiffy icon). UBI BANCA is the first and by the end of the year, it will be rolled out to all banks in the group.
SIA’s Massimo Arrighetti on Jiffy: "It’s the only interbank tool which is real time in Europe. We use the European standard."
"It was a toss-up between Jiffy and Snap but in the end we settled on Jiffy". The word jiffy is a unit of measurement corresponding to the time it takes to travel one centimetre. You learn something every day..
CheBanca- WoW
A mobile wallet app available to any Visa or MasterCard credit, debit or prepaid card. Utility bills, TV licence, car tax, transport cards and P2P payments are covered and it can be linked to MasterPass, allowing ecommerce payments.
Roberto Ferrari, CheBanca’s general manager, said: "It’s a project we’ve been working on for a year now. We wanted to enter the mobile payment sector but do more than just replicate our existing offer. We realised that the proliferation of online wallets on the market was forcing customers to manage multiple payment instruments. This gave rise to our idea of creating a democratic wallet, which could contain others and is open to everyone, including non-CheBanca customers."
Ferrari said WoW may include NFC in the near future, as its functions are expanded.
For Pierre Christophe, from BNP Paribas, WoW was the most interesting launch of the day, due to its open availability.
"People struggle and juggle all kinds of apps and this is the way it should be- anyone should be able to sign up and the focus should be on providing a good service. Service first, then product. People can try this out and take it or leave it, regardless of which bank they are a customer of. If you are confident enough in your product, this is how you should market it."
SIA’s mobile ticketing
Currently in a testing phase with pilot trials to begin, this app will enable public transport travel tickets to be uploaded and used via NFC technology across all networks across all cities. Initially, it will be rolled out across Napoli, Bologna and Ravena and extended across other Italian cities. SIA has worked with Telecom Italy and the various transport companies to develop it thus far and the platform is open to other public transport companies and mobile operators.
The key takeaway?
At close of play, Arrighetti said the key point was communication- and more of it- to send the message that digital banking is safe, fast and inexpensive. "Yes, there is risk involved, always, but it is a much lower risk than having cash in your pocket. The other thing is to keep things simple. The technology and infrastructure is all there, it’s a question of culture and communication."
And the future of prepaid? "It has a great future. The prepaid card is a powerful tool for social inclusion- it puts everybody on a level playing field", (from the unemployed to the overpaid).
Italy is ready yet the country needs guidance to make the digital transformation. Results of a survey show that those who have already adopted digital payments believe it to be more secure, faster and easier than cash. Those that don’t use just need to be informed about the possibilities and encouraged to try it out. The sticking point is not the small merchants, for whom cash payments mean less tax paid; it is the government and local public authorities who need to run a campaign of awareness. These bodies stand to gain the most from such a transition anyway. The amount of tax they could recoup could be in the region of $40bn. Besides the fact that taxes would be significantly reduced once a larger amount was collected, taxes are nothing compared to cuts, as SIA CEO Massimo Arrighetti adroitly put it.
