In the sixth episode of our new podcast “Voices In Payments” our host, Diederik Klopper discusses How to innovate through crisis times as a FinTech and the acceleration of payments developments with Barnabás Ferenczi, Head of Strategy & Marketing, and Rüdiger Vogt, Head of Payments 4.0 at G+D (Giesecke+Devrient)
With over 160 years of experience, G+D is actively helping shape one of the most important trends of the future: security. The long-established technology group creates confidence in global payment transactions, modern communication, digital identities, and data security, by providing innovative products and solutions.
Listen to this Voices In Payments Podcast Episode to find out:
If you’re curious to find out more about how G+D solutions Create Confidence. you can find more information here. Please reach out to Barnabás Ferenczi and Rüdiger Vogt if there are any topics covered in the podcast that you want to explore further.
About PaymentGenes’s “Voices In Payments” – The Future of Payments podcast:
The “Voices in Payments” Podcast, is an initiative launched by PaymentGenes to positively impact the payments community, by educating and connecting the market with vertical-specific industry expertise.
PaymentGenes Empowers Business growth by providing expertise-driven Recruitment, Contracting, Business Strategy Consult, and Data Strategy Services. These services all resolve and intersect around payments. Learn more about how we can help your business here.
Hi everybody. Welcome to the payment change podcast series. Voices in payments today, we are talking to Giza and the Flint about the future of payments and innovation with us. We have Barnabas the head of strategy and marketing. Who do you first, the head of payments? 4.0 business units together. They have over 19 years of experience in Giza and defense and are key innovators within the payment industry throughout this year risk, we will be focusing on the future of payments. What is actionable within the next two to three years? Let's hear more about that. I'm your host David Cooper. Today I have with me really good and Barnabas vacancy, both of you, a very warm welcome to this podcast series. All right. Thank you very much. Thanks. Right.
Great to have you both on perhaps to give a short background of G and D youth been around since 1852, went through a lot of crisis in the past, but come out on top, anything from UVA to chip cards, to mobile payments, car payments, and still keeping on innovating, definitely something that we will focus on because a year at famous jeans as well, we'd like to focus on the future of payments. To start off with a, a FinTech company founded in 1852, Barnabas, how does a company, yeah, keep a level of innovation, a forward thinking and future outlook within the company dynamics, quite interested to hear a bit more about that. A company like, it's been around since, many years and the whole ecosystem around us have changed a lot.
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01:58
Here it's very important that we keep focused on our customers and the aspirations of our customers, who our customers want to become, what are their pain points and what are the own business development targets. We leverage our internal source of inspiration to develop solutions that take customers to the next level. More recently, you also combine it with external sources of inspiration. For example, we are investing in startups ventures, or we develop partnerships with the fintechs. We also gather a lot of external sources of inspiration have focused on the needs of our customers and keep that focused along the way. Indeed sustainability and innovation. Of course, most of our listeners will also notice that.
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03:00
There are quite some changes in current way that we work. How did the whole COVID-19 situation, how did it influence the way of working with it in G and D and how were you able as a manager to assist your teams? So I think no one could really foresee and plan for the lockdown that happened more or less from one week to the next, in many of our locations around the world, just take Munich as an example where we're headquartered. Within days, most employees were sent to home office that was more than a thousand people and without any detailed instructions or pandemic dry runs in real time. From one day to another, everything's still functioned. From it to customer communication and alignment processes, all the meetings, everything moved strictly online.
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03:47
We even started doing Skype coffee meetings and attended virtual trade shows and conferences. So, but the question was, how can you prepare for this? Actually, I think you can prepare by instilling flexibility and an agile mindset in the organization in everything you do, as we did for G and D because working virtually together requires discipline and mutual consideration. That I'm really impressed by the way the global team has excelled in both. Considering the unprecedented changes in our private and professional lives, my experiences that we have mass at them really well for this call, this crisis. Yes.
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04:24
Of course with the global coverage that G and D has you have a ton of information as well from localized governments to localized officers that you can tap into to perhaps track the progression of a crisis such as COVID-19, but a gene D has whether the few storms already. How do you best capitalize on the accessibility to the information to make sure that you can formulate a well informed decisions from there,
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04:51
Like our global companies, we have followed very closely the local authorities and also global has have organizations like the, w H O in terms of, what is happening in the Kaisers and what other precautions and half measures that we need to take. Being a global company means also that we are very open to different perspectives and different dynamics, because as we all know, the had, different dynamics, in Asia than in Europe and in North America. You have to be always prepared and make sure you understand that, in the current situation, there are different challenges for your customers on the East, on the West side of the world. Having teams both on Eastern West side of the world makes you being very open and you appreciate and understand the changes your customers going through right now.
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05:49
Yeah. Barnabas you as head of strategy and marketing I have with full global coverage. How do you differentiate the for each.
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05:58
Specific region where perhaps the impact will vastly differ from one to another in order to best tailor, fit it to the current situation on the ground?
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06:07
It gives that can we combine a center approach and having a knowhow sharing, an experience sharing with local staff? So we set up for such situations like a central taskforce that has to manage both the human aspects, as well as the business aspects. We listen very carefully to what our local colleagues about the local conditions and local customers. We tailor make our solutions in terms of logistics or in terms of making the technology solutions adjusted for the specific local situations. For example, there were countries where it became very difficult to, send, people to bank branches to pick up the cards. Together with the bank customer, we could adjust, knowing that and understanding that the whole, logistics model so that it would get new bank cards at home. There is a lot of examples, and all that.
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07:11
It's very important that you combine a central innovation and know how about business processes and technology with a local touch of listening and understanding your customer needs locally.
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07:22
Yeah. I know one of your key motors is there's more to the customer to meet the eye. And it's also about developing new propositions. I can imagine as well, that this new delivery, for instance, the way of the delivering cards to the customers is also quite customer friendly. It something that you plan on keeping on doing in the future, or is it something that's once everything's back to normal, you get back to the old ways.
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07:47
In such a crisis, like the COVID, we all discover very fast, new ways of working and new ways of doing business. It was amazing to see how fast banking and payments have become digital or around the world and how a new business, where things have developed very rapidly in terms of how you onboard your customers, how you get your customers, how you manage your card with your customers, how you manage your contact with your customers. This is what we took as the most important learning from the Kaiser is that innovation and digitalization happens faster under such circumstances. In this regard, we are very positive that both our banks, our end customers, the path, those, and also we as company learns a lot in the Kansas.
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08:39
We definitely keep a lot of the new processes and innovations that we implemented during the crisis for the future.
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08:48
Christopher, both UDI and Barnabas as senior management, you are thoughts with, making sure that the longterm vision of the organization.
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08:56
Is, is taken care of course, these types of crises, ask for a lot of, stepping in on a more operational level. In what way, or in what sense do you allow your vision to shift from longterm to more short term, perhaps even at the next two quarters to the current day to day operations and still make sure that the team works to the most efficient ways? Well, maybe I can answer that one as the non strategy guy looking also at the strategy and the longterm focus of autonomous like that. I think we have a very good longterm strategy in place, with our DNA, as the basis, creating confidence, but when it comes to situations like COVID, your customers and the whole, organization really demand your short term focus on that.
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09:51
There's a lot of issues that have to be solved from one week or even one day to the next and where you need to come up with creative solutions. I was talking before about this agile environment that we work in order to be creative in such situations. We came up with really good solutions going from more physical world, like the meetings that I talked about to digital, alignments, and even processes from, signatures to approval processes and everything that was involved in this. Therefore, I, I think we have, in a very short time, really achieved a bigger change in the operations and in our processes where, quite some of this we will keep and take into the future and even make that part of our overall strategy.
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10:53
We have also identified new areas, that, have been emerging for our development, that before we did not maybe see as clearly, and that, because of the crisis have become much more evident. I can imagine as well, that at these times there are a lot of different aspects and love this processes that will come up, they will need adjustment. How do you prioritize, which needs, which one is most urgent. Do you have any examples of various things coming towards you and having being forced to make a decision and how do you weigh them against each other?
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11:31
That is very important to have a longer term vision, because unexpected things will always happen. These are like, when you're sailing or driving a boat are the little waves that bump against your boat, and they can give a bump in this or that direction. If you have a clear in which direction you want to drive your boards, the tasks a lot in terms of prioritizing resources,
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11:59
He said it as well. That's a one a situation like COVID-19, the breakout becomes more, a more substantial that you guys or senior manager sit together, everybody to redefine the vision to reemphasize on that, or is it something that's always has been a constant and you would just instantly know how to act upon that?
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12:22
I think for every company in a very serious industry, like payments and banking, it's very important to keep the principles on the radar. When you react to a short term Kaiser's or challenge, and the principles that you have to maintain security, you have to enable your customers to be able to use payments solutions in a secure way. This is what we have been doing since many years. In this regard, this is also our driving logic we have, during war. The cases that our customers, primarily commercial banks, they are able to serve that clients in a secure way with payment solutions. That also creates a good customer experience. That principle doesn't change during a crisis.
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13:14
Of course, you have to be very fast in terms of how you react to challenges in implementing this principle, let it be car manufacturing, or how will you deliver the cost to your customers, how you place previously physical or digital, but the principles are the same, I would say.
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13:35
Yeah, indeed. Perhaps to change a bit towards more, a future perspective, because like we already discussed, these unfortunate times also are a key driver for innovation, in your experience, the changes in the past few months, yeah. What what, new possibilities have they opened with regards to services, product solution that we can expect to enter the market or become more popular in the next year or two? Let me answer that one. You can just take contactless payment, for example, this is not a really new technology, but driven by the covert situation, public awareness and the acceptance by merchants has gone up significantly. For example, a recent report from MasterCard shows how contacted contact us adoption is becoming the new normal, with, almost 80% of the transactions across Europe now being contactless. The main reasons for that are simplicity and the cleanliness of this solution.
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14:39
They should be used to in the Netherlands already for quite a few years. Absolutely. I keep using that example of the bakery where we're for many years, although I had a contactless card, I could never it. After COVID locked down within two weeks, they were all set up, right. They have a point of sale now that accepts contactless cards. They, by the way, they didn't even accept cards before. That's how this whole, environment is changing. I think that also the fact of course at the spending limits for contact us have been raised in many countries within the last couple of weeks that has ordered that has really helped, people all over the place to benefit from the, from this way of paying. Also being very active in the payments with variables.
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15:33
We know that the sale, for example, off of watches with payment functionality has significantly gone up since the pandemic started. Also a lot of people now start to adopt the mobile phone for payment much more than before. The mobile contactless transactions have doubled in Europe, just in Q1. Another effect of the current time measures is that the online sales of course have become more popular during the last month. In this context, with the recent incidents in the news, securing sensitive customer data has also moved more into the focus. I think at G and D mobile security, we've identified these market trends longer time ago already. We prepared with dedicated products and services. As Barnabas has said before, now we see really how strongly this is being accelerated. There's this whole digital trend, with the COVID situation. Yeah exactly.
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16:30
It's the, when once you have to change, people will change. Like I mentioned, here in the Netherlands, we've seen contactless payments and then as well, a payments through, for example, Apple pay has been widely accepted. Whenever I travel abroad, whenever I come to a store where it's not possible to pay by card, I'm always a bit frustrated and flabbergasted that they would have to go back in time for my feeling to cash payment. On the other hand as well, there's a very good reason that those payment options are still there today. I think as well, that it's quite within your company culture and vision that to have choices available, but these kinds of strange times do change the way that people choose to pay.
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17:18
Do you see a lot of these different changes, lasting in the foreseeable future? Or do you think that most will go back to normal as well?
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17:28
I think that, during such a crisis, new habits are formed. People who never paid by contactless card in the bakery may pain out because they have a positive experience now. A lot of new customer groups, a lot of new consumer goals have come.
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17:50
Accustomed to online eCommerce now because in many countries lock down was so severe. That eCommerce was for me, the only way to maintain your consumption habits. We think that the cuffs, that experience now new forms of payments in a positive way, they will keep using touch payment forms. Along the industry analyst, you also expect that contactless payments in store that online payments in the eCommerce space, they are here to stay. What remains very important is to combine the availability of the different payment methods to enable choice for the costumers to provide security. Each payment choice has to be done in a secure way, and also that the consumer experience has to be very positive. And that's really what we stand for. We aim at to combine high level of security with a great user experience,
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18:54
Perhaps going back a bit towards the global coverage that you guys are having and having the main advantage of seeing a lot of developments on perhaps a smaller skill and localized.
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19:06
Are there any specific developments that you see all across the world that you think will have a really profound global impact? Well, I would say, let's take an example for example, China. So G+D is active in this market from for many years and we have a key position there in the payment space. We started out with Magnetic Stripe Cards, serving most major local banks, and then moving to chip technology and then onto digital solutions. We're very excited to see how our Chinese colleagues are shaping the future roadmap. That is the global future roadmap with an innovation lead of typically one or two years ahead of other regions. For example, variable payment projects were introduced their first G and D even created a full payment ecosystem for the biggest gas station in China. Now we've introduced a do it yourself payment card.
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19:57
Bank clients are using a smartphone app, for example, via we-chat and create their own car design. This is really, these are trends that have, started in China and that we've then taken into our R and D also for our global clients. Looking into the future, paying with QR codes and digital P2P apps, they were also first introduced in larger scale in China with WeChat and Alipay. My expectation is that we'll soon see a much more widespread adoption of similar solutions also in Europe,
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20:34
QR coach, which mentioned, have already tried and been tested in Europe for instance, but haven't really had the success that perhaps people were,
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20:46
Could it related to the fact, for instance, that contactless payments is now really taking off in collaboration with the whole COVID-19 section. Perhaps there needs to be an extra, no driver for QR codes to be as widely adopted as perhaps it already has been in China. I think it's a, it's definitely, that there is a need for a driver to accelerate this, indeed and covert can be, such a driver, but, also at the same time again, see, you need to see that the China typically is a bit ahead of the curve there. And, I mean, five years ago, or six years ago, people were using contactless, key chains to do payment.
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21:34
Therefore for example, when they contact us infrastructure was not even up here in Europe, right? So I think we will see this, with a certain time lag also because the user experience needs to be of course seamless and it needs to be then also nicely integrated into the existing apps. Now.
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21:53
I find this is a very good example for, so the importance of innovation solving pain points because in the, in Europe and in some other regions of the world that was already a very strong legacy infrastructure, like you mentioned, this week in terms of, in the whole, on the being able to pay with your card everywhere from morning till evening. There's a very strong infrastructure, both on mansion side and also on bank side and cath for the side. The real pain point for the different stakeholders like consumers, merchants, or banks, was not actually around the access point, or the access device, or how do I pay in China? There was a lack of, both a widespread POS infrastructure, although it's a market with a huge, more than 7 billion payment cards, but the infrastructure was very slowly catching up.
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22:55
This has created a pain point and it's created an inspiration for innovation to leapfrog that development like this, contact us and to move directly into QR codes. I think in Europe, also, there is a lot of innovative energy, but probably this energy will go into different fields and dimensions because the pain points are different.
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23:20
If you could shortly explain how to DIY cart, the cart works, it's purely a consumer card, right? The DIY card. The consumer can modify to each order. That's the beauty of it that you, as an end consumer can actually modify the cart, and design the card, to your liking, in an app, and that's basically,
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23:46
Gives you an individual card once you go through the fully customized to my liking. Exactly exactly. And, it's a, it's the only card that exists with this, exact design because you did it yourself and then as well, some possibilities for advertisement for companies that say, Hey, I will give you a discount in my store. If you, for instance, use my brand or your car. I don't think we have thought about this yet, but definitely something to think about it. Yeah.
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24:21
Great idea. By the way, this is also happening in closed loop ecosystems. A merchant is a, is the one who is behind the cards, and actually this is also something that we, more and more introducing mega markets in Asia, like in China and in the Philippines where large merchants have an interest to manage a payment system within the merchant space. Of course, we also know it in your eco ACAT and this kind of thing. This is really where a merchant can emphasize the bond between merchant and consumer and regarding the, do it yourself CAD. I think you also see a combination of two tenths here. One is that as individual, we want to express what values we stand for. I am an equal person than I wearing things that have cousins.
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25:18
My my thinking, or I am a very proud of my success as a businessman than I have maybe VIP status things around me. That leads to the 10, that also the payment cards become lifestyle objects. So we want to express our values. We are working on solutions, feed Metro cards for the VIP feeling. We are working on solutions with eco materials that represent that the consumer cares about the environment. Also here, it's going science with the term that the banks are feeling banks, especially now with all these difficult economic conditions, they need to have a very strong bond between them and the car for their end customers. If the bank support that the calf can become a lifestyle object, then this is a very strong bond. The bank needs the consumer also at the level of values and lifestyle.
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26:19
Not only at the level of, finance behavior, purchasing behavior,
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26:24
It's something as well that we with payment in tea with our clients, that they are as well still looking into issuing cards, even from a merchant perspective, with multiple use cases, it could be marketing, it could be loyalty, but indeed conversion increasement, but it's something that we see in Europe quite strong, but it's still on a global a skill. This is, this is happening.
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26:46
Absolutely. A WB, a lot of changes coming to the cards, space and driven by such trends in terms of personalization, in terms of looking into stone, customer bonding and customer attachment, and also due to innovation, if now we can make a car fully, except for, of course, the cheap end antenna of eco-friendly materials that is possible that the customer has a nearly hundred percent eco-friendly card in their hand. That's we can also make a Metro card combined with contact as function, which is a technical challenge a few years back. That is working, all of these contacts and some governments. This is very important because when I want to use a as consumer, my car is a lifestyle statement. On the other hand, I don't want to compromise my values or the use case.
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27:46
Technical innovation and these value based consumer trends, they go hand in hand.
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27:52
Yeah, there must be needs an improvement in the UX in order to make sense to, or to implement it. Indeed, a payment cards as Metro cards are for instance, for the London underground, but as well, we've been struggling here in the Netherlands as well with the OB chip card. It's really getting it up to speed and making it super user friendly. We're still not quite there yet. So there's level for innovation. If you can speak to the Dutch government, please feel free to do so.
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28:19
Like I say, there is a lot more to the car than meets the eye cause a gate's future in the cayenne now and use cases. Also if you go to examples, you mentioned Diedrich like transport, like combining identity management with the payment function or closed loop ecosystems where you have special benefits. The card has a lot of potential in this regard that we can still leverage.
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28:48
One other thing that I was quite curious about, and really perhaps you have some interesting insights hairs as to payment landscape is of course global, but as well, very localized with specific payment, methods that are unique to each and every region. How do you make the decision, whether you should implement them in your product portfolio, or you will just get a two scattered portfolio of all the different payment methods. What are the, some of the main decisions that you will need to take in that aspect? Well, first of all, I mean, we don't create our portfolio based on features per se.
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29:25
So we're,
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29:28
Doing our solution roadmap based on customer needs and how to add value in.
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29:33
They life. Just like we just talk about use case driven, like for example, paid frictionless online, but knowing that with a G.
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29:42
D solution you're secured or shop at a farmer's market using your fingerprint instead of a pin to verify your car transaction. Things like these that simplify the act of payment are what we typically look. And, with payment 4.0, we address a growth market that consists of fintechs, neobanks, and aggregators, such as payment processes. And many of the end customer needs. These players are serving a very similar around the globe. That's why you see them on the rise in many countries currently. For these needs, we develop our solutions sometimes with a local flavor, but always with global execution in mind. Just to add to the example of the metal card. We're constantly looking at how to enrich the payment situation and the user experience. For example, with the FinTech in Canada, we have launched a metal card on the one hand.
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30:37
This is a clear fashion statement. You can even hear the difference when dropping the card on the counter, right? So that's the whole idea behind, but on the other hand, it is bundled with services such as a realtime feedback on the prepaid account activity via an app for cost control. This means being both cool and making a strong statement when paying, but at the same time, having sustainable consumer behavior in mind. At the end of the day, it's all about enabling a satisfying customer experience, regardless of online, offline with a physical card, mobile wallet or verbal. And that's basically what we're addressing. Again, like I said, with a global focus, from a platform perspective, but with a local flavor that we can implement. Yes.
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31:25
We talked about, cards or Q our peer to pair, digital commerce, so many options that are currently existing in the market. Yeah, looking towards the future, and then, let's talk practical, in the sense of two to three years and not 10 to 15 years where it's a full biometric scan or chip implants that will allow a frictionless payments. What are some of the recent developments that you guys are seeing on a global scale that you're most excited about? Well, I'll give you two examples that I'm really excited about.
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32:03
I mean, based on what we outlined already, that there's a strong need to combine convenience and security for remote authentication and a G and D has developed a solution where a consumer can use the contactless payment card they already have in combination with their mobile phone to authorize, for example, bank transfers or online payments. We call this configured tap because you tap your card to the mobile phone and you can also use it to activate or entry into your mobile banking app or to activate a new payment card. And, and that to me is a really great about how you create a wonderful user experience combining a technology that's already out there plus a new innovation that's being driven by us.
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32:48
The other example that I would like to mention is, w we see really an increasing need to secure, sensitive consumer data that is being used in eCommerce transactions and here the technology of tokenizing customer related, sensitive information stored at Merced merchants and thereby making it useless for hackers basically, is very important. We are using our long expertise in the field of secure payments, by, or through this tokenization technology and with this where we're now addressing this need for security. Exactly. Yeah. Perhaps to start off, touch on the first point that you mentioned, as were combining the contract discard with the mobile phone. It something as well? We see a lot of developments on the field with mobility with shared cart services, companies like terror mobility with their small scooters.
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33:46
Is it possible.
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33:47
Software that will be then on the phone will be implemented in either the car or the scooter, and now you can use the card in that way too, to pay mixed payments? sure. I mean, we're already talking about in car payments, these days, and I would not be surprised to see this, also being integrated in other mobility solutions, of course. I mean, in terms of the form factor in terms of the functionality that is absolutely possible. Yep. Yep. The second one, you mentioned security and especially in focused on tokenization and it's of course, one of the buzzwords that everybody's talking about, perhaps every now and then it makes sense to take a step back and Israel for those who had not familiarized with the landscape. Can you just shortly explain in layman's terms, what does it mean tokenization?
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34:39
Well, tokenization basically means that the information, the, the clear information, so to speak that is on your card or your primary account number in particular is being, it's being, modified into a, a token that can be used for payment. That if you just have this token, you will not be able to execute a payment. Basically this information, like I said, would be useless, to make a payment online, in a regular way. It's translating the baby data into code language that can only be deciphered by the others who know exactly it's an encrypted way of transporting the information. In that sense, very secure as well,
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35:29
Constellation, and it makes, eCommerce payments, mobile payments, digital wallet based payments with the mobile.
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35:39
Yes. All right. Mobile contactless and secure payments, those are the things to look out for in the future in a foreseeable future, absolutely. In the foreseeable future. If you want to go further, but that would be another podcast. We can, we can of course talk about, things like, central bank, digital currencies. Future-proof digital payment solutions that gene D as a group is also working on. We are in discussions currently with central banks globally and preparing the first pilots on that. Also, I mean, you talked about, transportation, but were also looking at e-government solutions. Making the whole process of, for example, renewing your passport, much more user friendly. Of course also securing it infrastructure is on top of our agenda.
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36:36
We will also see more, secure biometric solutions in the future, whether we're talking about authentication with your face of voice on the mobile phone, or with a fingerprint on a payment card, right? So these are all trends, that we are actively driving, where we're spending a lot of time and effort in terms of developing new solutions. Again, like I said, I mean, these are every one of these points would be able to be a possible podcast on its own, I think, but that gives food for thought. I think, I will hold you to it that indeed we will touch upon one of these topics in the future if you're willing to, because, both Barnabas and Rudy, I must say that I really enjoyed it, Bosca this podcast. I would like to thank you very much for contributing.
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37:24
Yes, we look forward to seeing these developments in the near future. Thank you right back, our pleasure. Thank you. All right, guys. Thanks a lot. This was it for this week's podcast, and we'll see you next week.