Banks, Direct Speech, Financial Services, Forum, Innovations, Latvia, Technology

Viktor Dostov:The payments industry is now entering the stage of quite a substantial transformation. This is already a universally accepted fact, though surprisingly e-commerce does not pay much attention to it. Meanwhile, in my opinion, the coming changes can strongly affect how stores interact with their customers.

I would single out two tendencies. The first is the appearance of non-banking organisations in the payment chain, whose main specialisation is the development of interfaces. In fact, they serve as intermediaries between consumers and their bank, providing convenient mobile applications or other ways to transfer money. Banks are still the only ones who can open accounts, but with time they will lose their monopoly on the interfaces. In the future, acquiring contracts will disappear – stores will agree with information brokers, rather than banks. Legal innovations, for example, PSD2, are aimed at precisely such a market structure.

The second is the "disappearance" of payment. We clearly see this in the example of mobile applications. Built-in purchases there are carried out at the touch of a button; you do not need to enter card details each time. The trend for physical stores will probably be the same. A store must recognise its buyer at the cash register and do it without physical payment instruments – cards, telephones, etc.

-There are many non-banking structures providing their services in this sphere. How does it affect the banking structures?

V.D.Non-banking organisations appear on the market because classical banks cannot meet the customers’ demand for simple transfers and payments. Therefore, undoubtedly, the number of available services is increasing. The intrigue is in whether the payment market will become a "fiefdom" of credit organisations or if banks will compete with them and, ultimately, regain the market.

- Will these two classes of institutions be able to cooperate or function alongside each other, within their own niche?

V.D. I would not present banking and non-banking organisations as irreconcilable opponents. The relations between them, sooner or later, will find a certain balance. It seems to me that they will organically supplement each other. Banks will remain holders of sources of funding (i.e., will keep money of customers) and non-banks will provide customers with interfaces, personal finance analysis tools, the management of credit rating and so on. That is, the division will not take place on client niches but rather on specialisations.

In principle, the division of banking and non-banking organisations is the historical "rudiment" of the institutional approach to the regulation. Now preference is given to the functional approach, i.e. the regulatory requirements are not established based on the formal status of the organisation, but rather on the basis of the services it provides.

- What issues remain unresolved for representatives of e-money? What hinders development?

V.D. Probably, the main issues are still associated with the regulation, both specialised and in broader terms, for example in the area of combating money laundering. The e-money industry in Russia and in the European Union is regulated in a special way. Therefore, in practice legal issues in the enforcement of certain laws always arise.

Another important issue is the attitude of the government and the regulator to innovations. Regrettably, at times innovations are only considered as a source of additional risks, which certainly affects the regulation. As a result, we often observe how one or another activity exists in practice, but is unavailable from a legal point of view. All of this creates considerable uncertainty – nobody in the market wants to risk being put under sanctions. And if something is not done by you, it will be done by your competitors abroad.

- What are the factors contributing to progress?

V.D. Lately we are observing a gradual transformation of the functions of the regulators. Along with a supervising and controlling role, they have mastered the roles of consultants and analysts. This is perfectly illustrated by the "regulatory sandboxes", when the regulator actually advises innovative companies and creates conditions for the development of innovations. It seems to me that it is the dynamics of interaction between financial companies and regulators that will determine the rates of progress on the payment market.

- How will, in your opinion, payment services improve in the long run?

V.D. It seems to me that the main innovation is the consistent separation of the source of funding and the interface. Currently you cannot have an account at one bank and use the mobile application of another bank. We are used to such a state of affairs, but in reality it limits the emergence of innovations. Their separation will create the conditions for the emergence of an entirely new customer experience – payments on biometrics, disappearance of plastic cards as a form of payment and many other things. Time will show what will become of the basic, universal method of payment.

-This year the Russian Electronic Money Association is a partner of the Conference "eCom21". What are the main advantages of this forum in your opinion?

V.D. Our main task as one of the largest payment associations in Russia is the search for and support of the best regulatory and business practices in the retail financial market. Therefore, we are always looking for events organisers that share these priorities with us. We are delighted that our cooperation with "eCom21" is continuing for the third year in succession. It is rightfully one of the best European platforms for exchanging experiences and meetings with leading experts in the industry, while being largely focused on the interests of the participants from Russia. I am sure that in 2016, in Riga, we will once again obtain an opportunity to become participants of the most interesting discussions and reflect on the future of our market in the excellent company of professionals.