The electronic commerce market has been growing rapidly all over the world, more and more new players appear and clear trends are being formed in response to business requests. The development of e-commerce has become one of the central topics at the eCom21 conference held in Riga on 19th-20th November. We asked Ruslan Stecyuk, the Chairman of the eCom21 Steering Committee and the First Vice President of Rietumu Bank, about the place taken by banks in the process of transformation of this ecosystem and about the driver of these changes.
According to tradition, your bank is the organiser of the eCom21 conference. What was the main topic of the event this year? And why? If electronic money was the main focus last year, this year it is processing, payment acceptance and the development of electronic commerce. We proposed participants of this conference to discuss factors of development of e-commerce and topical questions for all the participants of this ecosystem as specifically and as comprehensively as possible. I mean banks, processing companies and payment institutions, including issuers of electronic money, and trading companies, and also the main link – buyers. Each of them plays their important role in the process of organisation of processing and payments.
Why was the topic of the development of e-commerce chosen separately? It was interesting to review and discuss the stages of development of each participant of the payment ecosystem. This process was slower for some of them. Some, on the contrary, had a bright flare and a lot of changes within a short period of time. Some started to overtake functions from other participants, and were very successful in this. Therefore, during this conference we spoke about the future, about the vectors of this development, whose model would turn out to be more successful, in what area participants compete, and where they are probably in synergy.
You are talking about the development in the market of electronic payments. Is it also related to the gradual transfer of finances to the digital and mobile environment? Are we really witnessing gradual digitalisation of the plastic card as well as the main payment tool? And who is the biggest driver of this process – banks or non-bank payment institutions? In my opinion, business is the most obvious driver of this process. Yet, non-bank payment institutions indeed respond to the requests and needs of business much more effectively and operatively. A bank as such is a more conservative structure, having its traditions, working within the framework of more strict regulations.
If we are talking about digitalisation – yes, the share of payments without cards is growing. The number of transactions, in which the payment tool is integrated into portable electronic devices, tablets, Smartphones, is growing. The nature of the payment tool certainly remains the same, only its carrier changes.
Nowadays, competition in the financial services market is growing not only among banks, as retailers and different start-ups are also entering into this competition. Are banks afraid of such competition, and is it possible that they will give up their market share in favour of new players in the coming years? I cannot speak for all banks, I will talk about our experience. Of course, on the one hand, we can perceive payment institutions as our rivals, which are overtaking many functions, they are closer to customers – and we can compete with them. Yet we have chosen different tactics. We have noticed areas of synergy, how we can be valuable to each other, and have built our cooperation with payment institutions in a way that is favourable, both for us and for them.
E-commerce has been developing in such a way that technical providers, as they received financial licences, got the option to make payments on behalf of their customers. It would seem that they had already undertaken part of the bank’s functions. Yet, in the area of electronic commerce, they still need an acquirer bank, they need the experience banks have as members of international payment systems. Of course, a payment institution is not just a financial mediator, it can contact international payment systems directly and receive its own acquirer’s licence. In this case, this institution stops depending on any bank. But is it feasible to make this step? Such a development path takes away the obvious advantage of the flexibility of approach and manoeuvrability of development, adding not quite field-specific and resource-intensive functions, which even many banks try to buy from outside by finding outsourcers. Will such a development be profitable for the market operator, will it have enough funds not only to create, but also to maintain these new additional lines of business? These important questions should be resolved while the company is “high and dry”, before it invests a lot of efforts and funds to get the status.
Those payment institutions, which are now dynamically developing in their specific sector, might become closer to their customers by providing them with convenient apps, reports, user accounts. This is their strength. They are even stronger here than banks, because they are closer to the trader. The next step – to become an acquirer – is quite a demanding process for them. It requires significant resources, including temporary ones.
We are not afraid of competition or development. We faced situations, when a payment institution became an acquirer, and therefore it did not need a bank for these functions any more. At the same time, our relationship did not stop, it just moved to another level, it took some other shape. Trust me, the e-commerce market is quite extensive, there is enough room for everybody.
Internet acquiring is one of the channels to receive extra profit for banks. Is this channel important for Rietumu Bank? Are your customers interested in the electronic commerce services you are offering and how has this interest been changing over time? We must admit that more and more businesses are moving to the Internet. Year after year, more and more companies start using the Internet, not only for providing information about themselves, but also as a valuable channel of attracting customers and selling their products and services. This is a never-ending process. This is why the industry is growing in such a dynamic way. And more and more technologies appear, which allow the opening of an online resource and the optimisation of expenses much faster. This is why there is demand for our electronic commerce services, and it is growing.
Last year, eCom21 focused on electronic money, including prospects of cryptocurrencies like Bitcoin. Has the attitude to this tool changed during this year? How do you see the prospects of electronic money? Over the past year, cryptocurrencies, primarily Bitcoin, of course, from quite a marginal and specific topic have become an acknowledged means of payment on the Internet for conventional buyers. At the same time, the majority of regulators still recognise Bitcoin as an immaterial product rather than as a currency. Some of them (including one of the largest) have directly forbidden their employees to talk about this topic. The technology itself is finding more and more admirers among the leading global financial experts. The problem of alleged anonymity is dispersing as a result of the localisation of payment solutions on regional financial markets. The question of the independent value of Bitcoin, which was initially related to this tool’s credibility, does not sound absurd any more – millions have confidence in this cryptocurrency. Although it is unlikely that Bitcoin can become a complete currency in the near future, it has chances to become an acknowledged means of payment and a clear investment instrument. This is why we are closely watching the changes with regard to cryptocurrncies on behalf of regulators, financial markets and the Internet community – so to speak, we are monitoring this situation. We will probably return to this matter during our next conferences, because experience shows that participants are very interested in this topic.
What will drive the growth of global electronic commerce in the near future? Who can become the leader in this market? The electronic commerce market has huge potential. For example, at the conference, we discussed many things, which you might call surprising. That the Facebook social network has become the largest media arena, while it has no news content, that the Airbnb website has become the largest real estate rental service, while it does not own any real estate, Uber has become the largest service providing the transportation of passengers in the largest cities of the world, while it has no car fleet. There are many of these such examples. Those who are faster, stronger and more functional will lead. And the novelty of thinking and the ability to respond to market challenges will be the drivers of growth.
Eleonora Gailisha Mass Media and Public Relations
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