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graphicstock man using digi - Global Banking | Finance

By Daniel Döderlein, CEO and founder of Auka

Six months ago I warned that Facebook’s announcement of a partnership with MasterCard was bad news for banks. I said that the next step for Facebook would be the creation of an accounts console of sorts, where payments could be made directly to contacts and merchants. On Monday, in the UK and France, Facebook launched P2P payments.

Daniel Döderlein, CEO and founder of Auka

Daniel Döderlein, CEO and founder of Auka

In 2015, WIRED reported how Facebook wanted their Messenger App to be the “app for everything”. Payments are, of course, part of this vision. For now, users will be able to link their MasterCard or Visa card as the funding source and pay contacts who’ve also enabled the functionality. This is much like Apple just announced with their soft launch of Apple Pay P2P and their linked Apple Pay Cash card.

If a user doesn’t have the functionality set up, Facebook will send them a prompt to enable it. Thus creating the viral spread in their quest to dominate this space, replicating how successful mobile wallets in China, the US and Scandinavia also gained traction. It’s one key part of the “formula”. It plays on people’s networks for spread – and who is better at this than Facebook?

As soon as they’re able, Facebook will cut the middlemen (MasterCard and Visa) and let users draw the funds directly from their bank accounts. This will save time for users in receiving funds but more importantly, for Facebook, it’ll mean the processing fee they pay to the card companies for every transaction is scrapped, while money flows in and out of bank accounts. The European PSD2 regulation will make this happen and Facebook already has the license in place to get access.

One of the first things we discuss with potential bank clients is (or, was) this eventuality. Last month we conducted an independent survey of 1,500 senior bankers from across 15 European countries which found that over a quarter (26%) believe the likes of Facebook, Google and Amazon will take the role of the bank within the next five years.* It seems they’ve been watching the news but not fully realising this eventuality is, to a large extent, in their own hands.

Whereas once it was almost certainly the banks who underpinned, created and benefited from the payments process, we’re now seeing a distinct payment-control fragmentation across the world.

In China, the world’s largest economy, the likes of AliPay and WeChat Pay clearly dominate the payments landscape. The world’s second-largest economy, India, demonstrated their hunger for a better mobile payments experience when 7.5 million users downloaded Google’s TEZ in its first-month post-launch. In the US, there is a land grab between Apple, PayPal (Venmo) and various other third-parties. Retail giant, Walmart, has just announced that they’re close to surpassing Apple Pay in usage for mobile payments in the US.

In most of Europe, PSD2 regulation will certainly drive payments change and there isn’t a clear winner yet. Of markets where mobile payment usage is prevalent, it’s only in Scandinavia that banks have retained their historical ownership of the payments process. The Scandinavian bank issued mobile payments are favoured and actively used by 65 percent of the total population.

Regardless of the region, where there is true mobile payments success, there is evidence of the same formula being used. It doesn’t matter who uses this formula to create the success – tech company, bank or retail giant – it just matters that the same principles are applied.

In Europe, existing payment services directives have meant that only those with a banking licence (banks) have been allowed to do certain things when it comes to account access and payments. That is of course unless the bank works closely with them in a mutually satisfying partnership. This means that it’s harder for AliPay or Google or anyone without the appropriate approvals to come into Europe and replicate the success they’ve enjoyed elsewhere. Once PSD2 has been implemented, however, that all changes. Banks will no longer have a choice but to give third-parties access to accounts through their newly created and opened APIs. Mutually beneficial or not.

We saw that in India, soon after their version of PSD2 (the Indian Reserve Bank’s UPI system) was implemented, Google took advantage by launching Tez. The Tez concept is something that an Indian bank could well have successfully created and launched themselves prior to their new regulations dictating they hand over account access. You see, it ticks the boxes when it comes to the “mobile payments success formula” mentioned above.

When considering all of the successful mobile wallet solutions mentioned above and as stated, regardless of what kind of company they originated from, they all have the following five things in common. This is the basis of the formula:


Anyone can use the platform to send and receive money quickly and easily, regardless of what bank they belong to. It’s a common platform for everyone.

Problem solving

The mobile payments solutions all solve problems for users. Examples of the problems solved include not having physical cash when splitting a bill or transferring funds owed, not having to recall complicated account numbers or risk sending payment to the wrong person and paying a merchant or person for goods or services quickly and easily with no third-party hardware. There are so many big and small problems being solved for everyone that the solutions could hang their hats on this alone.


All have the function mentioned above in that if a recipient doesn’t have the platform, they’re prompted to download it in order to receive their money. The promise of funds is a pretty big dangling carrot for most.


In a world of online social interaction, it seems rather soulless that your bank limits you to a standalone screen with a small “reference” field only. All successful mobile payments schemes allow users to conduct conversations with each other the way they would using any other chat or messaging apps.

Path to monetisation

You didn’t think these various companies dominating mobile payments were doing it purely out of the spirit of wanting to people’s lives easier, did you? All of the solutions can see a clear short and long-term path to cashing in. To date, no banks apart from those in Scandinavia have made money from mobile payments. Two of the ways that successful wallets (who are all following the same core formula) are making and will make money include more successful marketing and upselling based on robust personal data which previously wasn’t available and secondly, with third-party and merchant fee generation.

Facebook will surely seek to follow this formula across Europe, post-PSD2. The question is, which regions banks will secure their territories by rolling out their own successful wallets first?

*Through LM Research and Marketing Consultancy

Global Banking & Finance Review


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