Our guest for this new episode of #FintechInterview is Edoardo Volta, Head of Fintech in Mastercard UK & Ireland, joins us while we discuss present and future of banking and payment technologies!
Can you tell us something about your professional background? Why did you choose to work in the fintech sector and what do you like the most about it?
I attended a very interesting university course which was jointly run by the Polytechnic University of Turin, where I studied Management Engineering, and the University of Brighton where I deep dive in Business Studies. Straight after university, I worked for Rolls Royce in supply chain management for two years, but I was looking for a role more on the business side in London. As soon as I saw that American Express was looking for people with a supply chain management background, I applied for the job and that’s how I started my career in the payments sector. Then I had the opportunity to lead the Fintech team at Mastercard and I was very excited because fintech in London is a big part of the payment ecosystem and I had the chance to deal with some of the most interesting companies willing to push the boundaries of the payment space, while also serving the consumer. It’s very stimulating since it allows us to constantly innovate in line with the customers’ requirements as we try to serve them in the most digital way.
What is Mastercard doing to accelerate the fintech evolution?
A simple answer is: we constantly evolve, and that’s what fintechs are expecting from us. We started investing in this space before the word “fintech” even existed and we did it with the prepaid market, which is where most of the fintechs were born from, like Monzo, Revolut, and so on. What we had to do was constantly rethink the way we serve them to support their growth. More recently we offered an incubator service for fintechs called Start Path, where we choose 12 start-ups to work with for 12 months, we help them with their product proposition, we provide the network they need for the industry, and in some cases, we invest in them if it’s valuable for us. The main goal of this program is not to invest in the growth of fintechs, but to acquire new capabilities by partnering, instead of building them in-house.
What are the key advantages of Mastercard? How did it become so successful and how can it maintain this position?
What Mastercard has done successfully is expanding its service on a global scale and allowing users to have the same payment experience, no matter where they are in the world, in a safe and secure way. The strong infrastructure behind Mastercard makes it possible for us to achieve this.
Increasing safety is fundamental to maintain leadership, as one of the main challenges we deal with is payments fraud. In addition, differentiation and expansion of services are key to staying ahead, as the world of payments continue to evolve and more choices beyond cards become available to consumers. Nowadays cards are playing a significant role and they will still do it in the future. However, with new payment methods becoming mainstream, it will be essential to have diversified products and continue evolve our company’s strategy.
How does Mastercard differ from services such as Alipay?
We see services such Alipay as complementary to what Mastercard provides. We have a lot of products that co-exist. One of Mastercard’s key strengths is the ability to provide our services globally. Our strength lies in Mastercard’s global network which is something that other players have not yet managed to build so far. The future of payments will very much be focused on partnerships and by collaborating with these companies we can continue to deliver innovative payment solutions.
What kind of technology do you think we will see in the future of payments?
It depends on which part of the world we look at. For example, in Europe, the payment landscape has moved much more rapidly than in many other places, while in the US, faster payments are not present everywhere, and paying by checks is still very common. In addition, there are many countries where the payment ecosystem is still at early stages and cash is still king. In these markets faster payments and digital are the future, whereas in Europe, perhaps, we will see more account-to-account payments, where transfers are made directly from the sender’s to the receiver’s account. Cryptocurrencies are also becoming more mainstream and will have a space in the future of payments. I believe that in the world to come there won’t be a single technology that will take over, but there will be a wide range of options that will become more and more accessible.
By the way, the factor that makes paying by card still so popular is that it is more reliable in terms of security since you have a network behind guaranteeing your payments. Safety and security will be key differentiators for any solution to scale.
Now let’s consider two digital banks as a business example: Starling, founded by an investment banker, and Revolut, created by a young entrepreneur. Which do you think is more suitable, in terms of mindset, with Mastercard?
Every Fintech we work with is unique and each challenges us in different ways, which is great and means we are able to keep adapting as each new players dreams up something new to benefit the end consumer. Ultimately, Mastercard works with all of these Fintech players, and that is he power of partnerships, we are better for the many different customers we serve who keep us on our toes and at the forefront of innovation.
Which one do you think would be the victorious one, as right now there are a lot of digital banks with different strategies?
What will define success among the newer banks is profitability. In order to raise capital, and so to attract investors, a firm needs to be able to show that it can be economically sustainable in the long term. Moreover, the other key is differentiation. Companies must continue to evolve with the needs of the market: offering a bank account with debit cards won’t be enough in the next years. I expect that many of these new fintechs that offer financial services will need to evolve their proposition and their strategy in order to be able to generate profits. These companies need to ensure that they are transparent with the way they charge customers and that they charge on value, avoiding hidden fees, in order to keep their reputation of customer-centric organisations.
Why are the traditional banks not following the business model of Revolut and the other very successful digital banking companies, since they are gaining a lot of customers and success across youngsters nowadays?
If you think about traditional banks, providing a bank account is only a very small portion of everything they do. As a bank, they got a variety of solutions such as investments, mortgages, corporate banking and so on. It requires significant efforts for traditional banks to switch to digital because they are still sitting on legacy technological infrastructure. Moreover, Traditional Banks will consider the financial impact on many products that are making them profitable.
Banks such as Unicredit or Natwest have tried to take advantage of this opportunity by launching separate digital banking initiatives without affecting their core business. In this case the decision was between bringing them under the banking brand or keeping it completely separate, if they choose the former they fall into the trap of old policies, technological challenges, and so on. Consequently, they won’t acquire the nimbleness of a Fintech,however they do have loyal customer bases and scale. So what we are more likely to see is increasing partnerships between the Fintechs and the Traditional Banks.
According to your point of view, what could be the next wave of financial services innovations, now that consumers are becoming more and more informed and aware about the usage of mobile apps?
I think that there is a huge opportunity to serve customers in more ways than just in payments. Some areas are still not being challenged or in some of them, fintechs haven’t played enough. For example, investments, mortgages, and credit provisions are all fields where fintechs can go deeper by giving customers a different experience than that offered by the traditional players. For instance, a way to do that is by providing more transparency on pricing and options available to consumers. Firms should do everything to provide a much more transparent product so that people can manage their finances and portfolios better and more consciously. The thing that I love about Fintech is that one of its key goals is education for money. Their goal is to make consumers much more in charge of their cash and aware of their day-to-day spending, thanks to budgeting tools and other services. If we think about credit, it is an area in which there is an opportunity for more consumer education. I believe that the big wave that we will see in the next generation of fintechs is the focus on the educational aspect.
In case the credit card will be replaced, which are the main risks and how is Mastercard going to face this kind of problems?
Every business is potentially exposed to various types of challenges. Mastercard has a team that looks at risks from the financial aspect, to the reputational or regulatory ones. The team aims at understanding what could be done to minimize risks in the short term and how to improve our business in the longer term. In my opinion, the key is differentiation. Today, cards are a big part of our business, it’s what drives revenues now. As other payment methods become more widespread, we must continue to evolve and be a part of that journey, while at the same time ensuring we continue enhance our services around cards to maintain their relevance. There is also a big regulatory element to that as well. Regulators are looking at the payment ecosystem, at our business model and at what we are doing to defend the consumer liability. So, there are two things that we do constantly: we work with the regulators to ensure we support and enhance the payment ecosystem. Secondly, we help regulators thinking about what the future of payments could look like and how we can achieve financial inclusion globally.
Regulators are interesting partners to us because they are very interested in working with Mastercard and our competitors to achieve their goals to make the payment space more secure and inclusive, which is also a strategic objective for Mastercard.
How do you think that Brexit will impact the Fintech ecosystem? There are different opinions since Brexit can make the UK an even more privileged spot for Fintech, but at the same time it will be more difficult for UK companies to exploit the European market.
To date, Brexit has not been a barrier for start-ups in the UK. The Fintech market is still very dynamic, it is growing, and the investments haven’t dried up. London is still a leading market in Europe attracting investors and the most interesting place for fintechs to grow, so Brexit has not a problem so far. Will this change in the future? The devil is in the detail of the Brexit deal and what will companies be allowed to do. If the UK can guarantee a certain level of passporting, maintain the ability to access the European market, while setting up their rules, the country will attract more capital, and so it will come out as a win. I don’t see London losing its position as a strong Fintech Hub, at least in the short-term.
What would you suggest to today’s students willing to join the FinTech ecosystem and what skills are required for this ambition?
If you want to work in Fintech you need to be open to innovation. Fintech has innovation in its DNA. One of my customers was telling me the biggest innovation comes by taking something that has existed for a very long time and enhancing it. The other skill is resilience. You will fail, you will work for companies that do not succeed, hence having an entrepreneurial mentality is a key. Although Fintech might seem unstructured from the outside, numbers and facts are the most important things to keep in mind. Having a solid business model and a clear purpose is not less important than creativity. To conclude, I would say that the culture of many fintechs founders tends to be the key factor that drives the companies. Some are more goal-oriented, some are more partnership-oriented, and some are more quantitative. It is important for any applicant to really understand the type of company they are applying for and the key cultural drives.
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