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Talking Futures #4: New Payment Methods

Last Thursday, March 31, the fourth Talking Futures session took place at Mormedi headquarters. This is our series of talks in which we invite experts to tell us their vision about some of the trends that are changing the world.

Change breeds incredible experiences, and with a last minute change this Talking Futures session began. Our guest, Adolfo Ramirez, told us on the day of the event that he could not come for personal reasons, so we had to find another speaker or cancel the event. But we did not want to miss the opportunity.

It was Felix Uriarte who agreed to come to share in this close talk at our offices, in which he told us his views on the changes in payment methods that exist right now and where the future is heading. Felix Uriarte is the former Director of Marketing and Digital Banking at Bankia, as well as having been a member of the advisory board of Bizum and Redsys. It is clear that he knows a lot about payments.

You can already listen to the full conversation on our Spotify and iVoox and watch it on our LinkedIn and our Youtube channel. Below we share some interesting excerpts of what Felix had to say after being asked by our Brand and Digital Director, Joe Lozano.

I would like us to talk about new players like Klarna, SeQura or Sipay itself, which are shaking up consumer habits and raising expectations in terms of customer experience. I am referring to the new alternative payment methods. Why have we come to this?

The reality is that payment is a very important product attribute. You know the 4 Ps of the marketing mix. For me, payment is the fifth P. In fact, payment has a beastly ability to transform the product. For example, if I ask you what is more important in a product: the price or the effort you have to make to get it? In many occasions, and it doesn't have to be people who don't have money, the effort is what makes the difference.

You talked about Klarna, why is Klarna successful? Because Klarna hasn't done one thing that's very extravagant, but it's given you a peace of mind, a facility for you to take on paying for a product, low price usually, that takes away any friction and you make a decision much quicker. In fact, BNPL (Buy Now Pay Later), which is what Klarna does, increases sales of a product by 20%.

Payment can really make your product better, the perception and the product itself. I can talk to you about convenience or security. For example, PayPal payment gives you security. If you have PayPal in an application in which you sell expensive products, on tickets over 300 euros you sell 14 or 20% more, simply because of the payment. You have to give a lot of importance to the payment. (…)

And these new consumer habits, these new payment methods, are they for everyone? I would like you to talk to me about people, users, and companies.

I think it is for everybody and for all companies. We have the example: cheap products, young people who want to rotate a lot… There is a link that is already being raised: how do you link Klarna with reselling it on Wallapop. PayPal launched payment in three some time ago. We're going to see how we link all of this going forward. And there you have a fantastic chain, a fantastic customer funnel. IKEA, which sells cheap furniture, has put so much importance on this that last year it bought its own BNPL company.

It's so strategic about payment that it's no longer a cash flow issue, it's a strategy issue. But if you do an analysis of consumer durables… Cars: the movement of any luxury brand into mobility is clear. There are companies that are specializing in precisely what you think is not the target of this: high-income people.

Eight years ago I did a test. In a very well-known electronics store, we had the ability to do a cookie cross-check to see who came in, and I knew perfectly well if someone came into that store if they were a customer of mine and if they had a preconceived credit. And I would only offer BNPL payment to those who had very high credit. The ones that you would tell me "those guys are never going to buy a 300 euro TV on credit". So that we can see the value of convenience: 14% of the people who bought this type of product, who under no circumstances would have thought "I'm going to ask for credit", who didn't need it at all, applied for credit.

Klarna is the same as financial but what they have done is remove the word "financial" and they are a very cool company. So they've managed to make it look like they're something they're not. We are seeing how certain banks, especially retail banks, are realizing that the point is not to give you credit, but what you are going to do with the credit. Santander Consumer Finance, for example, has just opened a marketplace where what they give you is the product and they are behind. How do you see this? How do you see this shift towards "what matters is what you experience and not the product itself"?

It is exactly another way of telling what we said before: don't have it, use it. (…) Soon we are going to see a lot of experiences. This has been done fantastically well, like almost everything else, by Amazon. And now the banks are many of them moving to that model. If you take the typical chain: I am interested in something, I look for it, I buy it, I pay for it, they bring it to me, and if it is a complicated product I do web scraping… Amazon does it all. It attracts customers, you pay as you wish with Amazon Payments, it has automatically set up the BNPL, the returns are fantastic… This provides as much value as selling on Amazon costs you between 15 and 40%.

Traditionally, what a bank would tell you was: "take the POS and charge". A bank doing that, what value did it bring? I don't know, but what value was being paid? Zero something. Compare, 40% versus zero something. What are the banks, and Klarna included, doing? Opening up that data-driven offering to give better service. Typical example: Caixa with Wivai is making a complete mini marketplace to provide all services, and is even considering giving it to anyone, let's see how it works out. Santander has bought coches .com, because it wants to be in the moment when someone chooses a car, and I give them a credit.

Fintechs: Klarna, I am a heavy user because I am very interested in what they do, it is a fashion brand. Their app is absolutely geared towards people who like fashion, who like to change, etc. It's a marketplace. They are already selling data, which is a bit complicated, because they get customers with merchants and then recommends them to buy from other merchants, but Klarna will go from charging a 4% to charging a 10%, because they bring more value. Even from a value-added perspective measured in price, these models that expand everything, use data, and give you payment as something that allows you to do a lot of things in the chain, are much, much more valuable.

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