L'Espresso of this first week of November reports the news of an agreement between the main telephone operators and the main banks of the country. After years of study and experimentation, it will be possible to insert a card into a mobile phone which enables commercial traffic and payment by credit card.
The technology used is NFC near field communication which requires substantial changes in physical cards and POS. If we wanted to cover all of Italy, the investments would be enormous for 50 million cards and over a million pos. Within two to three years, the planned interventions should concern three hundred thousand pos. Yet Italy is one of the most interesting markets in the world due to the extensive and pervasive use of cash in our economy and therefore it is worth investing in everything capable of countering its presence.
What interests me the most is the nature of such agreements which could mark a profound transformation of the payments industry which has always been in the hands of the banks. We do not have all the elements of the agreement but some aspects taken from the press help to understand what it is.
A banking entity that holds a banking license and a customer database in compliance with the regulatory parameters on transparency and anti-money laundering joins forces with the telco companies to extend card operations especially to micropayments.
Payment institutions and electronic money institutions have been renounced in order to maximize the regulatory and economic benefits that combine the banking product and the mobile phone.
It will be interesting – apart from the antitrust profiles – to follow the evolution and the changes that this will produce in the banks and in the power and market relationships between the banking subjects and those of the mobile telephony. Standardized products tip the scales in favor of mobile phones (their number is higher than that of cards) and reduce the number of bank branches. The bank is confined to a provider of banking licenses, customer screening and above all the channeling of payment transactions in clearing and settlement systems that are legally forbidden to telcos. For the aforementioned services, the bank will receive royalties.
The distribution of banking products and a large number of transactions are entrusted to mobile phone companies and the latter will probably appropriate a high share of the added value induced by mobile phone transactions. In full agreement and obviously renouncing to compete with the banks.
This is an operation that will mobilize huge resources for the investments to be made and which will determine a new tariff structure different from the past on card transactions on which it would also be interesting to know something.
And in terms of regulation and controls, it would be worth carrying out a test of resistance between the various regulatory prototypes existing in the financial system. The banks, the payment institutions and the imels are subject to control, but not the telcos which operate in conjunction with the banks to the point of making them captive in payment services. What implications can one imagine leaving an entire sector unregulated and which will apparently be one of the most dynamic in the future? What regulatory constraint prevents telcos from operating directly in the payments sector by competing with banks for the benefit of consumers?
