Daria Rippingale (Bankingblocks): “Over the past 5 years investments into Fintechs and Payment Companies has exploded beyond the most generous predictions”

Daria Rippingale


What are your predictions on 3 top challenges that will have the biggest impact on the Merchant Payment Ecosystem in 2019?  

  1. Change to Payment Company/Fintech valuation drivers

Over the past 5 years investments into Fintechs and Payment Companies has exploded beyond the most generous predictions. As the lifecycle of these businesses has progressed, from concept, to reality, to major customer acquisition – enterprise valuations have taken the same trend; exploding beyond predictions. This has been a huge achievement for both the business and consumer finance sector, and has been instrumental in driving urgent change amongst major banks and incumbents.
The market is growing at an exponential rate, consumer update at its peak and Fintechs are winning their loyalty. However, something has absolutely got to give. If you track the trends of valuation across the payments and fintech ecosystem, there seems to be one big glaring problem; profit! As a (self-described) payments industry entrepreneur, this is great for our industry… it’s sexy, it brings more investment and it definitely brings the hype – but when will this bubble burst?
So many of the biggest players worldwide are operating by the same recipe – gain investment, provide free services, gain significant market uptake, earn no revenue, raise more money, attract more customers with free services, repeat; achieve billions dollar valuation based on market dominance – sell. Whilst this is a great model for payment entrepreneurs… what happens to those investors? Converting a highly engaged, but revenue-negative customer base into a revenue making business is a hard ask, and a big one at such a high valuation.
Don’t get me wrong, investments in the industry will continue, great value will be attained, but my prediction is the current (apparent) methodology of investment, which seems to ignore EBITDA (or revenue in general) is going to end. We will see shift back to traditional valuations and multipliers as the industry moves further into its lifecycle.

  1.     Cost of Adherence to GDPR and PDS2

One of major challenges that will face the payments ecosystem, specifically in regards to the requirement to adapt to new regulations, is the pressure this is putting on new entrants and smaller players. Significant infrastructure, security and development activities are and have been required and demanded of all players in the Merchant Payment Ecosystem over the past 24 months, which has caused a significant requirement for re-allocation of cash flow and resources for payments companies. There has been a lot of talk and focus on the impact this will have on major banks, with archaic technical systems (that are deeply ingrained), but there has been less chat about how this will affect the smaller or niche players in the market. Those payment businesses without significant external funding and resourcing are facing a tough time in the industry – having to seek additional funding, halting the delivery of products and services and rebuilding business growth strategies

  1.     Consumer lead demand

The fintech boom has had many effects on the merchant ecosystem over the past 5 years. This has been driven by in-industry experts, trying to modernize the current financial landscape, challenge incumbents and provide new avenues for consumer payments. The first to be successful have seen great consumer update, but these numbers keep dispersing as new challengers enter the market.
In 2019, with so many personal financial, payment services and point-and-play systems flooding the market, consumers will finally be leading the charge (rather the industry experts) with dictating what services they need, and exactly how they need it. Ease of sign up, lower differentiation of non-essential services and increasing consumer rights means Fintechs will now need to chase to keep their customer; not just offer a more accessible service than their (traditionally) less user-friendly banks.


Can you give us a view of what you are working on? What news would you like to launch in 2019?

Bankingblocks! In January 2019, we have launched the first, dedicated wholesale banking service specifically for the payment and fintech industry. Bankingblocks has been founded by a group of payments industry professionals to try and solve the problems facing Payment and Fintech businesses themselves – appropriate licensing, acquiring services, access to banking and international money remittance. Bankingblocks is business to business service, offering wholesale banking to the ever growing payments and fintech markets.
The product is simple – grow your business, block by block. Select, connect and launch.

Can you give us an update on what you’re currently working on in the area of merchant payments?

Yes! Bankingblocks is not only a principal acquirer (and offers multiple alternative payments), but our secret-sauce is the combination with IBAN and current account facilities to give the power back to both the merchant – and to their customers. This include consumer escrow services for large ticket items (integrated at checkout for seamless payments), connected card-to-account payments at checkout, liability-management accounts for Payment companies and more.


What’s next for Card Acquiring, Scheme fees and Interchange Fee Regulation in Europe in 2019?

When it comes to acquiring fees, such as interchange, I believe the leveling of playing fields will continue. With the introduction of PSD2, PISP and accessible bank payments are on the increase, and soon to flood the market. Card acquiring will continue to become a more expensive option for people with alternative access, and this will drive the shift even faster.
Acquirers themselves are facing significantly increasing pressure – margins are so thin they’re almost invisible, and the cost of correct adherence (and potential for fines) is significant. In the end, the major banks will be the winners – those whole can absorb their scheme fees and those with significant membership power will remain victorious with the stabilization of fees.
NEXGEN POS trends:  How do you see the shift to mobile and integrated point of sale devices in Europe and beyond?
This shift is significant, and it will be the driving force that finally takes the point of sale world into the 21st century. The industry is so fragmented, with many barriers and restrictions to innovation (cost of certification, geographic reach, connectivity approval, logistics etc). This has allowed the POS world to survive in a very outdated format with only one requirement – does the device accept card payments?
Its 2019, and consumer behavior has and is changing rapidly. Like in China, where the majority of POS payments are made by mobile device initiation, Europe is adopting mobile payments at a rate never seen before. Major retailers have been upgrading to service this trend for visitors from overseas locations, and in 2019, we will see that trend more and more – but not just for major retailers, for all retailers across Europe. The next few years will be a major turning point for the face-to-face and point of sale industry – with consumers leaving their wallets at home in exchange for wireless payments. In 2019 we will see a huge shift from traditional devices, to android based, configurable platform devices, which allow the integration (ongoing) of phone-based payment methods (whether overseas or local) in no time at all.

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ECN Team
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