When and how Bizum will be a company that earns money for banks (and gets money from users)

Everything seems to indicate that the instant transfer system integrated in the applications of banks is experiencing a decisive turning point against the use of banknotes and even cards. Despite this, he has been in the red for almost four years.

As Fernando Rodríguez, director of business development at Bizum recalls, the company’s primary objective was never to make huge profits. The idea was rather to offer an additional service to the customers of the financial institutions that promoted it, which are the majority of Spanish banks. This does not mean, of course, that they do not aspire to stop costing them money: in fact, Ángel Nigorra, CEO of the company, admitted in an interview with Merca2 that he expected abandon losses in 2021.

Verónica López Sabater, director of the Foundation for International Financial Analysts and expert in electronic payment methods, believes that banks have never been completely satisfied with adding a new service to their customers or losing money. They also wanted, he specifies, “to anticipate and defend against the imminent advances of big technologies in the means of payment”. Bizum was launched in 2016, just two months before the arrival of Apple Pay in Spain.

During the first year of life, warns Fernando Rodríguez, “the majority of users were employees of financial or professional entities aged 35 to 45, who were already frequent users of mobile and digital banking services”. Over the next few years, Bizum’s shareholders took advantage of its more than 90% dominance of the banking market to facilitate its gradual expansion through a guerrilla digital marketing strategy heavily focused on generation Y, which today represent half of its customers.

Bizum: what it is, how it works and the banks supported

We are indies

This marketing strategy is partly explained because the Bizum promotion entities tried to position the system as a tool indie and attractive to a generation of young people who are very critical of the banks after the 2008 crisis and who seem to be enthusiastic about the big technology companies that have already shifted their ambitions in the financial sector.

This enthusiasm did not start to collapse, clearly, until 2017, with investigations into the role of social networks in the victory of Donald Trump and Brexit, with European sanctions against Google, Facebook and Amazon and , finally, with the outbreak of the Facebook and Cambridge Analytica scandal. The declining reputation of tech giants has made it possible for many customers to feel that their data is more secure with banks.

Financial institutions also rely on gradualism and guerrilla marketing to avoid the sudden “cannibalization” of their traditional sources of income.

Remember that their immediate transfers (the same day) were always paid, while offering instant transfers (in less than 15 seconds) and free with Bizum. At the same time, everything seems to indicate that, last year, the commissions were much higher for the companies that billed by card than for those that did with Bizum. The former could have been around 0.39% and the latter by 0.25%. We are talking about a difference of 36%.

With Bizum, the banks achieved something that the operators did not succeed with WhatsApp: that someone “from the outside” did not come to take away their business

The pandemic seems to have confirmed the cannibal power of Bizum: while card consumption fell by around 50% in March and April according to BBVA Research, the new payment system attracted a million new users and doubled the companies that accepted it in their transactions. According to Fernando Rodríguez, director of business development, in April and May, transactions increased by 40% and, by the end of June, users had reached almost nine million. These are staggering figures, because in December 2019, they did not exceed 6.25 million people.

And it was not a success at all. By the time the fear of paying cash for the possibility of contagion became universal in the last week of March, the Spanish bank had already suspended ATM fees and increased the amount that can be paid from 20 to 50 euros. the cards without touching without entering the PIN code. We Spaniards keep up to 85 million credit and debit cards in our wallets.

Nor did they invite them to imagine overwhelming success or the evolution of their own number of users until recently. the legendary resistance of the Spanish to stop paying with coins and banknotes for the vast majority of their small daily vices, something we share with the Italians and, to a lesser extent, with the Germans, but not with the British and the French.


Verónica López Sabater, Director of the AFI Foundation Verónica López Sabater, director of the AFI Foundation.

Verónica López Sabater recognizes that the evolution of Bizum “It had not been impressive so far, because in October 2019 and three years after its launch, it had less than five million users”. And this was sponsored by the majority of Spanish banks, which gave potential access to the 18 million repeat users of their banks. online. In addition, as Ditrendia advised in 2017, more than half of Spaniards had already bought with smartphone.

Another aspect that puts Bizum’s success into perspective is that, if the forecasts are maintained, the payment system will close another year this year without distributing dividends or losses. Almost no entity was able to bill its customers for instant transfers.

Fernando Rivero, CEO of Ditrendia, which publishes a benchmark report each year that addresses, among other things, mobile payments, believes that banks will make Bizum profitable using “rates supported by the companies that use it and a constellation of new premium services such as deferred payment, programming of periodic transfers and, as soon as full interoperability between Bizum and its counterparts in other European countries such as Lydia in France or Neteller in the United Kingdom, international transfers are resolved.

Brussels is already pushing for the conditions for national transfers to be the same as for international transfers for the 36 members of the SEPA zone, made up of 27 EU members plus the United Kingdom, Liechtenstein, Iceland, the Norway, Andorra, Monaco, San Marino, Switzerland and Vatican.


Fernando Rivero, CEO of Ditrendia. Fernando Rivero, CEO of Ditrendia.

Fernando Rodríguez, director of business development at Bizum, prefer not to specify the way in which the banks, which are its customers and often also its shareholders, must make their payment system profitable. What he claims is that Bizum is adding new features to its popular instant mobile phone number transfers so that entities can bill their users for the entire package of services “using a subscription model similar to that of Netflix “.

In this sense, he emphasizes, “We will allow to send money by the end of summer with QR codes and we can include protocols like NFC or Bluetooth later. “They also don’t rule out,” he continues, “that you can pay with Bizum in stores online like Wallapop, platforms like SETTLELab or instant messaging applications ”.

Jaume González, responsible for business consulting at GFT Spain, would not dare to exclude or that “the basic service that Bizum now offers to individuals ends up being paid”. At the end of the day, he said, “the banks did something similar by increasing the fees for withdrawing cash from ATMs and it didn’t go wrong.”

The problem, however, is that when ATM fees were increased, for example in 2015, they were the main source of cash for individuals and hundreds of companies, they did not accept card payments for amounts less than 10 euros. Now things have changed a lot.

New scenario

For starters, most establishments allow us to pay amounts over five euros per card, since commissions have been cut in half over the past decade and The pandemic has cemented for months a widespread (and scientifically questionable) prejudice against banknotes and coins as transmitters of the virus. In addition, the use of cash, as indicated by the cooling of cash withdrawals from ATMs, has been slowing for three years.

As if that weren’t enough, the banks that promote Bizum have as heterogeneous and contradictory interests as their structures, and it is not easy for them to agree to increase the costs of this service. The similarities are minimal between the objectives of Mediolanum, BBVA, Openbank or Deutsche Bank Spain, but it was not the same when CaixaBank, Santander or BBVA, which controlled most of the ATMs, decided to increase their fresh in 2015.

In parallel, now also there are popular alternatives to payment systems controlled by large entities. For example, in the case of Bizum, Facebook Pay made its debut in Spain in June and the integration of WhatsApp and Instagram payment systems is expected in the short term.

The mega guide to mobile payments (2020): what services are available in Spain and with which banks are they compatible

By the way, WhatsApp is the same company that, taking advantage of its hegemony in instant messaging, introduced an annual rate of almost a dollar for some users in 2013 and had to withdraw it in 2016, the same year that Snapchat has consolidated as a free alternative to WhatsApp to exceed 150 million users. That’s when Mark Zuckerberg decided to “tweak” many of its features.

All of this can be a lesson for banks about the danger of starting to charge for free and popular service when other popular and innovative options have emerged that remain free. Jaume González agrees that billing for Bizum’s base offering would be risky, but notes that banks are already indirectly making money from it. The problem, he warns, is that its benefits are not easy to explain because …

How much does Bizum help them retain customers who pay commissions for other services? To what extent do they no longer benefit from the information provided by these instant transfers? How to measure financially the peace of mind that results from not depending on a large technology company to send and receive money and being forced to share with it data that could end up being exploited against it?


The new

When and how Bizum will be a company that earns money for banks (and gets money from users)

was originally published in

Xataka

by Gonzalo Toca.




Source : Xataka.com