What should you expect in 2016? I predict a shift away from pure disruption to tangible business models, along with some serious consolidation when it comes to market players.
The transformations we saw last year will continue and intensify, with some changes expected and others coming as a surprise. Whatever 2016 brings, we have to be prepared to make the most of change, to have the agility and flexibility to enjoy it.
In the area of payments, there will still be new initiatives, disruptive ideas and start-ups, in the Nordic region and beyond. But the frenzy from 2015 is over. Some players will succeed, but many will fail – including some existing, hyped players, “unicorns” and otherwise. This is a big change from 2015. And many big traditional players (banks and card companies) will try to reclaim some of the territory they have been losing to innovative smaller players.
This battle will not be without casualties – and some of them will be in debt collection, where 2016 looks set to bring some serious consolidation. Players have to be big enough to survive in a tough market. The winner will eventually be the consumer, because caring for the consumer is the only way to stay relevant (We use fairness and flexibility to transform debt collection).
Let’s look at payments first. Where previous years have seen investors’ money pouring into start-ups, hoping for successful unicorn-flavoured IPOs for payment services such as Square, the market is now maturing and looking for more value and understandable, solid business models. Payments on their own are not enough. It’s like investors are waking up from a New Year’s Eve hangover, and their resolution is to sober up, grow up and get serious about added value. The “P” part of P&L is becoming relevant again.
One natural step here, in making payments generate added value, is in enabling various types of loyalty programs, ones that follow the entire customer journey. The next step is personalised offers when you want to buy – not a constant push, but smart offers based on data compilation, predicting your needs and requirements. The addition of a credit option to the transaction, when the consumer wants one, will be a hygiene factor. People don’t choose a payment method in itself, but for the convenience and other benefits it brings. That is where data can make a huge difference in shaping services that provide that added value. It’s about being the player closest to the consumer.
And then there are the big traditional players, the banks. They are not going to surrender this white space to the unicorns such as Tink. Tink has more than 300,000 downloads in Sweden alone, and every one requires full bank log-in credentials. Together with other players, they are leveraging the upcoming implementation of EU Directive PSD2, trying to be the financial remote control for your life. The banks will try to retake control over the consumer relationship (they still have the basic data for every transaction, so why not add meta?), and we are fooling ourselves if we don’t expect the established players to defend their territory.
We are seeing plenty of disruption in payments already, away from a pure credit-card model. For example, we are offering payment-after-delivery with our AfterPay and white-label services; banks are introducing their own payment services, which are cannibalising their own significant card revenues. Speaking of cards, look out for MasterPass entering the Nordic e-com space for real in 2016, creating a closer relationship with the consumer.
But everyone is waiting for a massive shift – it’s not quite here just yet and won’t be in 2016 either. But it’s coming.
Speaking of massive shifts, expect a lot of movement in debt collection on the Nordic stage this year among our big peers Lindorff, Sergel and Intrum Justitia, in terms of structure, ownership and perhaps even business models.
The recent unexpected change of CEO at Intrum Justitia has fuelled rumours in the market that there might be bigger structural changes on the way, even that an exit from stock market might be an option for the owners.
At the same time, Sergel’s owner TeliaSonera is in an intense fight in its core business area of ICT and mobile communication, and new CEO Johan Dennelind has shown a clear intention to steady the ship after some turbulent years. The new management, which has already shown impressive executive abilities, is likely to want to focus on its core business, so there is a good possibility that Sergel might end up with new owners before the end of the year, which would have an effect on its operations in six countries.
It is unlikely a player such as Lindorff would just sit back passively if it saw an opportunity to enhance its position.
Turning our eyes to the international arena, as in the Nordics, we are likely to see a lot of surprising partnerships and M&A activity in the payment area. There is even talk of a behemoth like Amex being targeted, particularly if valuations are pushed down further.
Many say that “May you live in interesting times” is a curse. I would say that when you have a stable, professional, reliable business partner, interesting times are just what you need.
– Jan Altersten
Chief Executive Officer, arvato Financial Solutions Nordics