The good thing about the world of payments and commerce, Karen Webster observed during the latest edition of The Week in Payments with Erwan Gelebart, CEO at JazzCash, is there is never a lack of things to talk about. The last full week of February 2020 was no exception, the two said, as central banks in China and the UAE made big moves into cryptocurrency, digital banks continued their march forward worldwide, and innovative opportunity and regulatory authority bumped heads in Europe over the suddenly sensitive topic of retail stock trading.
Gelebart has a unique and international perspective on payments. His company provides bank accounts linked to users’ mobile numbers, allowing users to send and receive funds, pay bills, take out and pay loans, and conduct other everyday financial activities. JazzCash (owned by VEON, a global telecommunications and digital services firm) has 12 million active users in Pakistan, where 80 percent of the adult population is unbanked. According to the World Bank, that equates to a total of 100 million individuals. This represents a significant opportunity for firms seeking to broaden financial inclusion.
“What makes our service and all of the emerging digital services work is convenience,” Gelebart said. “That’s why people use them at the end of the day. Currency is currency — consumers don’t generally care about the specifics. What they want is the ease of transacting and accessing their funds, with the ability to do deposits and withdrawals.” Convenience, he said, is what makes the world go around in the digital age — and all of this week’s big payments news stories come back to it.
Crypto’s Big Week of Government Approvals
China and the UAE captured headlines this week with the announcement that both would be signing on with a digital currency initiative for cross-border payments previously known as Project Inthanon-LionRock, which is at work on a central bank digital currency (CBDC) for international payments.
It’s an important move, Gelebart said, if not quite a game-changer in the region. It’s evidence of an increasing acceptance on central banks’ part that if they can’t beat the digital currency craze, they may as well join it — and even lead it. The move makes a lot of sense, he noted, given the fact that central banks already produce currency in the form of cash, and there is no earthly reason why they couldn’t produce an electronic currency.
“I think it creates trust for the end user, because they get an electronic national currency right away, with an understanding that it’s issued by the central bank,” Gelebart said. “I would say merchants are legally bound to accept that money more broadly, but at some point, the whole ecosystem will want to accept that money. That’s really the biggest benefit to making it an international currency, and not a currency issued by private institutions.”
That doesn’t completely solve the chicken-and-egg problem in getting consumers and merchants to adapt and begin using electronic fiat currency, but it does inject confidence and trust in their system, helping to inspire the construction of the payments infrastructure to make it convenient for consumers to use. Because ultimately it’s that convenience, paired with something they can trust to work transparently and reliably, that consumers are increasingly seeking.
That’s evident in the governmental expansion into crypto, said Gelebart, and equally so in the global expansion of digital banking.
The Platformed Future of Financial Management
That consumer craving for a simpler, better way to manage their financial lives is feeding a FinTech revolution. Consumers don’t want to skip between several apps. They want a single-source aggregation that allows them to control their entire financial lives. They want the ability to register an account in a few seconds and access services within minutes. But Gelebart said we tend to ask the wrong question as we watch that explosion of FinTech opportunity, in an attempt to figure out which digital player will come out on top in each market.
“I think it’s not about who is going to win,” Gelebart said. “It’s more about how you position yourself within the market.”
And that’s particularly critical in the era of platforms. As the world recently saw in the great retail sales explosion in the U.S. around GameStop stock, innovative new ideas sometimes have dramatically unexpected consequences. And in the event of big surprises, said Gelebart, trust becomes an even more important commodity.
Creating Stability in a Surprising World
For all the outcomes forecast for the accessibility of investment opportunities for retail investors via apps like Robinhood, no one foresaw current events. It’s a world where a group of Reddit investors leveraged those retail investors to pump up the stock price of a struggling retailer at the expense of a few billion dollars short-selling hedge funds. It’s the kind of surprise — one that causes multi-billion-dollar market ripples — that tends to get regulators and legislators all riled up. Evidence of that can be seen by the fact that in the U.S., hearings are on the schedule — and in the EU, regulators have preliminarily said “no thanks” to Robinhood-like business models.
But regulatory action isn’t going to be the silver bullet solution, Gelebart said. The platforms that support connecting retail investors with brokers have to step up. They need to be the trusted player, because the reality in a lot of geographies is that consumers trust the platform more than they trust the regulators.
“When opening up a platform, it’s not about handing brands the keys and saying ‘okay, do whatever,’” Gelebart said. “For JazzCash, we do partner, but we select the partners we work with. There’s no free access, and we’re very cautious regarding who we partner with.”
The regulations are important, he said, but they’re not a panacea. There is a critical element of self-regulation that has been visibly lacking at times — particularly with platforms like Facebook, where scrutiny was low for a long time. Good platform governance will build trust and will keep convenience in place that customers more than desire at this point, Gelebart noted. It’s what they expect — and the brands that succeed will be the ones that find the best ways to innovatively deliver it.