The customer leads the way to pay

Joachim Goyvaerts (Head of Belgium & Luxembourg at PayPal) on PayPal's view on the future of payments

Facilitating access to money and providing multiple, safe, convenient and seamless ways of payment: that’s in a nutshell PayPal’s mission.

The generation of Millenials, born between 1981 and 2000, drive disruption in the way we will access money and pay, now and in the future. 68% amongst them expect to access their money completely differently by 2019, 70% estimates the same for payments. No less than 1 out of 3 is convinced that they will not need a bank at all. This generation expects innovation to come from outside the financial industry. They put their trust on technology companies such PayPal, Amazon, Google, Apple, or Square. Banks still struggle to differentiate and regain trust from this generation.

Trust the key word is out. For 16 years, PayPal has built up this trust worldwide, by linking a myriad of different local payment methods and currencies to its wallet. This has led to a loyal base of 162 million users worldwide in 2014, based on our e-wallet.  PayPal provides the optimal user experience across user platforms diverging from desktop over mobile to internet of things. Thanks to these efforts, ways to access and pay with PayPal are unrivalled. Behind the scenes, regulatory compliance, risk management best practices and advanced technologies lead to a solid sustainable business.

Looking forward, we will address the challenges ahead of us in order to remain the undisputed digital native payment method, by focusing on three growth enablers:

1. Mobile Technology
2. Cross-border Trade
3. Regulation

The Millennial Disruption Index 2014 - Scratch – Viacom – Media Networks

Mobile Technology

Mobile technology unlocks the potential to provide an improved customer experience and to reduce frictions to the minimum when paying/buying. Zero touch check-out will become reality. PayPal acquired Braintree Payments, the payment gateway managing all payments for new mobile-driven business models such as AirBnB, Hotel Tonight and Uber. Braintree’s One Touch literally allows making payment transactions with one touch. The convenience for the user monetizes into turnover conversion for the merchants. Mobile technology does not only add convenience and access to payments for the user. It reduces effort in IT development, ergo cost and TTM (time to market) to a smart copy paste of lines of code.

Today, PayPal is picking up the mobile opportunity quite well. We have processed 1 billion payment transactions in 2014, the equivalent of the entire Belgian card payments volume. With an annual growth of 67% in 2014, we are determined to continue on this path in 2015. However, if we look at  the recent past, smart technologies have not always delivered their full potential. E-purses on smart cards such as Proton have been struggling with a sustainable business model,  lacking above all trust and convenience from users, both consumers and merchants.

Mobile payments do not exist as such. Consumers are not looking for a different trusted partner for their payments per device. How does a payment solution need to look like when people start to combine devices such as a smartphone and a smart watch? Current risk models differ strongly between the physical and online world. The data on a smartphone can enhance fraud detection and prevention. Cloud based solutions to keep financial data securely stored enable to transcend the devices in all their appearances.

That is also the reason why PayPal strongly believes in innovative technology solutions, such as the one proposed by the FIDO Alliance. FIDO (‘Faster Identity Online’) is an open source initiative to find an alternative open standard to passwords as authentication method. Passwords are not only obviously inconvenient, they are also costly and often ineffective. Costly for corporates who have to manage password change requests and blocked accounts. Ineffective since often users use the same passwords for different applications and even share them or neglect keeping it secret.

An excellent example of PayPal engagement in the quest for innovative technologies to ensure seamless and secure payments, is the fingerprint authentication PayPal offers on Samsung S5 and Tab S models.

Cross-border Trade

A second potential growth enabler is the sharp increase in cross-border commerce. The global generation of millennials drives this volume to more than triple in 5 years to $307 billion in 2018.

PayPal supports this trend by allowing its users to  pay through their PayPal wallet in over 200 markets, in over 110 currencies, while  sellers and buyers can settle through PayPal and hold their wallet balances in 26 major currencies. Payments, in a mix of countries, access their local bank accounts, credit and debit cards, PayPal prefunded account balance, and even a line of credit both for buyers as well as sellers, filling a real need helping people to build a truly borderless marketplace.

Locally, Belgian e-commerce merchants are tapping into this potential. Cross-border receiving volumes through PayPal grow year after year at more than 30%.  Western European countries provide the large majority of this volume and growth. This brings us to the third growth enabler, regulation.


The single European market with a single currency and Single Euro Payments Area (SEPA) clearly accelerates cross-border trade. For PayPal, SEPA has been an important opportunity to streamline the payment flows and user experience. Thanks to SEPA direct debit, we have been able to directly link bank accounts with the PayPal wallet in key European markets. This is a growth booster as it allows  access to  bank account for buyers while eventually driving costs down for PayPal and its merchants.

Many regulatory initiatives on consumer protection such as the Dodd Frank Act in the US are aligned with our philosophy on Buyer Protection. In the key EU markets, PayPal will extend the Buyer Protection duration from 45 days to 180 days in 2015. This is another demonstration of the strong commitment of PayPal to protect its users. PayPal believes that payments of today need to cater for customer’s behaviours and choices of tomorrow.  Crucially, regulations must support innovation and technology development to ensure payment providers can meet customer’s continuous evolving demand.

Payment security policies are one of the corner store for this approach. Technology development – especially in the digital area – happens much faster than any policy drafting or review. To prevent quick obsolesce security policies should not limit innovation:  this can be achieved by catering for new security technologies. As the area of authentication has already benefited considerably from new technologies, EU policies should adequately encourage adoption of innovative developments to prevent widening the gap between EU and the most advanced technological countries. To adequately embrace innovation, future proof regulations should have an outcomes based approach: i.e. quantify the security objectives whilst providing payment service providers with the flexibility on how to achieve them.   

The main challenge with digital payment security is to find the right balance between a great user experience and security. In a rapidly changing payment environment this is especially tricky. However, customer convenience is an essential element in the authentication process and merits careful consideration. A cumbersome process is likely to lead to customer friction, which leads to avoidance strategies that frustrate the security objectives. PayPal experience shows that customer usability is equally important in maintaining overall security, as it is in encouraging a safe use of the product and prevents abandonment of transaction or avoidance strategies. When security is successfully combined with convenience, an effective security outcome is achieved. When the two depart, product use may suffer or security may be compromised.

These three growth enablers energize PayPal to lead innovation and customer centricity in the world of digital payments and enable People through Payments.

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