What challenges are faced by payment industry players in the Middle East?
OW: What challenges are faced by payment industry players in the Middle East?
AH: Network International is a merchant acquirer and payment processor operating across the Middle East and Africa. We currently support customers in more than 50 countries across both those regions, supporting about 250 banks and somewhere in the region of more than 65 000 merchants both directly as direct acquirers, also indirectly as an acquirer-processor. Over the last couple of years the organization has taken on a bit of a transformation. We've implemented a new set of technology stacks, and what we are attempting to do is to consolidate our position as the leading direct payment provider in the region. We are beginning to be able to support financial inclusion, and other forms of payment acceptance across both of those regions.
I think people, when they think about the markets we operate in, they tend to forget how much the market is dominated by cash. So across the Middle East and Africa approximately 86 percent of all transactions still occur in cash. Only about 20 percent of people in the region have a debit card, and only about 3 percent in the region have a credit card. On the other side, acceptance is incredibly low. So for example in the UK, around 40 POS machines or acceptance devices per thousand capita. Even in the UAE, which people regard as a very advanced market, that ratio is about 23 per thousand capita. So what we end up with is that the number of transactions per person is much less. So part of the challenge that our customers have and that we have as an organization is how we drive cash, add to the economy and move in digital forms of payments. Some of which will be card-based, and others are other forms of payment.
How can a payment processor succeed in the Middle East?
OW: How can a payment processor succeed in the Middle East?
AH: If I think about countries that are operating where people have very little personal disposable income, the cost to me and the cost structure of our deploying acquiring, enriching these markets, in contrast to markets where people have a higher GDP, is much more challenging. So some of the stuff we are trying to work through is how do I get to, what would be almost on one side almost a zero cost acceptance. So how do I get the cost of a payment to be zero? I get someone a device, or access to a device. That works and where the marginal cost is almost nothing. How do I bring them into the systems, how do I run them through AML, KYC, how do I get their applications processed. How do I issue them a token for payment very quickly and very easily? Again there are costs, so quite a bit of the work we are trying to do, some of which is up front, some of which is actually in the back office. So as I think of the way in which we see different regulators beginning to want to have data, in the country, many of the markets we are operating in are not like Europe, where you have a pan-regional regulatory body, and not regulated on a country by country basis. And our search to reduce the cost of the infrastructure to very low, so I've got a low fixed cost base. And secondly, how, as I’ve said earlier, do I bring the last mile to the merchant or the consumer, how do I reduce that cost, at the same time helping many of the banks, the other players in the region. Think of how they can make commercial models, so they can operate there effectively.
OW: How can payment companies cooperate with regulators in the MEA region?
AH: I think it happens all the time, helping the regulator understand what you’re trying to do. So when we look to enter new markets, and we’re doing some work at the moment, one of the first things we do is sit down with the regulator, understand what the regulator is trying to achieve, what concerns they have from a payments perspective, and therefore how we can adapt the way we implement our technologies to meet those regulatory requirements. In some instances, those regulations are many years old. Then we can start having a conversation with the regulator around them. “You wrote this at a particular time because of this, this, and this. The world has changed, and I can meet the risk that you are trying to mitigate, with a slightly different technology in a slightly different way.
What payments services will become revenue generators in the Middle East?
OW: What payments services will become revenue generators in the Middle East?
AH: The markets we are working with are very undeveloped. At the moment they don’t drive any sources of revenue from payments! So it’s about creating the underlining capability for them to be able to accept payments, adopt payments, to enable them from an issuing and acceptance environment to begin to monetize these initial streams that people have been monetizing in many other markets around the world for a long period of time. On top of that, we look at data analytics and drive data analytics in the region. So we set up around 18 months ago our own analytics function, and we’re starting to develop new methods to generate mainline context. We’re also looking at loyalty in a number of different kind of services that enable customers to generate revenue. On top of that we go back to a number of very simple ways that will help them to drive revenue in terms of helping them see how they are setting up pricing on the acquirer side, pricing on the issuing side. And really simple stuff. Some of the authorization rates we see are very low. We see that, because the way that banking works, we need to be Shariah-compliant. And the way in which some people deal with open limit challenges are fundamentally different. So for many of our customers, with some of our revenue streams we still have some options to help them through some very basic stuff whilst beginning to enable some more advanced revenue streams over time.
What valuable experiences did you gain from OpenWay Club?
OW: What valuable experiences did you gain from OpenWay Club?
AH: When I think about yesterday, there were two elements. One of your customers, SmartNet, was talking about the ways they are democratizing payments in Vietnam. And thinking about how they enable people who are unbanked or near-banked to enter the marketplace. That’s the same challenge we face in many of our markets that we are helping to solve. So I was talking to the team from SmartNet last night, thinking about how they manage things like AML and KYC. Things that actually sit on the periphery of technology, enrolling them in the technology itself, about how we think we can address that. On the other hand, some of these conversations, which we were already talking to OpenWay about, in terms of how we use cloud technology to reduce the costs of ownership and deploy technology, thinking about how work that you’ve been doing has progressed over the last year, thinking about how we plan in terms of technology and its deployment across the Middle East and Africa.
OW: What do you like about working in the payments industry?
AH: I like the fact that it changes. Many of the team that works at Network come from large banks or large processors or large merchant acquirers around the world. We like working in merchant markets. Actually the opportunity we have in an emerging market is to help transform those economies and to enable the speed or the velocity of money to increase and enable people to enter the traditional or non-traditional financial environments. It’s an incredible opportunity for us. We have a great deal of problems that we’ve solved, we’ve reduced the cost to enable people with very little money to enter the marketplace.
