Maaike Steinebach, the recently appointed general manager for Hong Kong and Macau at VISA, says her mandate at the payments-technology firm is to gain a leading market position with emerging client segments.
These include transport companies, virtual banks, and small retailers.
“What hasn’t changed is our mission to be the global leader in payments technology,” she said.
It’s an exciting time to be in the payments business, as more opportunities arise to woo people away from using cash. But the traditional four-party model in payments has new competition.
Credit-card/payment companies like VISA and Mastercard once enjoyed an oligopoly over the classic network of issuer banks, acquirer banks, merchants and consumers.
Fintech competitors aren’t just jostling for a piece of the action, however: they’re building separate networks and luring consumers and merchants inside their own walled gardens. This includes the likes of AliPay, WeChat Pay and HSBC’s PayMe, all of which cut external payment infrastructure out of the process.
So winning the new breed of clients is about both growing the business as well as fending off challenges to the industry.
New skills for new challenges
Steinebach’s background was a big reason for her to be chosen for this job at VISA: she set up Commonwealth Bank of Australia’s digital lab in Hong Kong (which the bank closed last year in a bout of cost-cutting), and is also a founder of the city’s fintech association.
A digital banker and fintechista seemed like a good person to win tech-based clients. And in Hong Kong, there are now a lot of new businesses to go after, including merchants and banks.
Beyond four-party clients, VISA is also growing its fraud and security business, as well as its cards business for corporations.
But the most dramatic opportunities are in newly emerged market segments, not only because they represent new business, but because they are being built natively upon Hong Kong’s Faster Payments System and could gradually scale into mainland China.
Win mass transit
Today the only ways to pay for getting around Hong Kong – by taxi, by tunnel, by train, by bus, or by ferry – is with cash or an Octopus debit card, which was introduced 21 years ago (and still doesn’t operate in taxis).
That is all set to change.
Toll-road operators have recently accepted contactless cards.
VISA is currently trying to win the same from taxi drivers, who have long resisted credit cards but have in the past two years begun accepting QR code-based payments. For credit card companies, this is a campaign to woo the drivers, the taxi license owners, and the transportation regulator.
Busses, minibuses and ferries are next.
We're open to collaboration with everyone
Maaike Steinebach, VISA
The big prize, however, is the mass-transit railway system operated by MTR Corporation. Last year, MTRC announced it will throw open payments to competition, breaking the monopoly held by Octopus. Already, Samsung Pay users can use mobile phones to tap through the turnstiles, and MTRC has introduced QR codes to the express train to the airport.
More of that is to come, and MTRC has a tender out for electronic fare collections that will support the technology of multiple companies, including VISA, China UnionPay, AliPay, WeChat Pay and Octopus. The new system should go live in 2020, at which point there will be a huge marketing battle for riders to use a particular mobile payment.
Steinebach says the firm’s experience with contactless cards in London’s underground allowed for scale: London’s system also threw open its Oyster card to competition, and travelers came to embrace the convenience of tapping a card at the gate, and the ability to see their transactions on their bank account’s balance sheet.
Win small merchants
Steinebach listed small retailers as a new focus. Hong Kong’s Faster Payments System and the advent of open API makes small merchants now a viable segment to target.
That’s true for players like HSBC too, which is using PayMe for Business to go after the same merchants – in a bid explicitly to keep out credit-card companies. Cards will remain popular for large transactions (because of the reward points) but their fees will put them at a disadvantage for everyday purchases.
This is about more than just growing our customer base
Maaike Steinebach, VISA
Steinebach didn’t respond directly to questions about this looming competition – “We’re open to collaboration with everyone” – but says VISA’s strategy will be around user experience: “We want people to be able to choose what’s best, and we think that’s contactless.” Which means cards as well as mobile apps.
Win virtual banks
The new players to be licensed this year by Hong Kong Monetary Authority represent new clients. But they also represent diversity, with each virtual bank’s business model focused on different audiences, taking on incumbent banks through better customer experience.
“Now all segments in Hong Kong will be covered,” Steinebach said. “This is about more than just growing our customer base. It’s also reaching our goals around financial and digital literacy, and get banking products to the underserved.”
VISA has been in conversation with all the applicants for about a year now, so Steinebach expects to sign deals once HKMA announces the recipients. But the company has already been working in the virtual cards space, such as providing China CITIC Bank International with a virtual credit card.
“Users are going more mobile, for both debit and credit,” she said. “We don’t think of this as a ‘card’, but rather an account with VISA that is linked to payments and the Internet of Things.”
Win the Greater Bay Area?
The last area of opportunity is the Greater Bay Area. Steinebach declined to comment on this topic, because she’s only responsible for Hong Kong and Macau. Shirley Yu in Shanghai heads the firm’s Greater China business and is its pointwoman for talks.
VISA and Mastercard currently do not have licenses to operate in mainland China (American Express has a local tie-up with Lianlian Pay). Moreover, mainland Chinese have largely given up cash, so the value proposition for U.S. card companies has to be more around serving mainland people or companies traveling abroad.
But the combination of mass transit and virtual banks in Hong Kong, and an appeal to cross-border integration, could play to the strengths of credit-card companies as they seek licenses from mainland regulators.
Transportation links are a big part of government projects to promote integration. Cross-border flows of people – tourists, commuters, businesspeople – are on the rise. Some virtual banks are likely to either be based in the mainland, or are active there.
So whether it’s to pay for trains, or financial services, VISA is stuck at the border. Yet for GBA to reach its potential, cross-border payment channels must be arranged – and mainland users may not be satisfied to limit their scope just to Hong Kong.
The payment players that solve this puzzle will be the biggest winners of all.