We talked to Rafał Gołębiewski, Elavon's general manager for Poland, about new services for the Polish market, working on Soft POS, developing Poland's card acceptance network and possible acquisitions
There are many payment agents who provide and maintain payment terminals in Poland. How is Elavon different from its competition?
The payment market in Poland is entering an entirely new dimension, which is the result of shifting customer expectations. I don't think a company like Elavon can still build its strategy on the current model, in which the payment agent provides a client with terminals and only deals with payment card transactions. In the new approach, which Elavon is currently adopting, we are not only thinking about what we want to sell, but also about what the client's needs are. This may sound trivial, but I have an example that illustrates it well.
Let's imagine that a big client - say, a chain of cosmetics stores - wants to buy our payment terminals. But they also mention that they have a problem with long checkout lines during peak hours. A payment agent in the current model would simply offer the company ordinary stationary terminals, not thinking about other ways they could help the client. This is now in the past. Today, a terminal operator has to try and look for opportunities to solve various problems that may not even be directly related to the payment process. In the example I’ve just mentioned they could, for instance, offer the client tablet terminals that allow employees to make sales around the store, which can make checkout lines shorter. Elavon represents this approach. Our know-how allows us to better understand our clients’ sales processes. By using the newest technologies we can meet their needs in many different aspects.
This sounds great, but I’m sure most clients looking for payment terminals are primarily interested in the price.
That's true in many cases, but we also have an offer for them. We have a service that allows for an analysis of the pricing models and card transaction systems the client currently uses. The analysis is done by our consultants. It shows in real time whether the models are optimal, whether they are compliant with current payment organization pricing and whether there are any errors. Sometimes a system error can seem minor, but when multiplied by a big client's turnover, it can generate huge amounts that could be saved. Our analysis can detect such errors and help optimize the costs of payment transaction services.
Elavon is one of two companies that decided to take part in Mastercard's Soft POS pilot program. Why is that?
One reason is the development of Poland's card acceptance network, which is going to begin very soon. I’m assuming that 70-80 percent of companies in it will be small and medium enterprises. Those companies need a cheap card acceptance method with simple devices, often mobile ones. Soft POS should therefore respond really well to those needs.
The second reason we're participating in the pilot project for the new solution is that we believe the whole industry will embrace Soft POS. Traditional terminals, which are only used for payments, need to transform into more universal solutions. It will most likely not happen quickly, but we want to be ready when those changes come. Starting next year we will introduce a new kind of terminal on the Polish market. Apart from a payment application it will also be equipped with applications that help the payment accepter manage their business - like stock management or loyalty programs.
Let's talk more about the Soft POS pilot. It's a cutting edge solution, but I feel like at this point an average business owner won't choose a Soft POS, which will work on phones that cost several thousand złotys, because it's cheaper to just buy a traditional terminal for several hundred.
The tests that we are starting to carry out are the first stage of introducing the new product to the market. Obviously, both we and the companies participating in the project will face many challenges. Our goal is to expand the catalog of devices this new solution will be available for. Besides, the pilot program, which will start very soon, only tests payments of up to 50 zł, so that the transactions don’t have to be authenticated with a PIN code. Ultimately we want to develop a Soft POS that can accept payments in any amount. The PIN code will be entered on the device, using a solution called PIN on glass.
What stage is the pilot project on?
We are currently working on technical arrangements. The goal is to connect our systems with the company Mobeewave, which developed the solution, and certify it according to the requirements of payment organizations. I’m talking about software as well as communications between systems. We would like to start the pilot program in the fourth quarter of this year.
You mentioned that the Soft POS pilot will test contactless payments with no PIN code verification. The test could include a significantly larger number of transactions if the payment limit was higher than the usual 50 zł. Do you think this limit could be raised on the Polish market?
We are analyzing this issue. There is a will to raise the limit among some sides of the card payment industry. Payment agents such as Elavon have a pretty much neutral position in this. Card issuers are the ones who should have more of a say in this because the potential risk lies with them. I would like to stress that the risk is only potential - fraud statistics in Poland do not reflect such a risk at all. That's why I think the amount limit for PIN-less transactions in Poland will be raised.
Elavon is taking part in the card acceptance network development program you mentioned, which is being introduced by a foundation created for this particular purpose, called Polska Bezgotówkowa (Cashless Poland). One of the key elements of the program is the introduction of a so called mandate that requires all businesses that use fiscal cash registers to accept cashless payments. Do you think the program can succeed if the mandate is not introduced?
The lack of such a solution could definitely limit the scale of the program and make it harder to reach its goals. The whole project could also take a much longer time.
Do you think it's possible to put 600 thousand new payment terminals on the market, even with the mandate?
The number was introduced while we were working on the program as a value that should serve as a sort of signpost that shows us the scale of what we should build. It is possible to reach that number, but we cannot guarantee it in any way. Perhaps when the pilot program is over, we will be able to say something about whether it is possible to reach this goal. But introducing the mandate will make the possibility of installing 600 thousand new terminals quicker and more realistic.
The program is unique on a global scale. Is it attractive enough to cause new terminal operators to appear on the Polish market, ones that we haven't seen here so far?
We are already noticing an interest in the program from parties from outside of Poland. A lot of them operate in the ISO model. They're companies that have specialized in the distribution of payment agent services but aren't always agents themselves, working instead for other agents. They specialize in the installation of traditional terminals, as well as mPOS. When it comes to big transaction agents who aren't present in Poland yet, the program will not likely be their main reason to introduce their services in the country. Companies like that usually build their strategies through acquisitions. Those will be possible when the ISO companies I mentioned build a certain scale in Poland and decide to sell their business.
Speaking of acquisitions, has the structure of Poland's payment industry reached its final shape in which it might continue for a longer period, or is it possible we will see some changes in ownership in the five or six major transaction agents?
Some of Poland's transaction agents are owned by investment funds, which means that sooner or later they might want to abandon such investments. It also means that we might see various scenarios taking place. I think banks might also leave the terminal industry because it's not part of their core activity. The services their customers need can be provided by specialized transaction agents. Several banks in Poland have recently decided to sell payment terminals, but we can see that in the West this trend has already subsided, which is probably what will happen here as well. So in the general near future the devices operated by banks might be available.
Would Elavon be interested in making acquisitions on the Polish market if some opportunities arise?
Yes, we are currently in the phase of looking for investment opportunities. We are carrying out analyses. Elavon started its business in Poland by buying several enterprises that operated here. The main area of interest in our search is currently e-commerce. Traditional commerce is moving online and we can't be indifferent towards that. We are looking at potential acquisitions or candidates for strategic partnerships. I should mention that partnering up with Elavon could be beneficial for local e-commerce businesses. We have a platform for all markets on which we operate. Working with us implicates a possibility of entering many markets around the world.
Why isn't Elavon currently participating in Polish e-commerce as much as elsewhere?
The popularity of pay by link transactions in Poland is in a way challenging. It's a local solution. We are working on making Elavon's offer in this area more attractive.