Payment Network: Together we are stronger – Jens Lütcke
The European e-commerce industry may be booming, but for goods traffic to function effectively, a safe and user-friendly international payment system is required. Payment Network's CFO Dr Jens Lütcke outlines how sofortbanking offers a secure online banking e-payments system for merchants and customers alike, while bringing banks added value.
Future Banking: Six months have passed since our last conversation. Dr Lütcke, how have your company and business developed in that time, and how do you see the medium-term outlook? For instance, is further expansion on the cards?
Dr Jens Lütcke: We are clearly on track for growth and are benefitting, above all, from two developments. Firstly, online trade is booming. We strongly believe this and the evidence is compelling: in 2011 we have increased our transaction volumes by 60%, compared with last year.
At the moment, around 20,000 merchants across Europe are handling transactions through us. We hope to break the barrier of two million transactions per month over the Christmas period.
Secondly, e-commerce is becoming ever more international. Even small merchants want to do risk-free business across European borders, and this is also what the European Commission wants in terms of promoting the internal European market.
This development and the introduction of SEPA are, of course, a great help to us and our business model. Our system, incidentally, is already SEPA-capable.
Both the consumer - through increased competition and the resultant falling prices - and companies - through greater market potential - will benefit from a common internal market. That is why our focus is quite clearly on further internationalisation, particularly as many of our customers, such as KLM, Emirates, Skype and Dell, operate internationally.
We are presently active in seven European countries: Germany, Austria, Switzerland, Italy, the Netherlands, the UK and Belgium.
By 2013 we want to be represented in all relevant markets throughout Europe. As a result of our advancing internationalisation, we have also standardised our product names; in all European countries outside the German-speaking region we now operate under the name sofortbanking (rather than our previous brand DIRECTebanking).
You are often presented as an opponent of the banking industry. How has your - sometimes rather tense - relationship with the banks developed over the past few months?
First of all I would like to stress that we have always had, and continue to have, a very good relationship with most banks - particularly with direct banks because they regard our system as an enhancement of their ownonline banking systems.
Direct banks were the first to realise that, with sofortbanking, their own online banking system could have a universal reach. The advantages are obvious: the consumer relationship is strengthened and utilisation increases, which in turn creates higher volumes.
But the biggest advantage - above all in the long term - is that money stays inside the banking loop and does not wander off into parallel structures.
For the banks, there is definitely a risk that one of the e-wallet providers, for instance PayPal, will develop into a direct competitor. After all, PayPal already holds a banking licence and, thanks to the birth of m-payments, the next stage in its development is on the horizon; mobile payments via smartphones could be the next killer application.
Companies from outside the banking industry, such as online businesses or mobile phone providers, are already very much present in that area and could by all means pose a threat to existing banks. In addition, new web players such as Google and Facebook are also forcing their way into the market.
Why is this development a challenge for banks in particular?
Especially in times of financial crisis, banks cannot keep pace with the power and innovation of these online companies. In addition, banks are often hindered by the fact that e-payment is not their core business and they are unfamiliar with certain aspects of e-commerce.
Actively cooperating with bank-friendly systems such as sofortbanking can help the banking industry position itself as a strong competitor, thus preventing displacement by companies outside the industry. This has been confirmed to us in many internal conversations at industry level.
There is, of course, a small minority who are keen to defend their traditional positions, especially within the banking federations, but the ongoing European monopoly proceedings are further discrediting these conventional standpoints.
We are experiencing a wind of change: monopoly proceedings are making it clear to banks that they don't have a monopoly in the area of online banking e-payments (OBeP) and that they must open themselves to cooperation. By working together with banks, we can very soon make the European Central Bank's vision of a successful Europe-wide OBeP system, which was voiced by different authorities, a reality.
On the subject of banks facing additional competition from outside organisations, your investor the Reimann family has recently made you a sister company of Sofort Bank. Are you now in competition with the classic banks?
There are the wildest rumours circulating in the market, especially in banking circles. Let me make another thing clear: Sofort Bank is neither a competitor for classic banks, nor does it have consumer relationships. Sofort Bank is a remittance traffic bank for e-commerce companies and is intended to minimise the technical effort, on the merchant side, of posting transactions.
In our view, online transactions are only profitable - particularly very small amounts - if the complete process, including accounts receivable, is 100% automated.
In addition, with the help of banks we can offer value-added sofortbanking services, for example customer protection or a payment guarantee.
At the end of the day, we want to help merchants minimise their accounting expenses - we are not interested in classic banking transactions!