Mobile Payments: Technology best way to reduce cash/cheque usage


Good technology is the best way to encourage people to stop using cash and cheques in favour of more secure and less costly methods of payment, the general manager of Fexserv Financial Services Ltd David Borg Hedley said.Fexserv general manager David Borg Hedley.In Malta, 88 per cent of transactions are still done in cash, but he warned that it would be a while until payment systems Apple Pay and Samsung Pay were available in Malta.

“Mobile payments are of great interest. But it will take a long time for these big names to be used for traditional payments. Apple Pay started in the US but the next country was the UK where there was enough demand to justify the investment – I don’t believe that Malta will be a priority for them for a while!” he said.

Mobile payments are of great interest. But it will take a long time for these big names to be used for traditional payments

Mobile payments may have started out as a technological innovation but they made headway for much more pragmatic reasons: they are used across Africa by people who have little or no access to a banking system. The use of mobile payments grew with mobile penetration: in 2002, only three per cent of people on that continent had mobile phones; last year, 70 per cent of the population had a mobile phone. Operator 3G Direct Pay estimates that in Kenya alone, mobile money transactions reached $22.4 billion in 2013, with Sudan, Somalia, Tanzania, and South Africa not far behind.

The phones are not only used to pay for goods and services but also to receive remittances, particularly from people who work overseas and are unbanked. The World Bank estimates that the money foreign workers send home to sub-Saharan Africa reached $32.9 billion in 2014.

According to the Employment and Training Corporation, there were 21,740 foreign workers in Malta in 2014 – so there is clearly a market here – but Mr Borg Hedley does not think that the attraction of this technology is limited to those sending money to isolated relatives living far from banks.

“It is very difficult for foreign workers to get a bank account in a new country unless their company intervenes – in spite of the EU’s Payment Account Directive which gives the right to citizens to hold at least one payment account in an EU jurisdiction,” he pointed out.

Reducing the use of cash has benefits for the host country as it creates a regulated channel, cutting down on abuse and exploitation.

Technology alone will not necessarily bring about behavioural change, though. He pointed out that the penetration rate of the Tal-Linja card only rose because paying for each bus trip without one was so much more expensive.

“That is the way to do it – but is there the will to do this in other sectors?” he asked.

Mobile payment solutions are one of the main competitors for principal Western Union Money Transfer, the largest remittance company in the world, for which Fexerv is the local agent. However, the company has never shied away from competition in any of its areas of activities, acknowledging that it took the decision early on in its 20-year history not to compete on price.

“It is more important to offer reliability and security. The payment business is all about trust. It is important to work with the best partners – but they do not come cheap. But this approach paid off: in 2008, during the financial crisis, you had to be sure that your payment processing partner would still be in business the next day!

“Nowadays compliance is our biggest concern, given the reputational risk if you do not do things well or thoroughly. This is why we have five people working on compliance, our biggest department after sales,” Mr Borg Hedley said.

Fexserv, which started out as Fexco two decades ago, started out offering wholesale foreign currency as well as a system allowing importers to pay their overseas suppliers.

“Back then companies actually had to send somebody to the bank if they wanted to make a payment. We changed that and allowed them to do it from their own offices.

“And then we kept improving and introducing new options, working with the big names in the payment industry, such as correspondent bank Deutsche Bank – the largest payment processor in Europe and one of the top in the world,” he reminisced.

Western Union’s service is offered to a staggering 200 plus countries, through 66 agents in Malta and Gozo: four Fexserv branches; 36 Maltapost branches; and independent newsagents, travel agencies and pharmacies.

The company was originally formed as a joint venture between Fexco Ireland and Alpine Holdings in Malta. The latter’s tourism-related activities have now been totally surpassed by the financial services side, and Fexserv now occupies the whole of the refurbished San Ġwann head office. At the beginning of the year, the headcount was 30 and it is now 48 and expected to grow further over the coming months.

The company’s determination to survive through innovation is a major factor in its success. Take foreign exchange, for example. Twenty years ago it bought foreign currencies wholesale from hotels and other providers and converted them back to Maltese lira ready for the next day.

Boosted by Fexco’s expertise, it cornered the market by guaranteeing that it would buy back unused currency within a month – so travellers would be able to take as much as they might need – knowing they would not lose out on the exchange rate if they did not spend it all.

Adopting the euro was obviously a hit for the company – Mr Borg Hedley described it as one of the biggest challenges in its 20-year history.

The payment business is all about trust. It is important to work with the best partners – but they do not come cheap

“Our competitors cut back on operations or closed outright but we decided to find a way to stay in this business and actually opened more branches. We looked ahead and realised that travel to exotic countries was growing, so we looked further afield.

“We started to offer 35 currencies, such as Dubai dirhams and Thai baht rather than just the traditional currencies. We also followed what was going on in the airline industry so when Turkish Airlines started operating, we stocked up on Turkish lira and the currencies of other destinations served by the airline.

“Until then, many people would take dollars or euros with them and convert them into local currency when they got there. But it is so much more convenient to have the right money when you get there – and if you use dollars abroad, even though they are accepted in many outlets, the rate will hardly be favourable!” he said.

Fexserv now offers 110 currencies , which is not as easy to manage as one might think, giving exchange rate fluctuations.

“It is not easy, especially with exotics. You need to hold stock and that means there is always a risk that you will lose value. The rate changes every second. But technology has helped our Treasury and made us much more effective and efficient!”


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