Visa plans major investments in Hungary, looks forward to exciting period

Hungary is a perfect market for Visa to grow in, and it is making continued investments to support this growth, said Charlotte Hogg, Chief Executive Officer of Visa Europe, in an interview with Portfolio. This market has most interesting dynamics because of comprehensive changes are taking place in consumer behaviour, there is a transition in place to the digital and mobile world and finances, and Hungary has a truly forward-looking regulatory environment, she added. We asked the CEO about the future of plastic cards, credit card companies, the instant payment system and the world of open banking.
Charlotte Hogg visa Europe CEO 03
Digitalisation in banking, the payment revolution, and the future of banking will also be on the agenda of Portfolio’s Banking Technology 2019 conference on 14 November. Don’t miss it!

The instant payment system is set to launch in Hungary next year, and with all banks joining the system simultaneously, it may immediately become a serious competitor for debit and credit cards in more than one field of the payment market. What does Visa think of this instant payment system? Is it a real threat or more of an opportunity for you?

I think we are currently living a truly interesting era in the payment market, and especially in countries like Hungary. This market has very interesting dynamics as we see a comprehensive change in consumer behavior and a transition to the digital and mobile world where customers have increasingly more control over their finances. Hungary has a truly forward-looking regulatory environment regarding the PSD2 Regulation, especially in two fields: strong customer authentication and open banking. Also, the country has a high level of technological development, another reason why it is interesting to be present in the Hungarian market today. The most important question for us is to find out what our customers need and what are the most important things for them.

We are living in a world where the moment of payment is disappearing: when you check in a hotel or hop in a taxi, you practically don’t stop to pay, and it is so much bigger than people realize.

The moment of payment means the payment situation when we held the money we took from our wallet in our hands and handed it over. But since it has disappeared, we need to think through all possibilities by which we can provide our customers with the necessary tools to manage their funds in a way that makes them feel having control over their finances. They want simple and secure payment, and it doesn’t matter if they use bank transfer, debit/credit card or any other solution to make the payment. The only thing that matters is customer focus.

Hungary is a market that’s worth investing in because it has a robust growth rate, a cash use ratio that is still high, and a technologically and digitally developed society – all these offer us a perfect opportunity for growth.

What are your growth plans for Hungary?

Thanks to our Hungarian team we are already growing in Hungary, and we are making continued investments to support our growth in this market. Visa Europe has undergone a major change in 2016. It operated as an association until that year, but it was acquired by Visa Inc. in 2016. Visa’s global agenda is to focus its investments on local markets, trying to get as close as possible to its partners. Since 2016, the number of Visa customers has grown 7 percent, and this number includes Hungarian customers as well.

Charlotte Hogg Visa Europe CEO
Photo by Valter Berecz 

What products are you introducing in the Hungarian and the European markets beyond plastic cards?

When we talk about a piece of plastic instead of payments, we forget about a very important part of what we do as a payment technology company. We need to be at the front end of transactions in the world of PSD2 and open banking when the moment of payment is disappearing. A good example of it is Apple Pay when customers want to use their mobile phones for payment: it is enabled by tokenization, making Apple Pay transactions even more secure.

Another good example is the ability to have control over transactions: my children are teenagers, and using a card payment solution I can have control over their spending and can set up rules for them. Last year we successfully migrated to a global infrastructure and automatically connected to hundreds of API’s (editor’s note: application programming interfaces), that enable clients to easily integrate our products and services into their own apps.

The really great thing with this global infrastructure is that when there’s an improvement anywhere in the world, it instantly becomes available for all of our customers around the world.

In addition, Europe is at the forefront in using open payment systems for public transport, which has several benefits for the economy. On the one hand, you can use public transport more quickly and can pay the exact fee, while on the other hand the data collected this way can take the process of organizing public transport systems to a whole new level for cities. For example, traffic planning can be much more efficient than it is today. And our job is to understand what our customers need locally, and it is also true for Hungary.

What do you think about the changing role of payment technology companies? You just mentioned smart city solutions. How will the position and business models of payment technology companies change?

The two biggest values for payment technology companies are brand and infrastructure, and these are the fields where we need to make a difference in these times of constant changes. Just think about the history of economics – the coin was a marvelous invention that truly simplified trading among the villages, and then came the checks that further increased the bridgeable distance in trade. And today we operate a payment system spanning the globe in a total of 200 countries where we have presence.

Europe is in the process of building a cross-border instant global payment system called SEPA that will not require the use of debit/credit cards. Does this mean a threat for you in the long run?

Change is good as it creates innovation. We are currently exploring our opportunities in the field of real time payments, and we also need to build our network, and this is why we created Visa Direct that can manage not only “pull” but also “push” payments. The key questions to answer here are: ‘When is fastness important?’ and ‘What are the risks of fastness?’ For example, if you buy a refrigerator and something is wrong with it, we have 60 years of experience in knowing how to protect the consumer and what steps to take. We continuously make investments to enhance the reliability of our global network, improving cybersecurity and data centers.

charlotte hogg visa europe ceo 02
Photo by Valter Berecz 

How many customers are using Visa Direct currently, and for what transactions?

Visa Direct is able to manage quasi real time push transactions (editor’s note: a push transaction is when a card is not debited but funds are received via it). A good example of how it is used is when a delivery guy delivers food, it implies multiple transactions: first, the consumer pays to an online marketplace, then the marketplace pays to the restaurant, and finally the restaurant pays to the delivery guy. Many of our customers use this system; today we don’t simply go to a shop and pay, but we have a whole online marketplace ecosystem built around us where these new types of transactions are needed.

What payment methods will we use in two years’ time? Will there still be debit/credit cards, will we still use cash for payments, or will we have something entirely different? What’s your vision about it?

There are customer needs that never change: people want to pay in a secure and simple way. I think payments in the future will be even more digital and even more electronic, and mobile devices will play an increasingly important role in them as the clear borderlines between physical and mobile payments will be blurred. People use different types of services, and there’s a strong correlation between these services and the types of payment solutions they will use. I never think of Visa as a plastic card company, but a digital payments company with a history of 60 years that is able to utilize emerging opportunities.

Do you have a PSD2 license? Do you plan to obtain an AISP or PISP license?

We are exploring our opportunities to obtain these licenses; first of all we are focusing on providing strong customer authentication solutions for our customers while still providing a good payment experience for them at merchants. We have a whole array of solutions to meet the requirements of strong customer authentication, and currently we recommend the most basic solution, which is 3D Secure authentication. In addition, we have a tool that whitelists merchants, so customers do not always have to use two-factor authentication, and we also have a solution for recurring payments.

The Central Bank of Hungary has recently made its decision regarding SCA rules. What do you expect in other parts of Europe?

Most of the countries have already made their decision and we strongly support the direction they chose. I think that the regulation, despite its best intentions, would have put many players, especially small-sized companies at a disadvantage, and we will work hard to support a gradual transition.

Digitalisation in banking, the payment revolution, and the future of banking will also be on the agenda of Portfolio’s Banking Technology 2019 conference on 14 November. Don’t miss it!

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