RATINGS & PAYMENTS

Michael Salmony 0:12

Hello, my name is Michael Salmony and Ralf and Javier and I would like to welcome you to another episode of the Payments Trilogue. And today we have a guest from an angle which maybe not many are expecting. I certainly found this a new thing, Standard & Poor's S&P. That's a company which we all know from ratings, credit ratings and giving triple A's to banks and to countries. And if like you, if like me, you didn't know that they were into payments,

I was pleasantly surprised to meet Sophia, who does exactly that. So Sophia, maybe you can explain a little bit what S&P does in payments and what you do and what got you there.

Sophia 0:54

Absolutely. Well, Michael, thank you so much for inviting me to join you on the podcast. So I am a I'm a research analyst based in London. I'm covering fintech and payments in the EMEA region at S&P Global. Now, a lot of people associate us with the Credit Ratings Agency, and I think that's the first association that comes to mind when a lot of people hear the the S&P name. But actually we're a we're a huge international company and we do a lot more than than just the the credit ratings. So we do

Data around public and private companies, news on financial services, energy, many other industries. And the The part of the company that I sit in is called the Financial Institutions Research Group. We're part of S&P Global Market Intelligence. And yeah, we are part of the company that provides data insights and news.

And within this financial institutions research group, we have a FinTech and Payments research practice, which I am part of. And we cover

We cover trends in the industry. We do some quantitative and survey-based research. We track venture capital investment into the sector. We do a lot of research on interesting and upcoming fintech companies that you need to know about. And yeah, we do some advisory for our clients as well, mainly in the payment space. So large payments companies, card networks, and some fraud prevention vendors as well.

Michael Salmony 2:20

That's fascinating. That's an angle which I think many people are not aware of what S&P do. Before we get into some of the things where you crossed my radar, why I thought you said some really remarkable things, just one last thing on S&P, because there's also a sovereignty angle. you forgive the critical question, sovereignty, course, is a hugely important topic in European payments right now. I don't need to expand on that.

But there was also discussion about rating agencies after the financial crisis, where some of them sort of rated banks triple A before they collapsed. And then there was an attempt by the EU to set up their own rating agencies to avoid that kind of problem in future. But I don't think that really happened. Can you comment on that at all?

Sophia 3:08

do you know what? I do get asked this a lot. I'm afraid it's gonna have to be a no comment from me on this one.

Michael Salmony 3:13

Okay, all right. We'll pass on that one and

delve straight into payment. The point that you made where we met was about stablecoins, where you said something, I will let you repeat your quote yourself, which I thought was a remarkable bit of truth, which one doesn't often hear. So I'll let you share your thoughts on stablecoins.

Sophia 3:36

Yes, so so to give the setting of this conversation, I was participating in a debate at Money 2020 Europe in Amsterdam back in June about stablecoins and whether they're revolutionary or rhetoric, and I got put on the team that was arguing that they're rhetoric. now this was somewhat for show, because I don't entirely believe that stablecoins are hot air. I actually think that they're an incredibly exciting innovation in global financial services. but one of the points that I was arguing was that stablecoins.

Stablecoins are often positioned as this incredibly simple, elegant, and cost-effective way to transfer money from A to B because everything moves and settles on the blockchain. It's instant. You cut out the middleman. I mean, you know, this is potentially fantastically exciting for businesses, for individuals, for enterprises. It's quicker transactions, it's cheaper. Great.

The thing is when you when you really pick apart how a lot of companies that do stablecoin payments work, you'll see that they actually have really, really complex vendor stacks. so these companies are whatever the opposite of vertically integrated is. there are, you know, partners that they work with who are dealing with on-ramping and off-ramping and liquidity and you know, keys, security.

Custodianship, aspects of user experience. So it's a really, really complicated stack. And I think that's not necessarily wrong in and of itself, right? Because I think stablecoins, they are complicated. I think for a start, a lot of the companies in this space are toggling between the fiat currency world.

and blockchain rails in that ecosystem and I think doing both of those and moving between them is it it's difficult. It req it requires a lot of tech and a lot of expertise. But I think I just really wanted to to question this assumption that blockchain and stablecoins are

you know, just by nature that much more simple than fiat and traditional correspondent banking networks because it's it's not necessarily the case, right? You know, there are additional costs involved if you've got that many vendors, there are additional points of failure. and I I think that needs to be taken into account as we as we look at that this new paradigm in financial services.

Michael Salmony 6:00

Anybody who's, yeah, carry on.

Ralf Ohlhausen 6:00

Yeah, but well isn't

so we are actually into rating. So I think you were assessing stablecoins and how well they hold their peg and I think Circle scored strong and Tether not so strong and but

Well, these are not bonds and obviously it's a like it I guess they're different animals. There is often no legal promise to pay back or no jurisdiction at all, actually. And th d does it make sense to apply these whatever two hundred years old rating language to something like stablecoins?

Sophia 6:39

I mean, I think it's a great question. You would actually have to I suggest you do a sequel to this podcast where you get the folks in from the ratings team because I think they're much better positioned to answer this one than I am because I I'm an industry analyst, you know, I'm more of a I suppose probably like

Yeah, a different beast in terms of analysts from from those guys. So and also just a fun fact, we actually have to go through compliance and have or maybe have a chaperone with us if we interact with those folks. So I would definitely say kick that question across to them and I'm sure they'd be very happy to take it on.

Javier 7:17

Sophia, if I may, I I think in your previous comment you were suggesting that payments, in my view, that payments may be more important than just payments as a business.

Sophia 7:31

Yes.

Javier 7:32

because if you look payments maybe I don't know, one two percent of global GDP in the world. So that's one measure, depending on the on how you do it. But I think payments are

Far more important because they have a lot of spillovers live and businesses just evolve around payments. It's not that payments are that important, it's just 1% of global activity. But all depends on finally moving value from one place to another. And the business itself is not that interesting, but it is the business what is regulated. And many times we forget that these spillovers are even more important.

That the fact that payments permeate the whole society is far more important than just the business. And even in terms of sovereignty, I think we forget that. Because we forget that that the most part of of payments are purely sovereign. It's not that we lack sovereignty in our local activity. But anyhow, what what do you think about this this I don't know, asymmetry in between

the payments perceived as a business and payments as a an activity that allows all other activities to to to function.

Sophia 8:54

Yeah, I think it's such a great question. And I think it's really interesting for probably for people who've had quite long careers in payments, will remember that there was a time when payments was considered to be quite a sleepy backwater of financial services. Whereas now,

Javier 9:07

Exactly.

Sophia 9:08

I think you know, there is a real recognition, I think, in the industry that it's actually it's very dynamic, it contributes a huge amount to, you know, prosperity and

you know, financial wellbeing and you know, just keeping keeping everyday economic life going. so I think, you know, and it's some of the I think definitely among people who are my age and younger, there is a real perception that companies like say Stripe and Adyen and checkout.com are really exciting places to work. You know, this isn't just some sort of tucked away, boring piece of infrastructure.

And and I I think that's a really good thing. I mean, one thing a lot of my friends ask me what I do for my job, and I do get really fired up about it actually, because I do truly believe that payments really are they're g they're a absolute sort of civilizational infrastructure, you know, they make so much day to day activity possible. you know, whether it's paying for a coffee, getting on a bus, whether you're a small business, etc. And I think definitely during COVID, I think that really changed the narrative around payments. I think when

People had to do so many more transactions via chip and pin or transacting online or using e-commerce in a way that they hadn't done so before. I think people really recognized the value of payments. I think the other thing that I often talk to my friends about is like there's actually more politics in payments than you might imagine, especially now this question of sovereignty, Javier, which you mentioned, has really become top of mind in Europe and I think probably some other places in the world as well.

Well, I think there have been some really interesting debates in I think in the financial services industry, in in politics in Europe and now I think in the UK as well, about the question of

you know, how much of the infrastructure that makes day-to-day payments work is managed and controlled by companies that are not European headquartered. and I think with everything that's going on in the world in terms of geopolitics, that question, yeah, it really has been top of mind a lot more recently. And obviously that's led to the rise of

alternative payment methods like Wero, more kind of energized discourse about the digital euro. So I think no, I think honestly from you know whether we're talking about commercially, politically, societally, I think payments are so interesting and there's so much more to payments than than might meet the eye.

Michael Salmony 11:37

I think all of us.

Javier 11:37

Just to illustrate, sorry,

just to illustrate your point, I it's I

Sophia 11:39

Three.

Javier 11:41

will be brief. In my early days in banking, being sent to payments and operations, if not a punishment.

Certainly it was not perceived as as a reward. But today

Sophia 11:51

Right.

Michael Salmony 11:51

you

Javier 11:51

it's it's really perceived as a something fanciful and attractive and interesting and a a good position in any certainly in in any fintech, but as well in in in any bank.

Michael Salmony 12:05

I was going to say exactly the same thing. mean, all of us have been in this business for a while. Payments used to be the boring thing in the basement, which nobody was interested in. And now it's the most sexy topic in finance, right? so welcome to the club Sophia.

Sophia 12:21

Thank you. Happy to be here.

Ralf Ohlhausen 12:21

I I I

have a question about the account to account and and and and sovereignty, but before that let me just one more on the stablecoin thing because I think your team published a report earlier this year about stablecoins and that the basically the the the deposits

well pull out from banks and and they they well banks will get things in return like issuance and maybe custody but essentially isn't that he's saying that banks will lose a lot of the good parts and will be left more with the plumbing. Is that what you meant?

Sophia 13:03

goodness. So that probably was a report written by the ratings, folks. We've got our own report on stablecoins as well, which I'm happy to to share a link to. I mean, I think there are questions about how banks are going to define themselves in a world where stablecoins become more mainstream for sure. I don't necessarily think it's going to lead to a massive outflow of

deposits or you know, banks losing their relevance. I think

I think, do you know my personal view as an analyst, this is rather than the S&P house view, is I think where stablecoins are going to come into play and where companies as stablecoin native are going to take the lead is on cross-border payments. Now, if you look at the traditional banking system, right, the correspondent banking network in the world has retrenched a lot over the past decade. there are a lot of cross-border payments that I think traditional banks don't necessarily actually want to be involved.

Involved in. So I think we're seeing a new breed of cross-border payments specialists or stablecoin native fintechs that maybe they're taking business that the banks don't actually want anyway. And this is kind of like a natural sort of readjustment and the shaking out of the market, which I think can only be a healthy thing. So that's my that's a personal thought on that topic of you know whether banks are going to be winners or losers.

Ralf Ohlhausen 14:33

Okay.

Michael Salmony 14:34

I mean, in the US regulation, it's all backed by T-bills. So goes into government funds, whereas in Europe, it's actually backed by bank funds. So the banks

Sophia 14:43

Yes.

Michael Salmony 14:44

still have the deposits and also they're going more into tokenized

Sophia 14:47

Yeah.

Michael Salmony 14:47

deposits and they're not so keen anymore, maybe on stablecoins. So it really is staying in the banking system, isn't it?

Sophia 14:53

Yeah, I think actually if you do trace the money, a lot of it, as you say, does still end up in the banking system anyway, definitely in the UK in in terms of how well regulation is shaping up over here.

Michael Salmony 15:06

Maybe you could tell us bit more what else you're looking at in your fintech research unit, A2A and cards and other innovations. What other stuff do you find exciting at the moment?

Sophia 15:17

goodness. I think account to account payments is really having a moment. I'm spending quite a lot of time thinking about that at the moment. And I think one of my pet topics is local payment methods in Europe. I absolutely love that topic. I think it's so fascinating to see how local alternatives to card-based payments such as Blik in Poland or Bizum in Spain have just become so part of the day-to-day fabric of economic life. so we've been sort of tracking their progress and

Obviously, you can't talk about A2A payments in Europe without mentioning Wero. That has also been really interesting to follow. yeah, and that plays into those questions of of payment sovereignty that that that we just touched on now. I always think account-to-account payments has kind of been the Cinderella of emerging payment methods. I think it's got a lot less hype than than stablecoins. I think

It's taken a while to get off the ground in Europe and and and in the UK, but I do think real momentum is gathering at the moment. I think it's been so interesting this year to see the really big platforms and retailers such as Amazon and eBay have added A2A as a payment method at checkout in the UK. I've been using it myself to to test it out. I think it works rather well.

So it's interesting to see, you know, what what's going to be next in account to account payments. I think the next

challenge to crack is account to account payments, a point of sale. because obviously we can do that with an online payment or, you know, doing a peer-to-peer payment with a friend, but it's not quite so simple if you are trying to pay for an item in in store. so I think that's going to be the next the next frontier of A2A. But yeah, really interesting. And obviously we've had this this new initiative in the UK, the U this UK payments

initiative that was announced at at Money 2020 about bringing together a lot of different banks and payments companies in the ecosystem to converge around account to account payment solutions. And it wasn't said explicitly, but I do think there's obviously a huge payment sovereignty angle in that. So that'll be interesting to see how that evolves.

Aside from that, do you know what? Cards, we do think that cards are here to stay. All of our research points to the fact that even though we've got all of these really interesting emerging payment methods coming out, such as or already here, such as account to account payment methods and QR codes.

The card is not going anywhere. but the way that we encounter it and the way people might use it is is obviously evolving. We've got a lot more kind of virtual cards and a lot more kind of cards showing up in embedded finance journeys. So yeah, long live the card, basically.

Ralf Ohlhausen 18:01

Yeah, I was about

to to tease you on that one because well I'm in account to account payments now for sixteen years or so and

Well yeah, the the growth has been forecasted for well all those almost two decades and the death of cards is

Sophia 18:24

Mm-hmm.

Ralf Ohlhausen 18:24

been talked a lot about, but they're still here, still strong. And it's a bit a question on at what point do you have to say that such forecasts are well just wrong and

Sophia 18:38

Yeah.

Ralf Ohlhausen 18:40

and it and it's it's not happening as fast as many want.

Including me.

Sophia 18:44

Yeah.

Yeah. I just think it's all about I think a healthy payments market involves a choice of different payment instruments and and the consumer clearly wants cards. There are clearly functionalities that cards provide or are perceived to provide that other payment methods don't have. I think yeah, I think I think they're gonna be around for a long time.

Ralf Ohlhausen 19:07

Mm we by the way, we we have covered the UK payments initiative here. It's not aired yet, but you will see. And yes, of course this is sounds like a great success story coming up there for like an an open banking, enhanced open banking, like a premium open banking solution, which we've also

worked on in in the rest of Europe for quite some time. SEPA payment account access scheme SPAA and similar at activities. I don't know. You mentioned well, no you haven't mentioned, but what is your what's your view on open banking really and and how that will pan out in Europe?

Sophia 19:51

goodness. I have complicated thoughts on this topic, right?

I think there is a user perception issue here. I think there's a lot of work that needs to be done around having one common name for open banking because it gets referred to as a lot of different things, as you know, account to account payments, pay by bank, open banking. It has been suggested by a lot of people that the term open banking is quite off-putting to a lot of people because it implies that your bank account is just open for all and sundry to extract funds and data from. Obviously, that's not the case.

But you know, we have to bear in mind that most people, unlike us, don't don't spend a lot of time thinking about the finer points of payments, regulation, and technology. So I think there is a branding issue and a consumer awareness issue that does need to be tackled before this goes mainstream. because I think a lot of people would see open banking or A2A as a checkout online.

and not know what it was, not really understand the additional steps, maybe not understand that it might have a little bit more friction involved the first time that you use it, if you're seeing it say for the first time on Amazon, but then the next time you come back and the next time it's going to be a very, very seamless

a very, very seamless journey. So yeah, I think there's some kind of the concept needs to be socialized a bit more. I think personally, from a point of view of resilience, I think it's great that it's there as another option to pay for things in day to day life if there were to be some massive outage for whatever reason in a card network, if you know that you can still pay account to account. Because like the infrastructure, as I've discussed actually with one of your colleagues before

Ralf, the the infrastructure is there. You know, if if there were to be some card outage, we we have it in Europe, I think, and the UK. We have that ability to to move money around without without the card network. so I just think it's great to have that, you know, from that operational resilience perspective. You know, we do live in a very uncertain world and it's it's great that it's there as as another rail. I think that's that's very sensible, very healthy.

Ralf Ohlhausen 22:04

Many thanks for mentioning that. So I think there are indeed those two big advantages of open banking in in particular in relation to sovereignty and autonomy. And one is the resilience, which is basically built in because is there is no central point of failure. There is hundreds of thousands of APIs, bilateral ones between banks and TPPs, etcetera. So there is

No attack surface, really, neither cyber attack nor military attack nor whatever. And then the other one, of course, is is reach. But well one one question though on the on the resilience while we're on the topic. so on this sovereignty thing, I think one of the big ambitions, of course, for the EU is is here to get an alternative to well or

to to the to the concentration of cards or between basically two players. But ar aren't we swapping the concentration risk between two players for a concentration risk into one single platform, instant payments, TIPS?

Sophia 23:16

Hmm. I would say no, not necessarily. I think as you mentioned with with account to account payments, it's it's not like it's a single network that can be taken down. It's just structurally different.

Ralf Ohlhausen 23:32

Well I I'm I'm saying because I was recently I was I spoke to about exactly making laboring the point on resilience here with the or decentralization actually I call it and on the open banking infrastructure. And so decentralization, we don't like that term. You know, that sounds like whatever, especially from a central bank perspective. Is that well, okay, it's true. We're there is still one single point of failure, which is the TIPS system. So sorry, there is still a central system, which is the TIPS system.

Sophia 23:59

yeah. Fair enough. Yeah.

Mm-hmm.

Ralf Ohlhausen 24:02

And

of course it's one of the best protected and everything, but if that falls over, I'm not sure how much redundancy there is.

Sophia 24:13

Yeah, I mean I suppose there comes the question like what would the backup be? What would a second or

Ralf Ohlhausen 24:19

Yeah.

Sophia 24:20

third rail

Javier 24:20

Paul.

Sophia 24:20

look like?

Javier 24:21

Yeah. Today I think you don't need to reach TIPS for every account to account transaction. You have local systems that work for for domestic or for the domestic landscape. So it's not really that you have to go to the to the central bank to to do any transactions there. So I think there is some more resilience, but I do agree that while people try to push their ideas

just i instigating the nightmare of the lack of sovereignty, I think it is much more dreadful to think of a future like that in nineteen eighty four with the European Central Bank being big brother.

Michael Salmony 25:07

I think TIPS and the sort of ECB run systems have a pretty good record on stability.

Big the risk. But maybe stepping back as saying, just listening to you, listing all these different payment methods, know, Wero and A2A and cards and stablecoins and whatever, and the resilience topic that it's good to have sort of plurality of systems. I'd like to put one theory to you, which says maybe we have too much plurality, because if we have too many choices, that's a lot of cost for banks and for merchants. It's a lot of complexity for consumers.

And there are people like Tony McLaughlin who we've had on our show who goes to quite an extreme position on that. says tokenization is a universal tool. You can use it from machine to machine. You can use it for small payments, for large payments. You can use it for cross border. You can do it. It's basically for everything. And he says these universal payment systems, these universal systems always win. We used to have a calculator and a radio and a

and an alarm clock and a Walkman. Now we just have an iPhone, which does all these things. So the universal replaces the individual. What do you think of that? Do you think we will have a universal way of paying one day and maybe just two for resilience? Or is there a utopia?

Sophia 26:34

I do I disagree with that. I think the thing is, is that as we all know, right, payments in Europe and the UK is is highly, highly fragmented. And I think there's a cultural dimension to this. I think people in different countries and cultures are attached

To or gravitate towards different payment methods for a whole range of reasons. I think there are some countries that are a lot more culturally sensitive to issues around privacy and data sharing than others. There are some that have are very attached to cards. There are some countries which are still very heavily cash-based. There are some countries where account-to-account payment has caught on extremely quickly, and people have been on board with that concept very, very early on. I think while we have that kind of

cultural diversity within Europe that extends to how people think about their money and how they pay for things. I just don't think we're going to have one payment method to to rule them all. I just don't think

Michael Salmony 27:29

Thank you.

Sophia 27:31

it's something that can be imposed. I think the consumer would would really resist that. I think in terms of choice of payments, yeah, I think this fragmentation can be problematic.

in Europe for a number of ro number of reasons. I mean one of them is cross-border payments and sort of knitting together all these different ways of of paying. I think that can get pretty tricky. I think there's that kind of Goldilocks effect when you're offering payment methods at a checkout, ordering offering enough different payment methods that you're able to offer the consumer the right range of payment choices that they would expect, but then also not offering so many as to overwhelm them. And then I guess

Yeah, let's not forget about the merchants here, because it does cost money to accept different payment methods. And I think, especially with a lot of these LPMs, it's not just a question of you just plug them in and offer them as a checkout, right? Some of them

Javier 28:24

Yeah.

Sophia 28:24

are more complex and time consuming to integrate than others. Some of them have quite long lead in times, like surprisingly so. I'm not going to name names. So yeah, I think it's about hitting that sweet spot about, you know, what payment methods you

you offer and when. But no, I I absolutely disagree about one payment method to rule them all.

Javier 28:43

Yeah. Yeah. We all

Michael Salmony 28:43

Very fair,

Javier 28:45

Michael, we all have a smartphone, but we use different apps on it, each of us. So it diversity

Michael Salmony 28:51

Mm-hmm.

Javier 28:52

comes not from the device but from the applications on it.

Michael Salmony 28:56

Mm hmm. Okay.

Sophia 28:57

Yeah.

Michael Salmony 28:58

I mean, that would argue that

Ralf Ohlhausen 28:58

But you could I have a

Michael Salmony 29:00

we're gonna have a single platform, but okay, sorry,

Javier 29:02

Yeah.

Michael Salmony 29:02

Ralf, you were gonna say something.

Ralf Ohlhausen 29:04

No, I have a question to actually both Sophia and Javier. I think S&P reported some years ago that European banks had a big sell-off of their payment businesses, disposal, I think mo well more than a billion or so. And now they're all asked to come back and to make European payments great again, sovereign and invest into Wero and other investments.

So are we watching institutions to be pushed back into what they previously decided is not attractive and they don't wanna do?

Sophia 29:46

Yeah, now on this occasion, I actually can speak about that report because I wrote it.

Michael Salmony 29:51

Yeah.

Sophia 29:51

yeah, I think this has been such an interesting topic to cover because a lot of these sell-offs of payments assets by European banks, these were like not the big sexy M&A deals that made headlines, even though in terms of the size of the deal, some of them were quite chunky in, you know, fintech and payments M&A terms. so a lot of them kind of went under the radar a bit. A lot of them weirdly were happening around the time of

pandemic. so I think it was something I was looking and comparing these these deals around when I was stuck indoors a lot back in back in those days. And there really was a trend of yeah banks shedding these assets. I mean some of them kind of stayed in touch with the payment market by striking

sort of long-term commercial agreements with the payments companies that bought these assets. So they still kind of kept a stake in the market. But you're absolutely right. It's really fascinating that they are now being invited and coaxed to come back to playing in that space, especially with A2A. So yeah, what to make of this? It's very interesting to see how all of this unfolds. I mean I suppose being involved as a kind of consortium member

in something A2A based or facilitating A2A. I suppose that is different from running like a a full stack merchant acquiring business, which in some cases is is what the banks were doing. And I think some of them felt that, you know, they just didn't have the kind of the investment and the desire.

to turn the merchant acquiring businesses into something really modern and really competitive that could keep pace with the likes of some of the well then new entrants to the market, such as Stripe and Adyen. So they were like, okay, you know,

let's let's leave this to other people. but yeah fascinating to see how this goes because I think there really has we've witnessed a lot of different sort of shifts in the tectonic plates of of payments and in in in Europe over the past decade. It's always really interesting to take stock every now and again of who owns what and who's sold what and you know where where the centre of gravity is now.

Javier 32:02

Yeah. I think I I very much agree with Sophia. I think it all is kind of a trend or or cycles or the pendulum going one way and then the the in the other direction. I think in banking banks need to belong to a herd. You cannot be alone because you cannot be right alone in banking. You have to be in in in the in the center of gravity if possible. So Having successful

strategies alone, it is not possible. So that's why When you are in one end and somebody there is a movement towards the other end, the others follow. And then you have all the herd moving in one direction, like selling assets in in payments or or companies or whatever. But then you have the reaction, and when you have the first movers going the other the other way, then you have the followers and you have the the the following trend which is in the opposite direction as the what happened some years ago.

I think that's very common in in banking and it applies not only to to to payments but to many other businesses around banking. Banking is about belonging to a herd in some sense.

Sophia 33:12

That's really interesting. I do not disagree with that. I think

Michael Salmony 33:16

Thank you.

Sophia 33:17

one thing to add to some of you know, that the story about banks selling off payments assets is a lot of those sales came from banks in Europe and countries like Greece and Italy, where banks had got really hammered during the global financial crisis. And if you cast your minds back, a lot of them were in, I mean, years long cleanup processes of you know working out distress loans, you know, really big.

restructurings, kind of really refining and narrowing down the business. And for whatever reason, I think back in that cycle at that time, before anyone even knew what COVID was and some of these strategic decisions were being made, it was it was obviously decided that payments businesses were gonna be that was going to be where the axe would fall. And so I think there's there's that aspect of it as well.

Michael Salmony 34:10

Thank you.

Ralf Ohlhausen 34:10

Well, I

I I can't hold myself back asking you one more thing because it's just too tempting. I know you're not in in rating, on the rating side, but if you could I ask you to give it a s a rating on whether Europe will achieve payments autonomy or not. What what what's

Michael Salmony 34:29

Thank you.

Ralf Ohlhausen 34:30

the outlook? Positive, stable, negative, and

Javier 34:33

Yeah.

Ralf Ohlhausen 34:34

and what would what do you think could trigger an upgrade or a downgrade in achieving

Autonomy here.

Sophia 34:41

goodness. So I can't give a rating to anything because I'll probably get fired. but I can c I can I can give my argument in somewhat different terms outside of the rating and rating yeah,

Javier 34:50

Yeah. Exactly. Rephrase. Rephrase. Yeah.

Sophia 34:54

I can rephrase it. goodness me. I I think we're in a I think Europe is in a good place to have a much more diversified and resilient

Payments infrastructure. And I think it's well on the way to achieving that. However, I think the two big payments companies from the US, of which we speak, are they so embedded and so ingrained into so many aspects of payments in Europe. There's always going to be some kind of reliance and dependency on them. I think the question is, you know, do we move past this being potential unhealthy dependence? You know.

I see them getting into a is a maybe a bit more of a healthy place in the market where they're very much like, you know, they're a big ecosystem partner, they're a big connector, they're very good at what they do, they're good neighbours in in the European payments world. but

we have other local native infrastructures that work alongside them and could continue to run and keep us all in a position where we're able to pay our utility bills and buy a coffee should there be any mishaps of the network. So that's a bit of a nebulous answer. I see a bit of a rebalancing, but I don't think we're ever going to in the next, I don't know, for well the foreseeable future

have a situation where there's not some degree of like very strong participation by these these foreign companies in in the world of of payments in Europe.

Ralf Ohlhausen 36:30

Yeah, and there is there is there's another couple of com US companies in the way. another two holding sort of monopoly on the mobile phone operating systems, which are increasingly important for all this payments thing. Anyway, thanks.

Sophia 36:47

Yeah.

Michael Salmony 36:51

Maybe just in defense of the big card companies, mean, they would argue that they also invest massive amounts in Europe and they also support other payment schemes which are not just card

Sophia 37:00

Yeah.

Michael Salmony 37:01

based. We have been trying to get them on the show but they have a bit of a communication problem. It all needs to be aligned with their corporate. It would

Sophia 37:07

Yeah. I mean

Michael Salmony 37:09

be lovely to get their position and we hope we will get them one day.

Javier 37:12

Yeah.

Sophia 37:13

Absolutely.

And I think, you know, I don't want to paint them as the bad guy in any respect. And

Javier 37:17

Exactly.

Sophia 37:17

I think one thing the phrase I would use that I use just now about them is kind of good neighbours in in in Europe, because I th I think they they are. I mean, I had the opportunity actually, MasterCard invited me to a European media day that they had at their European HQ in in Waterloo, in just outside Brussels. And one of the things we got to see was their big sort of cyber resource centre. And I think the amount that they've invested

Into cybersecurity and fraud prevention. I mean, these are things that I think actually the whole ecosystem can really benefit from. I think they do take their role very seriously when it comes to things like fraud prevention. And, you know, I take my hat off to them. So I think, you know, obviously there is this sort of geopolitical situation rumbling on.

we do have almost a duopoly in Europe. and obviously I'm not not that I'm doing sort of the PR for for MasterCard and Visa, but I think that's I don't want to demonise them because I think that they're there's some there's some smart people working in those companies and they're they're doing

Javier 38:18

Yeah.

Sophia 38:18

some good things as well. And you know, they're they're not responsible for geopolitics or market structure. So yeah.

Javier 38:26

Many many

times the card companies are presented by the European authorities like evil and I think

Sophia 38:32

Mm.

Javier 38:33

strictly unfair.

Sophia 38:36

Yeah, exactly. I think it's just it's a very as with most things in payments, it's very, very nuanced. And yeah, it it it's not a black and white issue. And I I think there's there's some good people working in those companies. We've got to address the sovereignty issue, but let's not throw the baby out with the bath water.

Michael Salmony 38:52

They've just been very successful and maybe there's a good reason for that.

Sophia 38:56

Yeah.

Michael Salmony 38:57

Ralf, Javier, any last points?

Javier 39:01

very insightful.

Michael Salmony 39:03

Thank you indeed, Sophia. One notices that you have a background in journalism and communications and it's lovely to speak to somebody who really understands payment deeply but can also communicate the ideas so lucidly.

Sophia 39:15

thank you

so much. That's really kind of you. Well I genuinely I love sitting down and discussing payments with with people who care about this industry. So thank you so much for having me on the show. Really enjoyed it.

Michael Salmony 39:25

My pleasure. So thank you to Javier, Sophia, Ralf, everybody watching. Hope you enjoyed the show and see you next time.