The Digitization of payments in Italy: toward a Frictionless experience

The digitization of payment systems is a process that the entire Eurosystem has been investing in for some time. The use of digital makes monetary transactions faster and more convenient, improving the user experience that achieves increasingly frictionless logics.  

In Italy, the use of cards has increased in recent years, aided in part by European regulations that have consistently promoted the use of electronic money and cashless. If we analyze how the banking portfolio is structured, almost all cards (76 percent) belong to Retail customers, Affluent have 18 percent, SME and Private have 4 percent and 2 percent, respectively. The high number of Retail cards is justified by the important presence of debit cards on this segment (63% of the total number of cards in the banking portfolio are debit), mainly because upon signing up for a current account, banking institutions offer a debit card associated with each account holder. Credit and prepaid cards, on the other hand, account for 23% and 14% of total cards in stock, respectively.

Credit cards, on the other hand, continue to be the most widely used: on average, 1.8 dispositions are made per week (95 per year), compared to 1.7 with debit cards (92 annually). In addition, credit cards are the ones generally used for larger transactions because of its credit characteristics.

 In the recent period, we are also witnessing an important increase in the number of prepaid cards issued (new issues equal to +24%, compared to the previous year), used to meet the specific needs of young and online customers. However, compared to credit and debit cards, the dispositions on Physical Pos made by the same type of card are limited and equal to one disposition per week (50 per year). In contrast, customers use prepaid cards for very small amounts and usually for web purchases, to minimize risks from possible cloning.

With reference to bank payments, it is recorded that the Home Banking/Web Responsive channel is the most used, although the share of customers moving to the mobile App continues to grow strongly. Fewer and fewer customers are choosing instead to make payments through a physical operator (branch or contact center), with the exception of particular dispositions, such as the international transfer, for which human interaction is preferred, due to the complexity of the transaction or because this dispositional option is not offered on banking apps and sites.

At the tail end in digital payments is the evolved ATM. Despite significant investment, the results in terms of use are still unsatisfactory (1 percent of cases). Customer migration to the ATM, even the evolved ATM, has not taken place as expected, either because of the absence of specific education or because the ATM is usually on branch premises (only 13% are outside the branch).

In summary, the digitization of the payment system is underway and causing a marked change in the service and distribution models of financial services. Accompanied by efficiency strategies, the branch has quickly abandoned the role of payment initiation and transformed into a consultative place, leaving the payments business in the digital environment.

However, in the latter environment, the field of competition is much wider, due to the emergence of very innovative forms of payment, such as e-wallets, Peer-to-Peer (P2P) payments, and QR-Code payments, which require new payment product developments from banks, in order not to lose market share, to new players.

Edited by the team Cetif Research

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