Bizum App is a service that instantly transfers money between bank accounts. It was built by the bank and covers 95% of the Spanish market. There are currently 8 million people using the service, which is the most widely used service of this type in Europe. This is a surprising success, nowhere else. This article presents their origins, the reasons for their success, how they launched new products, and future challenges.
Our interest in Bizum App arises from knowing different ways of working with successful products. Bizum has done it, but his way of working is not standard. They need to line up dozens of banks to iterate the product, and the interface, services, and users are controlled by the bank rather than a well-trained Bizum product team. They define some guidelines that the bank will implement. This is contrary to the way I work and what I preach in the article, which makes the conversation very interesting.
What is the Bizum App?
Bizum is a database of IBAN account numbers with an identity verification platform. Banks are clients of Bizum, they are banks that provide Bizum App services to their clients and to all of us.
They use phone numbers as agents to transfer money between bank accounts instantly. If I want to send Bizum from my BBVA account to my friend’s account in Santander, BBVA asks the Bizum App to convert my friend’s phone number into his bank account number and transfer it to him immediately.
The technical team defined what the basic requirements of the service are, what information the catalog will store and how to carry out these queries… Then, Redsys prepared a technical document, and the bank cooperated with Redsys to implement the integration of the system. .
Our research ran into another interesting challenge, namely, how to ensure consistent deployment of dozens of applications. They solved the problem by conducting technical certifications and brand verifications with each bank. “The bank must carry out a technical certification verified by Redsys. Then, Bizum will verify the brand in the bank’s application (logo, message) ”.
In addition to this, banks can also integrate Bizum and its colors and visibility in the application. From the beginning, some banks displayed Bizum on the first level of the menu, while other banks made it inaccessible, adding complexity to users.
When Bizum began to grow, those entities that previously saw it as one of the many services saw it as a key element for the commercial acquisition and digitization of their customers.
SEPA instant credit transfer
SEPA (Single Zone of Payments in Euros) is a European Union payment integration program that aims to simplify bank transfers denominated in euros. It was launched in 2008. We noticed this change when our bank accounts started using country codes (like ES91) as prefixes.
The next step is to allow pan-European bank transfers with the funds available in the account in less than 10 seconds. They call it SEPA Instant Credit Transfer (SCT Inst). It was officially available in November 2017. It allows transfers up to 15,000 Euros. From July 2020, the maximum compensation amount will be increased to 100,000 euros, and will also be provided in less than 10 seconds.
In SEPA terms, this innovation allows:
With the widespread use of cash and checks today, they are likely to thrive in the person-to-person and person-to-business market segments. They can reduce the cost of processing cash and checks, which are the most expensive payment methods in the entire economy. They facilitate payments for electronic and mobile services.
The EPC Report on Instant Payments (June 2015) lists many examples of expected use cases for instant payments, such as paying part of an invoice, services that require payment on the spot, online purchases, and purchases of value-added products between two people.
Bank of Spain
This legal action did not take place in other countries. Each central bank has its own rhythm. For example, only 19 banks in the UK support SCT Inst. There are 9 in the Netherlands, 2 in Ireland, 1 in Sweden, and so on.
You may also be interested in:
GAFA is short for Google, Apple, Facebook, and Amazon. The big tech companies are targeting banks, they are working hard to get into the payments space. Banks realized five years ago that they needed to move faster to compete with them. They need to establish defense mechanisms to attract customers.
An alternative to Mastercard and Visa
Yves Mersch, a member of the Executive Committee of the European Central Bank, said in the opening speech that the credit card sector is dominated by non-European players, and the international card program is in a leadership position. European players are lagging behind, mainly due to the lack of a pan-European card system and even the lack of interoperable card networks. In this case, we should strive to find a true immediate pan-European solution rather than repeating the same mistakes.
However, the European Union created the SCT Institute. To make instant bank transfers, the Bank of Spain forced all Spanish banks to join, suspecting that technology companies had entered the field of payments and hoping to establish an alternative solution not to depend on American credit card companies . The result is Bizum.
Spain is the only case in the world in which so many banks have agreed to create a single payment solution.
How was the Bizum App born?
At the beginning of 2016, 27 Spanish banks jointly established a company called Sociedad De Procedimientos De Pago SL with an initial investment of 2.8 million euros. They cover 95% of the market. Its original corporate mission was “to create and run a public directory in which the IBAN number of the bank account is linked to the identifier.”
They hired Ángel Nigorra, the former CEO of Euro 6000 (a payment platform owned by Spanish banks) to run Bizum, and he became the only full-time employee in months. They hired Accenture to coordinate the work and coordinate all the banks. They chose Redsys (another payment platform owned by Spanish banks) to develop the platform, host it and certify the bank. Redsys is a good option because it has been integrated with the bank, which makes launching Bizum easier and faster.
How do these 27 banks agree?
This question aroused our interest in talking to someone from Bizum App. In economics we must meet people from different countries so that we can develop products that everyone can reach 95% of them. We all work in the same company and sometimes forming an alliance is not so easy. What do you do when you need to form alliances with 27 different companies?
“The consulting firm and the bank decided to organize themselves into working groups to adjust and make recommendations to the board. Legal, commercial, operational, marketing and technical working groups were formed. Each working group has employees from different banks.
Payments for e-commerce
One of the most relevant uses of banks is that they allow banks to start charging merchants because end users can still pay people for free.
At this point in this article, it is important to remember that Bizum users are not your customers. He is a customer of the bank. The same goes for the company. The person who entered them in Bizum was the bank. Therefore, the bank’s work is essential to use Bizum as another source of income for online payments.
Banks must use virtual POS to contact their businesses to activate Bizum on their website so that their customers can choose to pay by credit card or Bizum. The more users who choose Bizum, the more advantageous the banks that offer national payment plans will be, which will bring the same competition as Yves Mersch said.
Conclusion and opinion
Until two years ago, Bizum only had three employees. The rest, especially engineers, work for Redsys or the bank. Through this plan, they will reach 12 million users in Spain by the end of 2020.
The main challenge for Bizum App employees is to coordinate everyone and inspire inspiration, which is why all banks agreed to provide product improvements on specific dates. This way of working allowed them to develop quickly because they took advantage of the bank’s applications and users. People don’t need to download new apps or create new accounts. This implementation promoted their growth. However, my impression is that it can now serve as the sword of Damocles.
However, Bizum must accept iterations by consensus, and most banks must implement changes or new products before issuing a full announcement. They don’t have an app that can be improved quickly. They are not directly related to the user, so all messages are transmitted through the repository. This only applies to Spain. All Bizum-like apps in Europe should do the same. This way of working is not optimized for speed.
You may also be interested in:
Bizum is a leader, and it is usually the best time to reinvent yourself. Does the bank want to increase payments in Europe? Or do they want to catch up in a few years? My advice to them: get moving and reinvent yourself.