Kai Lindstrom, OP-Pohjola: "The role of banks in the Finnish mPOS market"

About Kai Lindstrom

Kai is Head of Acquiring at OP-Pohjola Group, Finlands largest banking group, overseeing the team which handles business-as-usual and continuous development tasks for OP Merchant Services. He has been working in the cards business since 2004 when he joined OP-Pohjola Group as a technical issuing Project Manager.

In 2007 Kai joined OP-Pohjola Group’s acquiring team as a Business Development Manager. He played a central role in launching the banks OP Merchant Services solution in 2011. In 2013 OP-Pohjola Group entered the POS terminal market with a roadmap to launch an mPOS initiative shortly after. Kais focus has been on driving terminal business cases across the group and he is currently preparing for the launch of the OP mPOS solution with Monitise.
 

First of all, could you give our readers some insights into OP-Pohjola’s position in the Finnish market?

Kai Lindstrom: In the Finnish market, we cover both banking and insurance and we have 4.2 million customers. This is quite significant when you consider that there are almost 6 million people in Finland and out of those, 1.4 million use both our banking and insurance services.

When it comes to the cards business, we are one of the two largest issuers overall and also the largest Visa issuer in the whole of Scandinavia, with 3.2 million cards issued. In addition, we are the number two acquirer in the Finnish market after Nets.

Could you share with our readers what your position is in the SME market, in particular?

Kai Lindstrom: With regards to the SME market, we’re very strong because we’re a cooperative bank - more specifically, a cooperative group. This group is formed of 195 independent member banks and has 600 branch offices, covering almost all of the country.

Given the cooperative structure, an OP member bank is owned by its customers, so they really feel that it’s ‘their’ bank. Furthermore, we see that SMEs and micro-merchants all like to run their banking activities with us because they feel closer to us than some other banks.

Could you please give some examples of mPOS solution providers from the Finnish market and describe the competitive landscape of the mPOS landscape there?

Kai Lindstrom: That’s quite easy because the only visible and active solution provider is iZettle. We have heard that there might be some small companies that are under the radar, but they have not advertised or contacted us so it might be that they are still working on their solutions. Given this, we can assume that they are not ready for the market.

One interesting thing is that iZettle has cut the price of their device in half. Given the fact that they’re the only one in the market, it begs the question as to why they might be doing that. We assume it’s because they haven’t sold as many as they would like and therefore need to subsidise it in order to get things moving.

What is OP-Pohjola’s business approach when entering the mPOS market?

Kai Lindstrom: As a 100+ year-old company, we have a strong brand and an excellent reputation in the Finnish market, so we feel we are able to bring dependability and trust to merchants. When iZettle entered the Finnish market in 2012, we were contacted immediately by our customers saying that OP-Pohjola should bring this service to them as well. They also said that they wanted the service but didn’t want to receive it from a foreign and unknown company. They know and trust us, so that’s why we’re able to provide our merchants with a reliable and dependable solution.

Furthermore, when clients see our logo on the app and device it brings that kind of trust that both cardholders and merchants need. When the cardholder puts her card in, she can trust the OP-Pohjola service and the fact that our bank will not steal her card data.

At the MPE event we have seen a lot of vertical industry mPOS solutions. How does OP-Pohjola cater to the different needs of the SME market?

Kai Lindstrom: We are now entering the mPOS market with Monitise as our partner. One of the key reasons we chose Monitise is the fact that the application is very rich in terms of features, and also the fact that they have an extensive roadmap coming up with loyalty, m-invoicing and other functionalities. It may not be that important for the sole trader, but when the size of the merchant gets bigger, those value-added services become more important.

In addition, when merchants grow, we can provide the traditional terminal line and, of course, the acquiring OP merchant services in the background which enable the merchant to take the next step. With us, the merchant needs to have an OP-Pohjola merchant service acquiring contract in the background and with the mPOS stand-alone terminal integrated, it’s just a matter of accepting the payment. When the merchant grows, becomes more successful and therefore ready to take the next step, they don’t need a new contract because their OP contract is already there. All they need is to change the terminal.

What other considerations did you have in mind when choosing the white-label platform of Monitise?

Kai Lindstrom: Firstly, OP-Pohjola wants to have a long relationship with both its partners and customers. We have seen that there are now several hundred different mPOS solution providers in the market, popping up like mushrooms after the rain. Some of them may have something special, but most of them just have PowerPoint slides - we wanted the kind of partner that we can trust to still be with us in five years, continually providing excellent services. That kind of approach can’t be guaranteed by start-ups.

Another reason behind the decision to partner with Monitise is the fact that they are not just an mPOS provider - they have all kinds of mobile solutions. We’ve already discussed additional services, like support for our mobile wallet ‘Pivo’ and talked about how Monitise could embed their solution in our mobile wallet. Also, in addition to card payments, customers can make cash payments so that the merchant can track all of the transactions he or she has made.

Finally, due to the fact that we are Visa issuers and Monitise is Visa’s strategic partner in mobile solutions, we feel that this partnership is very important.

What is the go-to-market strategy for getting these clients on board with your solution?

Kai Lindstrom: We’ll strive to provide the service to our customers as soon as possible. We will start selling it in all our branches and reach out to our target group - micro-merchants, sole traders. We received very good feedback from merchants on showing them our demo.

Another thing that we’re planning is a focus on cardholders. We will be contacting them to announce this service and inform them that their card data is safe, as well as their contact information. Basically, we have a spearhead strategy of going into the market by informing both merchants and cardholders that the service is ready – and safe.

In terms of volume, usage and acceptance, in a year from now, where do you predict you will be?

Kai Lindstrom: We’ve estimated that if we sell 1,400 units in a year, we’ll be off to a good start, taking into consideration the fact that it’s a very new service to the Finnish market. We believe that when awareness increases, we’ll start selling more and more. As far as iZettle is concerned, they are using another acquirer in the background and if any merchant accepts iZettle, they will not have access to OP Merchant Services.

On the one hand, the goal is to build our micro-merchant relationships - on the other, the goal is to increase card usage and acceptance in Finland. At the moment, we see that many sole traders don’t accept card payments or mPOS because the traditional terminal is expensive and they don’t want to commit to these fixed monthly costs. The volume of transactions from micro-merchants is currently quite small, but we are determined to serve them as best as we can. One of the benefits that will come out of this is that cash usage will decrease in Finland and that is one of our goals. We are striving for a cashless society.

Company description

OP-Pohjola Group is Finlands leading financial services group providing a unique range of banking, investment and insurance services. The Group has the mission of promoting the sustainable prosperity, well-being and security of its owner-members, customers and operating regions through its local presence. Its objective is to offer the best and most versatile package of loyal customer benefits on the market. OP-Pohjola Group consists of some 200 member cooperative banks and the Groups central institution, OP-Pohjola Group Central Cooperative, with its subsidiaries and closely-related companies, the largest of which is the listed company Pohjola Bank plc. With a staff of 13,000 OP-Pohjola Group posted consolidated earnings of 601 million euros before tax in 2012 and had total assets of 99.8 billion euros on 31 December 2012. The group has over four million customers. www.op.fi