PayPal Prompts Poland’s Banks to Team Up for Rival Payment App

Updated on
  • Banks team up on mobile payments, leapfrogging Western peers
  • Startup has 3.5 million users, 2 million transactions a month

Banks competing in one of Europe’s most cut-throat markets decided to team up on a new technology that allows their customers to leave their wallets at home.

The Polish startup, named Blik, enables customers of nine banks to draw cash from ATMs, wire money using telephone numbers and pay for goods or services on the internet and in shops without sharing card or bank data. Two years after its launch, it has 3.5 million users and enables 2 million transactions per month.

The venture is part of lenders’ effort to accelerate their digital transformation to reduce costs and win more clients. Poland’s banks have caught up and in some instances leapfrogged western peers just 20 years after Citigroup Inc. introduced the country’s first mass-scale credit card. Blik is seeking to take a piece of the financial-industry pie reserved for digital companies such as PayPal Holdings Inc. as well as the payment system mechanism of credit-card issuers.

Grzegorz Dlugosz

Source: Polski Standard Platnosci

“Poles are open to innovation and more willing to take into account technological solutions when choosing a bank,” Grzegorz Dlugosz, chief executive officer of Polski Standard Platnosci SA, the parent company of Blik, said in an interview in Warsaw. “Our advantage is that we are a multi-channel payment system.”

Wiring Cash

Blik is incorporated in banks’ mobile applications and directly linked to users’ accounts. It bypasses card issuers and other outside mobile-banking providers, differentiating the system from those introduced by giants such as PayPal, Apple Inc. and Alphabet Inc. The move was also aimed at reducing transaction costs, though after card transaction fees were cut in Poland two years ago, the costs are now comparable.

The Warsaw-based company still faces challenges such as the relative ease of using credit cards for contactless payments. The number of transactions carried out with debit and credit cards exceeded 1 billion quarterly last year. Internet purchases and cash withdrawals hence account for more than 80 percent of Blik’s transactions. Also, probable future entrants into Poland’s market, such as Apple Pay, could bite into its share of payments.

Blik clients can use 15,000 cash machines throughout Poland to pick up money by typing in an access code generated in the application, instead of inserting a bank card. Dlugosz said this may be a way for parents to wire a cash to their children.

Payment Options

The company says its system is safer than current internet transactions because information about bank accounts and credit card numbers aren’t used at any time, and the unique code times out after a specified period.

“Blik gives clients payment options not available elsewhere, which is why we will continue to support the venture,” said Barbara Smalska, head of technology and development department at Alior Bank SA, one of Blik’s investors. “That said, we won’t limit any other methods as we want users to choose the most convenient solution.”

Blik declines to give information on its spending, revenues or bottom line, but according to central bank data its transactions amounted to 453.7 million zloty ($111 million) in the third quarter of 2016. This marks a four-fold increase over the same period of 2015, but it’s still a fraction of the 151.2 billion zloty of transactions carried out via bank cards.

Teaming Up

MBank SA, a part owner of Blik, will this year allow its clients to decide whether to use the Polish payments app or Android Pay, according to Jaroslaw Mastalerz, deputy chief executive in charge of technology at the Commerzbank AG’s unit.

“Polish units of western banks are very often their most modern businesses technology wise,” Mastalerz said in an interview on March 7. The industry providing banking for Poland’s 38 million inhabitants is more fragmented than in many west European markets, leading to intense competition for clients, he said.

Other Blik owners include state-controlled lenders PKO Bank Polski SA, privately-run Getin Noble Bank SA and the Polish units of Banco Santander SA, ING Groep NV, Banco Comercial Portugues SA and the banking arms of mobile operators Orange SA and Deutsche Telekom AG.

Blik plans to expand its offer to post offices and other state institutions to help the Polish government’s effort to limit cash transactions and reduce the untaxed gray economy.

“As a much more convenient alternative to bank cards, our ambition is 10 million clients in next few years,” Blik’s Dlugosz said.

— With assistance by Piotr Bujnicki

(Updates with data on card transactions in sixth paragraph.)
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