Martin Huldi, CEO
Conrad Auerbach, CFO
INTERVIEW WITH CEO/CFO
In both divisions we are driving forward with digitisation.
In mid-2017, the Aduno Group sold its Acquiring and Terminal business to SIX Payment Services Ltd. Why did you decide on this step?
Martin Huldi: Consolidation has been taking place in this area of business for several years. In the near future, there will probably only be large acquirers of European dimensions left. Aduno SA as a purely Swiss player was too small to be able to play a role in the long term.
Conrad Auerbach: In addition, despite continual efforts to optimise the business, the earnings from acquiring did not meet our expectations. From a financial point of view, the timing was favourable for a sale. So you might say it was both a strategic and an opportunistic step.
What does the sale mean for the future strategic course of the Aduno Group?
Huldi: It means that in the Payment division, the Aduno Group will focus on the area in which it can generate the best returns, drive forward innovations and create most value, and that is the issuing of cards. That, together with the Consumer Finance division, is our main area of business. We still see huge potential here and we will further expand issuing.
Auerbach: It also means moving away from parts of the strategy in previous years of bringing together consumers on one side and merchants on the other. This is firstly, because the synergies that we had hoped to achieve by bringing together the two worlds did not materialise as desired, and secondly, because we no longer wished to make the capital investment needed to realise this strategy, given the consolidation referred to at the outset.
The financial result for 2017 is once again very positive. What were the reasons for this pleasing performance?
Auerbach: The market environment provided a strong tailwind. The Aduno Group is currently living in the best of all worlds: the economy is doing well, consumer spending is strong, tourism is flourishing, interest rates are low and the currencies are trading to our advantage. This is a very favourable constellation for us.
Huldi: In addition, there is the trend away from cash and towards cards. We are seeing cards being used not just as a means of payment while travelling and in e-commerce but increasingly as a day-to-day means of payment as well. The Aduno Group recorded a rise in the number of cards in circulation by over 4 per cent and transaction volumes were up by almost 9 per cent. That drives our turnover and is also, of course, good for the earnings we achieve in this business. Volumes in the Consumer Finance business likewise increased significantly in 2017 as a result of the targeted expansion of sales channels.
At the beginning of August, the domestic interchange fee was further reduced to 0.44 per cent. How did you succeed in absorbing this reduction?
Auerbach: Through a mixture of various factors. The main factor by far was the sharp growth in volumes. We also implemented cost reduction programmes, and not just starting last year. For instance, we cut back our project portfolio. Finally, we increased certain charges slightly, which also had a stabilising effect.
In the past, the Aduno Group has offered prepaid cards and credit cards. With the launch of new products in the shape of Debit Mastercard® and Mastercard® Flex, the Group is entering a new area of business. What are the reasons for this?
Huldi: In other European countries we are seeing a trend towards convergence of the two payment methods debit and credit. So you can decide whether a payment is charged immediately to your bank account or whether you will instead get a monthly statement as with a credit card. Customers want this freedom – as would seem to be indicated by the fact that around 180 million Debit Mastercard® cards are currently used in Europe. As an allround solution provider in Payment, we want to offer our customers this freedom as well, and will therefore launch in mid-February with the first of our partner banks.
What other benefits do these new products bring for customers?
Huldi: We are confident that the range of functions offered by these products will meet many customer needs. Debit Mastercard® and Mastercard® Flex are suitable for contactless payments, for e-commerce and for mobile payments. Thanks to the ability to digitally encrypt information on what is called a “token”, you can load the card not just onto a smartphone but also onto wearables such as the Fitbit and Garmin activity trackers. In short, it makes life even easier and even more secure for customers.
The expansion of digital payment solutions was a general focus of attention in 2017. Where did the priorities lie?
Auerbach: We significantly enhanced our VisecaOne app. In future it will be possible to use specific services directly through the app, such as requesting a new PIN or blocking cards. The app allows us to get closer and closer to the customer by way of digitisation, so that they have more autonomy at any time of the day or night. Another pleasing development in this connection is that we have significantly reduced risk costs. Identifying fraud has always been one of our strong points and that is true now to an even greater extent.
Huldi: VisecaOne has made outstanding progress. We now have more than 700,000 registered customers. Most of them use the app actively, some of them every day. As a further change, we have integrated the rewards programme surprize into the app. Customers can now select and obtain surprize rewards directly on their smartphone, which has led to a clear increase in use.
Let’s stay with digitisation. Open APIs (application programming interfaces) are a topical subject in the context of fintech. What is the Aduno Group’s take on this trend and where do you see opportunities?
Huldi: The Aduno Group seeks to be at the forefront when it comes to APIs. That is crucial for us. API is not just a future technology and a platform for Open Banking, it also makes it a lot easier to work with banks and customers. APIs open up almost unlimited options for shaping processes between banks and the Aduno Group, and doing so in an entirely secure and straightforward way.
Auerbach: APIs also help us on the time axis when rolling out new services on the market. With APIs, the Aduno Group can connect its services up to the bank much more quickly. That can be seen, for instance, with VisecaOne, which now works through an API. So we are not just talking about API, we are also implementing specific projects.
How satisfied are you with the Consumer Finance division?
Huldi: Very satisfied! We grew significantly in both areas of the business, personal credit and leasing, new volumes were very good and the credit portfolio also increased. After some difficult years previously because of the reduction in the maximum interest rate and other regulatory interventions, this is particularly pleasing. Less pleasing is the general margin trend because of pressure on terms.
Auerbach: As well as success in the marketplace, it is therefore also important from the CFO’s point of view that things are right on the cost side. At some point, the happy times of very low interest rates will come to an end and costs will rise. Whether we will then be able to raise prices as well is questionable at least. If we want to maintain our margins, the cost base needs to be prepared accordingly. In 2017, we achieved considerable progress in reducing our cost base and launched additional initiatives that will bear fruit in 2018 and 2019.
What sort of measures were they specifically on the cost side?
Auerbach: We are driving forward the digitisation and automation of our processes as well as the streamlining of our set-up. The objective is to handle increasing volumes while keeping the use of resources constant.
So in Consumer Finance, too, it is about making use of the benefits of digitisation?
Huldi: Exactly. We are working on making the credit approval process quicker, simpler and more efficient. In 2017, cashgate launched an entirely digital credit agreement involving video identification and a digital signature. The advantage for the customer is that their application can be processed a lot more quickly, while the benefit for us is that the internal processes are simpler, leaner and likewise faster.
The world of work is also being changed fundamentally for employees by digitisation. What effect is that having at the Aduno Group?
Huldi: Digitisation will indeed bring huge change to the world of work. Other skills will be called for, such as flexibility, autonomy and managing yourself. Work will be more mobile, less tied to a location, and new forms of collaboration will arise. As an employer, we have a responsibility to prepare our employees for these changes and to assist them through this process.
Auerbach: With that in mind, the Aduno Group has launched a project called “the smart way to work”. This is made up of three areas in which we would like to offer state-of-the-art solutions for future working. Firstly, the premises and the infrastructure in the building, and, secondly, the people, i.e. the forms that collaboration takes and the requirements placed on employees. The third area we are currently focusing on is the technical infrastructure, such as computers, telephones and video con-ferencing systems as well as digital collaboration platforms.
Not all employees are likely to welcome these changes. For some it may also lead to stress. What value does the Aduno Group place on health in the workplace?
Huldi: Digitisation is a factor, but the Aduno Group had a very challenging year overall – including in terms of the high volume of business and the number of projects. We could not cope with this without effective and motivated employees. Accordingly, we place a great deal of importance on the health of our staff. The Aduno Group has an occupational health management system that we are further developing on the basis of the high standards of the Gesundheitsförderung Schweiz foundation, which promotes good health in Switzerland.
Auerbach: We are committed to ensuring that a healthy lifestyle is part of the corporate culture of the Aduno Group to a still greater extent, and are carrying out measures within the company as well as outside it. In 2017, for example, 350 of our employees took part in the Virgin Pulse Global Challenge for the first time. This involved us exercising for 100 days in 50 teams and devoting ourselves, with great success, to healthy eating, healthy sleep and adequate physical activity.
Continuing with employees, the Aduno Group carried out a study on equality of pay between men and women in 2017. What were the results?
Auerbach: Very good, if not quite perfect. The pay difference not attributable to objective factors is less than 2 per cent. This result is very gratifying, as the sector average is 9.9 per cent. The experts from the universities of Zurich and St. Gallen who conducted the study were pleasantly surprised. We ourselves were not surprised as we expected it, having worked towards it. And in the coming months we will be working on closing the gap completely.
What are the priorities for the Aduno Group in the current year?
Huldi: The strengthening of Payment in all its aspects has priority. In February 2018, we will launch Debit Mastercard® with our first partner bank. As the year progresses, it will be joined by other banks. A further focal point is making Payment services for our banks more flexible. The aim is to offer them more choice with regard to the scope of the service and pricing. Another initiative in 2018 is concerned with the digitisation of back-office processes, in particular in Consumer Finance but also in the areas of finance and human resources.
Auerbach: Completing the sale of the Acquiring and Terminal business is likewise a high priority this year. The core task in this connection is separating the IT. At present our IT provides services not just for the Aduno Group but also for the Acquiring business that been transferred to SIX. We need to separate these processes and progressively transfer them. That is a highly sensitive project that needs to proceed with all due care.
How do you expect the company to perform this year?
Auerbach: We are optimistic for 2018. As long as the environment remains as it is, there is no reason why it should not be another strong year. We are ready and our customers are too, it seems.
Huldi: The Aduno Group is well positioned strategically. The trends in the sector, including at international level, are going in our direction and we will be able to benefit from that. The new services – Debit Mastercard® is a representative example, enabling payments both via a smartphone and with wearables – will generate additional growth. In this context we are well equipped for 2018.