Neira Jones, Emerging Payments Association: "Fintech is not a revolution, more of an evolution"

Apps and the cloud are shaping the future of the payment ecosystem. Against this backdrop, which key trends are leading the way towards innovation?

Apps and the cloud are only a part of what is shaping the future of the payments ecosystem. It would probably be more accurate to say that the evolution of technology, the changing demographics that are in turn creating new behaviours and new markets, the socio-economic context, as well as the regulatory landscape are all contributing factors to this evolution. The main trends as I see them are driven by the aim to try and understand customers better, with varying degrees of success, as we have seen before. Therefore, big data, predictive analytics, machine learning are all key technologies supporting this, and they can also help with the challenge of trying to drive efficiencies and reduce costs – this is also where cloud and apps play a part.

In addition, given that the ecosystem, driven by the advances in technology and the agility of new entrants in taking advantage of them, is even more swamped with data on consumers, another key trend is to find ways to protect that very data from criminals. This is exacerbated by new regulations such as the Payment Services Directive 2 and the EU Global Data Protection Regulation. To this effect, authentication (with technologies such as biometrics) and digital identity in its many forms will all play an important part in the coming years.

Are IoT technologies disrupting processes? If yes, what new opportunities are created?

It would be an exaggeration to say that the IoT is “disrupting” processes, but it is undeniable that a lot of experimentation is taking place. In addition, it would be misleading to state that the IoT on its own creates new opportunities as it is, as far as I can tell, it is the combination of technologies that drives potential innovations. For example, recently, AJ Bell Youinvest launched spoken portfolio valuations and Capital One launched new consumer banking services, both using Amazon Echo, challenger bank N26 launched P2P payments using Siri, and Life Insurance company John Hancock offers its customers a discount if they agree to wear a health tracker.

Juniper Research predicts that, as millennials change banking habits, banking apps accessed by smart watches will exceed 100 million by 2020 (factor perhaps attributable in part to the Apple Watch). Whilst wearables are an obvious application of the IoT, we mustn’t forget to look at other industries and the opportunities they could present: recently, General Motors updated its OnStar system to enable subscribers to make mobile transactions and earn loyalty rewards through car applications, and at the beginning of 2016, MasterCard and Samsung partnered with online grocery retailers to develop an app that enables consumers to order groceries directly from a new range of smart refrigerators, and of course, we’ve had the Amazon Dash buttons for a while.

As always, the proof of the pudding is in the eating, and customer experience and trust will drive adoption of these new technologies and services. We have interesting times ahead, who knows which partnerships will come about, and I look forward to them!

Fintech revolution versus security innovation - how can fintech companies help banks address security challenges?

Interesting question, which I will turn on its head a bit... First of all, I will make the controversial statement that fintech is not a “revolution”, more of an “evolution”. In fact, innovation doesn’t happen in isolation (fintechs almost always reuse existing infrastructure and technology) and it doesn’t happen by discarding current technologies and reinventing the wheel (fintechs almost always look creatively at what exists today to create something better, faster or more appealing). Secondly, whilst some fintech organisations can help banks address fraud and security challenges (especially those in the fraud prevention, machine learning, threat intelligence, identity and authentication, and other regtech areas), I think that collaboration will be key and that banks can also help fintech organisations with fraud and security (after all, they have been doing it for a very very long time...). Conversely, fintech firms can undeniably help banks become closer to their customers and help them transition from a product centric to a customer centric strategy.

Could you please elaborate on the role of the government versus the role of players in the private sector for a successful online fraud prevention model?

I am very encouraged by the Payments Services Directive 2 and its stated intent of promoting innovation and competition, whilst ensuring that the security and integrity of the payments ecosystems are preserved. Whilst the recently released EBA draft Regulatory Technical Standard (RTS) on Strong Authentication caused a few eyebrows to be raised (including mine) due to the potential introduction of more friction in the customer experience, I have no doubt that these issues will be ironed out during the consultation period (after all, everyone agrees with the fact that low value doesn’t necessarily equate low risk, and its concomitant that high value doesn’t necessarily mean high risk). As always, cooperation is key.

In addition, regulators worldwide have created sandboxes for fintech innovators and we see more and more new entrants getting licenses and access to infrastructure, which is encouraging. As we move towards an open banking model, the role of APIs will become more and more prevalent, and we already see known players, such as Barclays, MasterCard and Sutor Bank, making their APIs available to developers. In addition, the World Wide Web Consortium (W3C) recently released a draft specification for secure web payments (Web Payments HTTP API 1.0 and Web Payments HTTP Messages 1.0). So the role of government and regulators will be to ensure that they continue to promote innovation and competition in a safe environment, and private sector organisation will have to strike the fine balance between opening up (and upgrading) their infrastructure and collaborating whilst remaining competitive and secure.

About Neira Jones

Neira is a Non-Executive Director for cybersecurity firm Cognosec and Chairman for payments innovator Comcarde. She also chairs the Advisory Board for mobile innovator Ensygnia, partner for the international Global Cyber Alliance and Advisor and Ambassador for the Emerging Payments Association.

About Emerging Payments Association

The Emerging Payments Association brings together companies across the emerging payments spectrum to help shape the future of the payments industry landscape. Our vision is to make the UK a global leader in payments innovation by attracting investment capital and creating a hospitable regulatory environment for innovators, new entrants and disruptors.

Read the rest of this interview in this year`s edition of our Online Payments and Ecommerce Market Guide.