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Expert opinion

EPS 2018: richer user experience while rethinking responsibilities

Friday 23 March 2018 | 08:35 AM CET

New technology and more collaboration will support ‘faster versions of payment solutions’ of what is done today, however it also opens a door to new security risks.

Delivering better services to customers and, through the process, creating a richer user experience, making things simple and efficient while generating a new dimension of engagement - these are just some of the opportunities banks, fintechs, FI and retailers aim to tap by using technology and staying compliant.

Senior payments professionals from all corners of the payments industry met in the capital of justice and peace, The Hague, to share and hear exclusive insights on instant payments, GDPR, digital identity, authentication and more. For two days, the Louwman Museum has been home not only to the world’s oldest private collection of motor cars, but also to the European Payment Summit 2018.

The pains and gains of the GDPR

Data is one of the most valuable assets that FI, markets and society have. In a debate around GDPR, the panellists have identified what are the regulation’s main principles for data processing (explicit and legitimate purposes, being accurate and up to date, being lawful, fair and transparent, as well as identifiable only as long as necessary) and also its main challenges: common understanding, security, safety, trust, data use without consent, free flow of data and data portability, accountability and liability.

However, dealing with customer data still remains a sensitive topic. To conclude the debate, Silvia Mensdorff-Pouilly, the European General Manager at ACI Worldwide, invited the audience to meditate over the dystopian novel “The Circle” that tackles, through the use of metaphors and analogies, topics such as the blatant violation of privacy rights, the way current workplaces are built, as well as the installation of surveillance cameras, with the aim to monitor and later analyse behaviour. As a consequence, there is an increasing confusion and fragmentation regarding personal data, data protection, management and security, and therefore not only governments, enterprises and retailers, but also consumers need to be educated into ways of protecting their data to avoid such dystopian situations.

Instant payments - the new norm for cross border payments

As consumers expect easier and faster services, instant payments could become a normal service that ecommerce and cross-border payments providers will offer in the near future. However, taking into account that the customer journey is different from one region to another, the pure service of offering instant payments might not be enough of a customer proposition to users.

When talking about instant payments, two examples popped out: Tikkie and the pan-European instant payment system - RT1. The free-to-use app, Tikkie, is an ABN AMRO initiative, available to all Dutch or German banks’ clients. They can use the app free of charge to send payment requests to family or friends via WhatsApp or text messages.

The other initiative, RT1, has had a very promising start, as it is at the heart of the instant payment ramp-up across SEPA, according to Petra Plompen, Senior Manager at EBA Clearing. The pan-European instant payment system has processed more than half a million transactions in the first three months of its operations, since its inception in November 2017, with a total value of EUR 300 million on 19 February 2018.

The PSD2 payment ecosystem – challenges and opportunities for banks, merchants, and FI

When it comes to PSD2 and Open Banking, there used to be a lot of work thinking about the compliance part, but now it is more about looking into the consequences of opening up data for third parties. “New partnerships and alliances will be formed. As niche players will utilize Open Banking opportunities and create a new breed of financial services – how will the banks and “traditional” finance institutes respond? Changes in the revenue dynamics can be expected in the financial industry – especially within credits and loans” Jes Rasmussen, Mobile and Emerging Payments Director at Nets told us.

Moreover, “rather than focusing on a product-based offering, financial issuers are likely to make a move for a more holistic approach and issue credit lines that can be distributed across different products. This way issuers can get a more comprehensive position on extending consumers’ liquidity. And have enhanced ability to also personalize customer-based fees and rates” he added.

Riding the technological wave: AI and Quantum Computing

As artificial intelligence (AI), regtech and blockchain have become more buzzwords than actual real use cases, Vivek Bajaj, the Global VP at Watson Financial Services Solutions, IBM, has shared with us some real examples within financial industry where AI is applied.

This technology is about engaging with customers and augmenting the possibilities of reality, especially when it comes to helping banking staff answer customer queries, meeting compliance, improving transactions speed and safety, fighting financial crimes for all players in the payments ecosystem, and more.

The dawn of the third millennium unveils another powerful tool for information processing, the Quantum machine, or Quantum computer. “A Quantum computer is an unprecedented mighty tool to crunch vast amounts of information, just with the glimpse of an eye”, according to George Gesek, the CEO of Novarion Systems. The implication of this technology are big, as quantum computers can be used to breach security measures in transactions.

Digital identity – what have we learned from the Estonian model?

The discussion around digital identity and around why identity is bigger than payments was kicked off by Taimar Peterkop, DG Information System Authority in Estonia, who presented the Estonian model of how digital identity is created and stored.

The Estonian ID-Card initiative was launched by the local government together with the private sector in 2002, and it is offered to citizens free of charge. Thus, every person can provide a digital signature by using their ID-card, Mobile-ID or Smart-ID, to identify themselves and use e-services such as e-schooling, i-voting, e-Prescriptions. The success behind the program relies on the relatively low number of citizens taking part to it, according to Taimar. Nevertheless, as many digital IDs are tied to the use of social media, or the internet, trying to balance security with technology and frictionless user experience makes the system difficult to operate. “It is difficult for government to trade security, especially when it comes to voting” he concluded.

There has been a whole debate whether it is feasible to create a standardised scheme for storing the digital identity that can be applied anywhere across the globe, or whether this process should be organized more on a national level.

The success stories in authentication and biometrics - FIDO Alliance

The new Regulatory Technical Standards (RTS) for Strong Customer Authentication (SCA) under PSD2 has created some controversy; for example, the European Banking Federation (EBF) called certain provisions “incompatible with operational reality.” However, in the light of the innovative fintech, the banks need to rethink their identity strategy, as digital services need strong and convenient user authentication to serve as their “front door”. “A purely compliance driven approach to PSD2 doesn’t seem to be very promising”, thinks Rolf Lindemann, the Senior Director of Products & Technology at Nok Nok Labs.

Some agree that a “Dedicated Interface” (i.e. a banking API) could be the best approach to comply with PSD2/RTS and to provide a convenient user interface for utilizing Third Party Providers. Still, Mastercard surveys have revealed that biometric authentication (when done right) helps reducing the Cart Abandonment Rate from 15% to 3%. As a result, FIDO Authentication proves to be one of the best ways to implement biometric user authentication (especially given the new GDPR), Rolf added.

The discussion whether TPPs should implement the Redirection Model, the Decoupled Model or the Embedded Model is still ongoing and might be handled differently across various countries.

The Florin Awards

The summit came to an end by celebrating the innovation in “Securing Transactions” and acknowledging the best in the industry through the Florin Awards. BioCatch, a global behavioural biometrics provider, was selected through both jury and public vote for the honour of “Best Innovation in Securing Transactions” at the European Payments Summit’s Florin Awards ceremony. The second place was awarded by jury members to SecuredTouch, a behavioural biometrics provider for online transactions, which delivers continuous authentication to reduce fraud.

We want to take this opportunity to thank the Transactives team for inviting us for the European Payment Summit 2018 and warmly recommend their next event Global Payment Summit 2018 that takes place between 19-20 Septembers in Kuala Lumpur.

About Mirela Ciobanu

Mirela Ciobanu is Senior Editor at The Paypers and has been actively involved in covering digital payments - related topics, especially in the cryptocurrency, online security and fraud prevention space. She is passionate about finding the latest news on data breaches, machine learning, digital identity, blockchain, and she is an active advocate of the need to keep our online data/presence protected. Mirela has a bachelor degree in English language and holds a Master in Marketing.

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