MPE 2019 – setting the state of commerce payments industry through knowledge

PSD2 and Strong Customer Authentication - still great influencers over the payments landscape

We may definitely extract three keywords from the MPE 2019: PSD2, SCA and customer experience. These three topics are perfectly intertwined, since SCA, which is part of PSD2, targets the end consumer. The impact of SCA worries both solution providers and merchants, as a new layer of security might affect the frictionless customer experience that everyone has fought to achieve. Some experts believe that as long as SCA will imply biometrics, there will be no friction whatsoever. As Steve Cook, VP Business Development at FaceTec, mentioned in his presentation, the improvement of facial recognition technology is going to pave the way for more easy-to-use and secure biometrics technology.

What does SCA mean for payments? Not that much for MOTO (Mail Order/Telephone Order) payments, direct debit, Merchant Initiated Transactions (MIT) and anonymous prepaid. Not that much for low value, low risk, and recurring transactions (on the same value) either. For the rest, there is a significant concern when it comes to payments acceptance. According to Martin Sweeney, CEO of Ravelin, smart technology can provide exemptions, step-up authentication and data to issuers in order to address the payments acceptance. Merchants are urged to use an acquirer with low fraud rates, outsource their Transaction Risk Analysis (TRA) and to use 3DS2 for the least bad customer experience.

Switching to out of scope payment methods might be a solution to avoid SCA, however, it very much depends on the business model of each organization. MOTO payments, for instance, are relevant for food delivery, but for other types of merchants, this method could involve even more friction than SCA might bring. We should watch this space, to see if out of SCA scope payment methods will be more embraced by the commerce businesses. Nevertheless, payment solutions providers are strongly encouraged to consider alternative payment methods with more predictable user experience. Whitelisted merchants will be exempt from both 3D secure and SCA. In addition, merchants should actively prompt whitelisting into the checkout flow, collaborate with the issuer and whitelisting providers and/or find an acquirer that can apply Transaction Risk Analysis (TRA) exemption. These remarks belong to Martin Koderisch, manager at Edgar, Dunn & Company.

Innovation drivers

The SmartPOS seems to be a disruptive element in the payments industry, opening the door to innovation, as Julien Sarat, MD at Spire Payments demonstrated in his presentation. The technology behind it will leverage a highly intelligent gateway architecture, providing new growth opportunities for banks, merchants, and acquirers. We should be thankful to smartphone developers, since the smartphone paved the way for SmartPOS, and now, drop-in replacement costs from a smartphone overlap, which means that SmartPOS might become affordable to any business.

Modern solutions for payment acceptance don’t involve too much hardware, but manageable and scalable methods. Sam Shawki, CEO of MagicCube, presented the PIN on Glass/Mobile that will allow both micro merchants and large retailers to use cost-effective mobile POS, in order to create a seamless experience for merchants and consumers.

“The payment terminal is giving way to payments taken directly on consumer off-the-shelf (COTS) mobile devices. The card schemes are driving towards a contactless future, and we’ll see soon a lot of smartphones kissing each other” David Gudjonsson, CEO, Handpoint

The innovation pace walks across cash. A study conducted by Juniper Research has revealed that 75% of UK adults expect all retail outlets to accept payment methods other than cash. Windsor Holden, the representative of this company, also revealed different use cases where card payments can be used with mPOS devices: music festivals, taxis, mobile businesses. Moreover, both consumers and businesses can see the advantages. The first doesn’t need to carry cash, the latter may benefit from these operations that are highly dependent on cashflow to remain in operation.

According to the research company, the growth in this space is driven by:

accessories shipments expected to increase from 14 million in 2018 to 29 million in 2023;

PayPal acquisition of iZettle key in strategy to develop seamless offline/online experience in multiple markets;

traditional POS providers (Ingenico, Verifone, PAX) gaining traction in selected markets.

If we look at the US market, another research conducted by Electronic Transactions Association has shown that 73% of the population has a smartphone; of those, 11% use mobile payments, with Apple Pay being the most popular mobile wallet. Moreover, merchants consider the mobile option more and more, with 10 out of 100 accepting contactless payments.

“For payments providers, omnichannel has become a point of survival in acquiring today and value-added apps and services are needed to provide next-generation acquiring services” Mrdjan Uzelac, Director Business Development, AEVI

At the same time, OP Financial Group states that mobile is no more needed, and biometrics is the next big enabler in changing the way we pay. Furthermore, the POS-terminal era is ending, and now, the tablet is the innovative and appropriate device for accepting digital payments.

In all this discussion around payment methods preferences, one has the tendency to believe that the customer journey stops at the checkout. It goes without saying that optimizing the checkout page is crucial in today’s shopping environment, however, a Valitor report suggests that retailers should look beyond that. Dr. Christine Bailey provided a sneak peek of their upcoming APEX (After Payment Emotional Experience), where customers’ feedback after making a purchase is depicted. As a key takeaway, the return process is a hassle, being in several cases time-consuming and costly. According to the report statistics, 50% of consumers say ‘no free returns’ is the most annoying issue, while 60% won’t shop there again. The report might be good guidance for customer retention.

Closing remarks

Cashless, contactless, frictionless - what all these have in common? The same outcome: more convenience. The industry players will increasingly invest in new technologies, to help merchants in delivering the great customer experience that everybody is talking about. Payment service providers will definitely welcome the arrival of SmartPOS, and they will further look into simplifying the payment processing. Overall, the payments industry will still increase its ambition in providing security and convenience, but I believe that this year the focus will be on personalizing digital payments, a customer-centric strategy which is now key given the rise of the ecommerce sales.

We have witnessed some major mergers and acquisitions in 2018, and certainly, we will witness more of these. Big companies see the great opportunity of development via an acquisition, this move being a good way of upgrading their capabilities. What’s more, the ecosystem has started to see the benefits of collaboration, leaving the competition aside.

As for the impact of SCA… let’s just all admit that we don’t know what will happen next, but with all the technology in place, one will find a way to tackle any challenge that might emerge.

MPE covered the latest technologies, trends & business models of merchant payment acceptance, checkout & conversion, fraud & security and changing customer shopping experience. To grasp what this conference was all about, check out the event summary.

About Anda Kania

With a high interest in the latest news of the payment and fraud industry, Anda has used her position of senior editor at The Paypers to discover and analyze the hottest topics and to discuss with the top thought leaders in the domain, in order to get the pulse of the fraud and digital identity industry. With a Master’s Degree in International Relations and National Security Studies, Anda is in a constant search for the upcoming trends and the best way to comprise it in words for our readership.