What should we expect from 2018 in digital transactions and ecommerce?

David Birch, Consult Hyperion

I think a major focus for the whole merchant payments ecosystem in the coming year will be the new threats, opportunities and players in the emerging open banking world. Starting with the UK’s move to open banking in January and moving ahead with PSD2 across Europe, the ability for trusted organisations to access consumer bank accounts and to not only obtain transaction information but also to instruct payments will inevitably change the landscape.

There are new opportunities for acquirers to become broad-spectrum merchant service providers (MSPs) to facilitate interaction between the open banking infrastructure and the merchant community. This very appealing vision of the future (for merchants) will draw them towards a once in a generation change at point of sale. Merchants can easily afford to incentivise customers to switch to account-to-account “instant payments” and at the same time offer considerable customisation based on customer account data.

Apart from anything else, I expect to see a resurgence of interest in the “decoupled debit” proposition whereby platform-provided strong authentication to retailer apps will allow them to bypass the existing card infrastructure (I have seen projections indicating that a third of European card volume could disappear in the coming years) and perhaps even the physical POS itself.

I can certainly imagine self-scanning my way around Waitrose and when I hang up the scanner to leave, the Waitrose app will pop up on my phone with the total, ask me to swipe my fingerprint to confirm, and then Waitrose will instruct an instant payment from my account to theirs. As a customer, this looks to me like a familiar debit proposition: I walk out of Waitrose and the money walks out of my account. The fact that it never goes near the existing rails is something I neither know nor care about.

The retailers themselves, especially the millions of small retailers, will also benefit from this transition because a variety of new products and services will spring up to help them to manage their bank accounts, funding requirements and general financial services needs. I am no expert on small business financing, but the ability to see the details of a retailer’s bank account will surely lead to new opportunities for specialist financial services providers.

All things considered, 2018 is going to be a pretty interesting year and I am very much looking forward to learning about the new possibilities at Merchant Payment Ecosystem 2018 in Berlin.

Raymundo Leefmans, Dimebox

PSD2 & Open Banking: With PSD2 coming up, 2018 will be the year in which banks clearly define standards for access to the(ir) account(s). This regulatory requirement will bring a lot more efficiency in the payment cycle whilst combating fraud at the same time. Merchants will be allowed (in)direct access to debit the customer’s account with significant cost benefits as compared to other payment methods, as well as guaranteed availability of funds! Financial institutions, on the other hand, will struggle with this new payment method where they can traditionally earn much more by offering other more costly ones. Loss of momentum and whether merchants and consumers actually benefit from PSD2 and open banking will strongly depend on the speed and willingness of banks to open up.

GDPR: The regulatory framework has been set out, as well as the 2018 deadline to implement all of these rules. However, there is still ambiguity about the actual implementation and enforcement of the rules in different markets. How the rules will be enforced should be made clearer in each market, as their literal interpretation currently leads to a costly exercise for merchants, as well as unequal implementation and potential enforcement in different markets. It is expected that these ‘’design flaws’’ will be ironed out throughout 2018, after release.

Blockchain: The actual technology behind popular cryptocurrencies will finally be leveraged to its full potential, bringing efficiency, control and cost benefits throughout the entire payments value chain. The broader acceptance and adaptation of blockchain is currently dependent on the (larger) financial institutions opening up to provide relevant services to their customers.

As an example, blockchain can facilitate the requirements for banks to allow access to their accounts and enable real-time and validated transactions. Currently, Ripple is such an enabler allowing for efficiency in the underlying financial transactions between Financial Institutions, but which is not yet widely embraced in the larger merchant ecosystem. Therein lies the opportunity for (technology) players in the payments value chain to introduce innovative services for merchants.

Transaction pricing vs. Value add pricing: Financial Institutions will have to step up their game and change their business models from the “per click” pricing model to one where merchants pay for the value-added services they are offered. This opportunity presents itself as an evolution of capabilities offered by players such as Ripple or Dimebox, who leverage their technology to bring efficiency in the payments value chain to all parties involved.

Pricing payment services on the per click model will not be sustainable, not in the least because of PSD2 and Open Banking, where new payment methods will cannibalise the current payment revenue streams. Merchants are however willing to pay (sometimes slightly more) for a service that helps them battle fraud, have more security on getting the actual funds and, of course, increase efficiency and automation. As a result of these regulatory changes coming in 2018, merchants will ultimately expect more transparency from their service providers on pricing, so imagine the possibility to offer your merchant a pricing plan based on:

Their cost savings due to high automation

• Guaranteed conversion increase with smart tooling/routing

• Decrease fraud without creating hurdles for genuine customers

• The most granular reporting and insights into consumer behavior and provide payment options relevant to these profiles

• Automation for resource intensive tasks.

Meet us at MPE!

The Paypers will be attending the MPE event on the 20th to 22nd of February, in Berlin. Meet us there to discuss more on the payments and ecommerce ecosystem and how 2018 will bring a new, innovative mindset in the industry.