Why open payments matter

We have discussed at length over the past year our views on how ‘open payments’ are a transformative force in our industry. The trend towards greater openness – both commercially and technically – continues apace, though there is still some way to go.

It is worth reinforcing, however, that the trend toward open payments – characterised by more accessible, flexible, and transparency in payments services – is not a zero-sum game; overall, there will be more winners than losers. Many stakeholders can and will benefit from open payments, but for different reasons and to different degrees.

Consumers

Consumers are the ultimate beneficiaries of open payments; they will enjoy seamless user experiences, lower costs, and more convenience across all channels although technical innovation may frighten some consumers. These consumers may be wary of digitised and invisible payments, thus, payments industry stakeholders must help these consumers understand all the benefits of a more open payments environment, balanced with the need to understand security aspects.

Merchants

Merchants will enjoy more accessible, flexible, and transparent payment services because they will provide more choice and lower long-term costs. Embedded and invisible payments will also increase conversion and lead to additional commerce channels.

Banks

Banks arguably have the most to lose, although loss is not inevitable. Banks have a unique position in the payments marketplace, which can be used to their advantage even in the context of open payments. Today, banks are losing some control over payments and the impact of PSD2 could threaten their foothold. Banks face a quandary because openness does not fundamentally align with pressures to become more secure, more compliant, and less expensive; yet failure to embrace openness will lead banks to lose out to technical solution providers that do.

Banks, therefore, must find ways to embrace openness in spite of these challenges and move to a more partnership-oriented approach. There are many examples of partner-led approaches to openness and innovation today. For example, Santander invested in iZettle, BBVA funded SumUp, and Private Synchrony invested in LoopPay before it was acquired by Samsung.

Other incumbents

Many other incumbents across the payment value chain will be impacted by open payments, including payment networks and acquirers. There is a natural tendency to assume the impact of openness will be negative. Yet history tells us that incumbents often benefit the most from significant technical evolutions. For example, telecommunications providers thrived during the mobile phone revolution because it greatly expanded the volume of both phones and traffic over their networks.

Open payments will drive more volume, more products, and more partnership opportunities towards incumbents. Openness is likely to pressure smaller legacy providers who fail to adapt; those legacy providers who have the resources to evolve and embrace the business opportunities created by open payments should benefit. Visa and MasterCard, for example, aim to prosper from growth in new payment solutions such as Apple Pay, Android Pay, and Samsung Pay, all of which elected to approach the market using the legacy rails provided by the card networks.

Payment gateways play a key role in the evolution to open payments

The gateway (the PSP service) sits at the heart of open payments, at least as it relates to payment acceptance. PSPs, therefore, will become more vital to the marketplace over time as primary providers of openness. Gateways provide connectivity, which simplifies the lives of their customers and is at the heart of open payments. Gateways also led the transition from legacy, closed protocols and interfaces, to modern, open technical interfaces. So, these providers will continue to play a key role as stakeholders seek out global reach and payment service suppliers look toward partners for new solutions.

The whitepaper “Openness is Changing the Future of Payments” can be downloaded here: http://unbouncepages.com/whitepaper-open-payments/

About Markus Rinderer:
Markus Rinderer serves as SVP at ACI Worldwide, driving the development of the companys omni-channel merchant retail strategy. Previously, he served as CEO and founder of PAY.ON, a leader in eCommerce payment gateway services, which was acquired by ACI in 2015.

ACI Worldwide:
ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 5,100 organizations around the world. Through a comprehensive suite of software and SaaS-based solutions, ACI delivers real-time, any-to-any payments capabilities and enables the industry’s most complete omni-channel payments experience.