Wolfgang Berner, ACI Worldwide: Openness has three core attributes - accessibility, flexibility, and transparency

ACI Worldwide has been championing the idea of ‘open payments’ over the past year – what do you mean by open payments and what is the real value?

The trend towards technological and commercial ‘openness’ developed outside of payments, transforming industries such as private accommodation, personal transportation and even food delivery. This trend has taken longer to impact payments and financial services, but our original goal in publishing a whitepaper on this subject was to generate discussion about how the trend towards openness could transform payments and financial services.

From the ACI perspective, we see openness as having three core attributes: accessibility, flexibility, and transparency. And these attributes exist along three main payment service dimensions: technology, business models, and methods of trust generation. This is the framework that we developed to understand the many elements of open payments, but to summarize, the real value of openness is that it enables payment providers and merchants the agility and the responsiveness needed to develop the sort of next-generation payments services that will be vital to their success in the coming years. Reduced time to market and development costs, enhanced ease of use, incremental sales, and improved business model flexibility are all real benefits to open payments.

In an interview with The Paypers last year, Markus Rinderer characterized the state of the payments industry as ‘semi-open’ – do you still see this as the case today?

It has become a cliché to talk about any given industry or vertical reaching its ‘Uber moment,’ though if there is such a thing in payments, I don’t believe we’ve reached it yet. The industry as a whole has shifted in the direction of openness, but there is still a long way to go, so I think the statement that payments is ‘semi-open’ still holds true. Part of the reason, I believe, that progress has not been as rapid as in other industries, is due to security concerns. Hacks and data breaches are a very real problem, so industry players will continue to move cautiously in the direction of greater openness.

One trend that we’ve noticed over the last year is that a lot more payments companies are putting their APIs front and centre, with marketing efforts focused on highlighting the capabilities of their underlying architecture and in particular the developer documentation that facilitates integration and building of custom features. Just look at the increasing engagement with the development community – proof that software engineers are no longer peripheral but in fact central to building a next-generation payments company.

Talking about the impact of open payments in the payment ecosystem, we see that most UK and US ecommerce merchants go to web developers or commerce platform providers for payment services, instead of banks, acquirers, or independent sales agents. How could payment providers get a broader part of the ecommerce value chain, such as additional ecommerce solutions, and by extension claim more of the respective revenue?

Incumbent payment service providers (PSPs) face significant challenges when payments are increasingly embedded, such as the loss of direct control over distribution. PSPs are either part of the broader solution or out of the game. This trend is currently most visible in mature payment acceptance markets where PSPs and acquiring services are frequently distributed via independent software vendors (ISVs) and value-added resellers (VARs). In the UK and US, most ecommerce merchants go to web developers or commerce platform providers for payment services, not banks, acquirers, or independent sales agents.

Commerce solution and service providers are increasingly competing in payments because openness enables these lines of service to run parallel – they increasingly API-based and easier to integrate. PSPs must therefore not only seek partnerships with commerce solution providers, but also explore ways to capture part of the broader commerce value chain and revenue pool. Monetizing payment data and competing for commerce solutions are two options. The tablet POS market is a good example of this trend, where some payments companies are expanding beyond payments into the broader commerce marketplace. But bear in mind the trend toward open payments is not a zero sum game; there will be more winners than losers.

How do you balance openness with the needs of security? It seems that greater openness could compromise a provider’s security, isn’t it?

The payments industry relies on the secure exchange of data that is increasingly complex, voluminous, and threatened by fraudsters. At the same time, the data needs to be shared with a growing number of trusted partners. Therefore, technical openness is an important element in payments. To be open technically, a service provider must make its service accessible, flexible, and transparent without compromising security. Every business needs to determine for itself how to strike this balance, but being technologically open to partnering with the right security and fraud management vendors is also a pathway to a more – rather than a less – secure service.

How do you see the evolution of commerce and payments in, let’s say, the next five years from now?

Looking at the figures around the growth in mobile and mobile devices, it is clear what direction we’re moving in, and how both payment providers and merchants need to prepare. There are now 8.6 billion mobile devices worldwide, which is 1.2 devices per person. And they are increasingly powerful devices: 2016’s iPhone is more powerful than 2006’s iMac, has similar screen resolution, and a much faster internet connection. Nearly 80% of mobile users in developed markets use a smartphone and analysts expect 70% of the world’s population to have a smartphone by 2020. Mobile now accounts for more than 50% of ecommerce in the UK and China, 33% in the US, and over 20% in many other European markets. And this mobile revolution goes way beyond smartphones, extending to wearables, connected cars, IoT (Internet of Things) and so on - payment providers, therefore, need to provide the (mobile) SDKs to facilitate next-generation payments.

One thing that is harder to foresee is how certain macroeconomic forces may impact ecommerce or specifically cross-border ecommerce. In the political world, both in Europe and North America, some of the current rhetoric is running counter to the idea of open borders and open commerce, notably positions on free trade and protectionism. 2016 has been an unpredictable year, so I really wouldn’t want to speculate too much, though I do believe that when one door shuts another opens, so we may see some trends in cross-border ecommerce in 2021 that are simply difficult to envisage right now.

About Wolfgang Berner:

Director, Product – Global ecommerce at ACI Worldwide. Wolfgang’s experience as a developer, project manager and product owner has been critical to the success of ACI Worldwide’s open payment technology (based on a RESTful API), which is the backbone of ACI’s UP ecommerce Payments solution.

 About 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.