Wolfgang Berner, PAY.ON: "A payment gateway needs to be more than just a payment gateway"

In the rapidly evolving ecommerce market, how can PSPs keep pace with the changing needs of both consumers and merchants?

The continuing globalization of ecommerce is creating new opportunities, and merchants want to move quickly to take advantage of these opportunities and secure new business. But with so many things to consider, the last thing that a merchant wants is a payment provider that either restricts their growth, or having to work with multiple payment providers in different regions.

Rapid change is rewarding those PSPs that are agile and adaptive. From a technological standpoint, this requires superior open platform architecture and streamlined processes. But many PSPs are opting for a business solution to the technology demands; that is, they are forging strategic partnerships with specialist technology providers in order to get the agility and flexibility their merchants need. These partners can also bring a range of value-added services to the table, enhancing a PSPs proposition and consequently increasing merchant ‘stickiness’.

What are the value-added services you would recommend to PSPs to enhance their proposition, especially in a cross-border context?

Payment providers support merchants as they expand internationally by offering relevant alternative payment methods, and enabling local and international acquiring. This is driven by consumers’ expectations of local payment methods, currency, and language; the absence of which leads to higher dropouts. But a payment gateway really needs to be more than just a payment gateway. Additional value-added services, such as tokenization and one-click checkout, allow merchants to streamline their operations in a cross-border context by reducing the number of solution providers they need to deal with. Increasingly, payment providers are expected to deliver both their core gateway and value-added services through a single technical integration.

Real-time fraud prevention, business intelligence, one-click and recurring payments, consolidated reporting and analysis, loyalty and gift card programs, mobile SDKs… all these value-added services have one commonality; they simplify and streamline merchants’ business operations. Because PSPs work in different verticals, with different payment and risk needs, the value-added services that are most suitable or fit best within their proposition will vary substantially. Again, strategic partnerships are one way this is being addressed.

One additional note on this subject, an increasingly important differentiator for payment gateways is their integration with ecommerce or shop plugins. Whether SaaS-based (e.g. Shopify) or self-hosted (e.g. WooCommerce, Magento), plugin integration should be considered alongside the already mentioned value-added services.

Omni-channel might be an ecommerce ‘buzzword’, but what is clear is that payment providers want to enable merchants to accept payments from any device. But these developments also create new fraud case scenarios. Could you explain what vulnerabilities merchants should be aware of with regard to their omni-channel strategies?

Omni-channel commerce – or simply ‘omni-commerce’ - increases the complexity around payments, and by extension the complexity around fraud management. The complexity is due to certain payment methods being more prone to fraud in different channels, increased risk exposure when entering new markets, or rules and regulations that shift fraud from one channel to another (e.g. EMV mandate in the US driving fraud to ecommerce). As a consequence, consolidated fraud management is seen as one of the most important value-added services a payment gateway can offer. In 2015, ACI Worldwide commissioned Forrester to conduct research on the topic of omni-channel fraud, and revealed that 65% of retailers believe they lack adequate fraud management for an omni-channel environment. They also found that only 46% have consolidated fraud management solutions across all channels, although another 40% have this on their immediate roadmap, indicating that it is a high priority.

One of the challenges of ‘omni-commerce’ is that multiple customer touchpoints create more data, multiple channels demand more payment options, and consumers are demanding both convenient checkout and fast fulfilment. Merchants are being pushed to deliver a frictionless experience, but at the same time it is essential that they protect themselves from fraud. Real-time decisioning can help merchants to ensure a seamless checkout (maximizing conversions) and also help with the goal of faster fulfilment. A consolidated fraud solution increases cross-channel visibility and makes it easier to detect fraud patterns. Getting good data across all channels is essential, but the human touch is still needed to interpret trends and fine-tune real-time decisioning. For this reason, support from expert risk analysts is preferable to a ‘plug and play’ solution.

Going one step further, how do you see the role of payment gateways in the world of Internet of Things?

In a lot of ways, the ‘Internet of Things’ (IoT) is the logical extension of the omni-commerce world. Today we talk about enabling a seamless shopping experience when moving between desktop, mobile, and brick-and-mortar, but by 2020 – with more than 25 billion connected devices – that complexity will multiply as cars, fridges, watches, glasses and other everyday devices become payment-enabled.

In this context, value-added services will become an even more important part of the payment gateway proposition, although they will also continue to function as intermediaries between consumers, merchants, card schemes, alternatives, and a range of financial institutions both traditional and disruptive. Additional value-added services will emerge out of big data analytics, used for both business insights and to manage fraud.

A PSP that can bring together the most flexible and secure payment gateway solution, the most sophisticated real-time fraud prevention, consolidated reporting across all channels and payment devices, and offer the best interoperability (i.e. through open APIs) will be well positioned to respond to the incredible complexity that will arise from billions of connected payment devices.

Open APIs, as you mention, are becoming more common, and are also being discussed in the context of PSD2 - what impact will this have on the evolution of digital payments and commerce? And how do you envisage the future business case of a payment service provider in the PSD2 context?

PSD2 has the potential to open the door to increased competition from non-banks, and I do think that we will see the emergence of new players who are agile and able to move more quickly than traditional banking players. Whether PSD2 is a seen as a threat or a challenge is really a question of perspective. Traditional banks are cognizant of this, and some – such as BBVA – have already moved to reposition themselves as ‘digital first’ companies. The directive promotes the usage of banking APIs, and therefore any payment provider that employs open platform architecture (i.e. REST standard) will be well positioned to enable strong cooperation and integration between banks, fintechs, and other technology platforms.

In general, open RESTful APIs lead to microservice architectures, which in their application result in better and more resilient payment system architecture. They also reduce costs for the wider ecosystem, in particular banks that need to provide APIs as a result of PSD2. Importantly, resilient open architectures offer more opportunity to react faster at a time of accelerated change and disruption in payments.

PAY.ON has been acquired by ACI Worldwide in order to expand business and leverage payment services for customers. Could you briefly outline the main benefits of bringing these two payment technology specialists together? What new services are you planning that may help customers expand their business or, simply, manage it more efficiently?

Bringing together PAY.ON and ACI Worldwide presents some really exciting opportunities, especially in developing end-to-end payment capabilities and supporting next-generation retail strategies. ACI’s acquisition of ReD in 2014 also means that clients benefit from ReD Shield’s sophisticated fraud management solution set. We are therefore able to deliver on the sort of value-added services and consolidated solutions discussed. We are yet to see anyone fully deliver on the promise of omni-channel, but I strongly believe that as a result of PAY.ON becoming part of ACI Worldwide, we are perfectly positioned with regard to building out omni-channel around ACI’s POS offering, PAY.ON’s ecommerce and mobile technology, and ReD Shield fraud management capabilities.

About Wolfgang Berner

Wolfgang is PAY.ON’s SVP Product, bringing to his role experience as a developer, project manager, and product development expert. Wolfgang has been instrumental in the development of PAY.ON’s open payment technology (delivered through the Open Payment Platform) that drives all of PAY.ON’s global payment gateway solutions.

About PAY.ON, an ACI Worldwide company

PAY.ON delivers white label global payment gateway solutions to payment service providers, ISOs, acquirers, ISVs, and VARs, enabling them to fully outsource payment transaction processing or integrate a gateway-to-gateway solution. Modular solutions enable payment providers to rapidly increase revenues, reduce costs and risk, and accelerate expansion into international markets.