This should be an important lesson for the payments and fintech world – that the most important thing for many merchants is simply staying alive! Of course, getting paid is an important part of that but it matters little about whether the consumer is paying by cash or card in 500 milliseconds or 30 seconds or that the latest consumer convenience is a payment enabled piece of jewellery! The overall offering is important and payment systems undoubtedly have a contribution to make, but the core offering of the right product at the right price, in the right place, etc will eclipse anything a payment solutions company alone can provide.
Payment is not one of the core ‘Ps’ and, as much as the paytech world would like to see it as such, it is unlikely to ever be! That means that it’s increasingly difficult to argue that a payment solution, in and of itself, has any significant value worth investing in. Innovations with relatively high cost but barely marginal benefits can only usefully be implemented as part of something with tangible, revenue generating potential, or which appeals to new customers’ demands. This necessitates a more collaborative approach between the wider paytech world and the providers of core merchant solutions. Those might be the providers of ePoS/till systems, customer interface devices such as self-serve kiosks, customer acquisition and loyalty channels, real estate/shop fitting providers, core ecommerce platforms, fulfilment channels or even the suppliers of the merchants’ main products or services.
As we look forward to the start of another year, the increasing regulatory and legislative burden on the wider merchant community and its supporting infrastructure is reducing the competitiveness of the economy as a whole.
The big things for this year are the Regulatory Technical Standards for Strong Customer Authentication (RTS for SCA), EMVCo’s Secure Remote Commerce, Brexit, and the UK Payment Systems Regulator’s market review into the supply of card-acquiring services. In this blog it’s impossible to cover all of the hot topics in detail – for that I encourage you to engage with the programme of weekly topical Vendorcom Payment Forums
that go into much greater depth and have representation from all affected stakeholder groups.
Perhaps, also, the realisation that cash is not going away any time soon will finally dawn on folks and that fintech ‘disruption’ is a detrimental objective in relation to trust-based transactions which need to be resilient, interoperable, secure and ubiquitous, even if it can be argued that what is currently offered requires a fundamental rethink.
Solutions providers and merchants alike should be familiarising themselves with the rigors that RTS for SCA will demand and preparing at the very least to implement 3D Secure V2 as the most straightforward method for two factor authentication for card transactions. It cannot be overemphasised that the devil is in the detail of SCA. It would be wrong to think of this as only applying to card payments or only to ecommerce. All electronic transactions need to be assessed and contactless face to face transactions will be affected too! To emphasise this point, I encourage merchants to reflect on the implications for wearable payment tokens such as rings and bracelets. Because the Regulations specify that contactless payment must be two-factor authenticated after every five transactions or a cumulative €150 spend value is reached, the future of static / dumb wearables will be under serious scrutiny as the RTS for SCA is enforced from September. With under 250 days to go, I expect we’ll see the term ‘persistent wearables’ see much greater emphasis. Only those wearables which can be authenticated AND can be proven to have remained in constant contact or possession of the user/authenticator - such as a smart watch, biometric tracker or similar device – will have any real value as a payment token post SCA.
In relation to Brexit, perhaps the most important area for merchants accepting card payments is in relation to the implications for the EU Interchange Fee Regulation. Rather than go into detail here, it’s best to review the general update on HM Treasury’s approach to financial services legislation under the European Union (Withdrawal) Act
and their specific explanatory information on the Interchange Fee amendment
Happy New Year and good luck with getting closer to what the reality is for initiating and accepting payments across the varied and finely nuanced merchant marketplace. I wish success for everyone in the wider payments ecosystem in 2019.