PayExpo 2014: Assessing the Revolution
The gtnews focus centred on a range of specialist vendors’ insights into current market uptake of electronic payment (e-payment) solutions, identifying the main technical and business trends and evolutionary potential, and overcoming barriers to entry in various sectors. There are contrasting views over the best way forward. General consensus is that the industry needs improved bank integration and services, that establishing a card operation can be a complex and demanding process, and that delivering an enhanced non-technical user experience is essential for both merchants and clients in the retail sector.
Corporate Payments
The primary focus for foreign currency exchange broker Moneycorp at PayExpo 2014 was the corporate payments space. Marianne Gilmore, Moneycorp’s head of enterprise solutions, identified the current corporate priorities as achieving low-cost payment routing, intelligent allocation of funds, and getting paid on time. She pointed out the importance for corporates of all sizes of prompt notification when receipts have occurred, via short message service (SMS), e-mail or telephone messaging.
Additionally, today’s corporates demand fully effective technology provision and issue resolution support from their payments service provider. Modern solutions must support a wide range of payment types, including Society for Worldwide Interbank Financial Telecommunication aka SWIFT; Clearing House Automated Payments System (CHAPS); Bankers’ Automated Clearing Services (BACS); the single euro payments area (SEPA) and other domestic and international services. There is an growing preference for service arrangements that incorporate consistent and competitive fee charging with the delivery of round amounts of currency in the receiving bank accounts. This bypasses the hassle and cost of dealing with counterparty reconciliation issues.
The market also now requires strong and efficient underlying cloud based technology, and automated support systems to accommodate the demanding requirements of external regulation and internal finance policy. This extends to areas of risk management such as know your customer (KYC) and anti- money laundering (AML) guidelines.
Moneycorp has voluntarily chosen to be regulated on the incoming as well as the mandatory outgoing side of payment execution. The company advocates that the responsible authorities, such as the UK’s Financial Conduct Authority (FCA) and Her Majesty’s Revenue and Customs (HMRC) should formally extend industry regulation to this level of ring-fencing, to provide a higher level of security over fund movements.
Retail Payments: Cards versus Apps
David Abbot, Europe, the Middle East and Africa (EMEA) payments head at financial software provider Fiserv, pointed to a need for more investment directed to integration of many banks’ back office technology programmes. This is especially prevalent in the areas of e-invoicing and e-billing, and also extends to the e-payments business function. Today’s technology investment is primarily directed towards supporting regulatory change, new business development and client management. The industry could do more to improve core processing; for example through deploying automated reconciliation systems.
Abbott feels that banks can respond to current market needs by partnering with specialist third parties to advance their e-payment and remittance service provision; thereby enabling clients to operate internationally much as they do domestically. For example, it appears increasingly likely that the vision of a globally-integrated bill presentation and payments service will soon be realised. Once delivered, this would give corporates and banks the advantage of additional risk management benefits in major areas such as fraud, AML and crime prevention. Interestingly, the internet gambling industry presently leads the way in an innovative use of effective cross border e-payment solutions.
Sara West, head of sales, debit and prepaid at Fidelity National Information Services (FIS) promotes the one-stop shop approach and the provision of a fully-managed service, to overcome barriers to entry that many believe still characterise the card issuance business. She feels that clients are best served by an end-to-end service, which extends contractually to essential areas such as processing services, regulatory compliance, 24/7 call centres, risk management and fraud prevention, with a complete e-KYC provision.
The trend in the card and pre-paid industry is towards real time automation, replacing the traditional batch processing solutions. Clients are seeking instantaneous initial customer recognition, as part of securing consumer trust in the protection of their money. West sees the current £20 (US$34) transaction size maximum as a significant barrier to UK adoption of contactless payments, as it restricts the facility’s value for many retailers.
John Doyle, business development manager – Europe for FSS Technologies (UK) feels that the market for card processing management is too closed to provide optimal levels of choice for new entrants. Merchants evaluating a card programme often find that too many different players are needed for successful programme establishment and costs can appear prohibitive. He was encouraged by the increasing number of companies attending conferences such as PayExpo, which are seeking to hire card management experts for their own purposes. Doyle noted the diversification in the types of organisation entering the card market, such as transport companies, universities and major sporting venues. The profile of merchants is changing, notably with the growth of pre-paid cards. These are being recognised as a useful market intelligence tool, both for merchants’ research into clients’ spending habits and for managing loyalty programmes. The main barrier to entry is the diversity of experts needed.
Jack Hopkins and Ultan Miller, co-founders of start-up technology company Lasu, see significant growth potential for mobile commerce (m-commerce) in the independent fashion retail sector. Their vision is the elimination of all barriers to entry, by minimising the complexity of inventory management, shopping and payment processing for both merchants and their customers, via the ‘personal digital high street.’ They believe that technological innovation requires effective social embedding, so that all types of users become comfortable with the entire m-commerce experience.
Suresh Vaghjiani, director of card services at Optimal Payments, said that the many obstacles experienced by companies in working towards trouble-free payments in the card business result from the industry’s underlying complexity. This stems from the user having to work with many different providers – the issuing bank, a processor, a programme manager, a distribution manager and an acquirer in order to establish and operate a card service.
Vaghjiani believes the industry is due for consolidation, as organisations offer multiple services to the communications marketplace, and potential clients seek one-stop shop solutions. In the cards industry, one consequence of this market transformation is that it should become quicker and cheaper for potential new entrants to launch card programmes. New solution providers will, however, need to overcome potential security concerns in order to become established in a market dominated by the established giants of Visa and MasterCard, and to offer fully joined up packages.
Yves Eonnet, chief executive (CEO) of Paris-based mobile platform provider Tagattitude asserted that the payments industry faces a radically different paradigm. He explained that the technology generally deployed today was originally designed for ‘bricks and mortar’ use, but does not respond well to the demands of e-commerce and the Web. Securing current requirements with the old tools is challenging, so a major shift must occur. As e-commerce is now essentially mobile, it demands the deployment of dedicated tools designed for this environment. While the smartphone revolution has begun, it is not yet fully underway.
Eonnet foresees the end of the dominance of cards. The key issue is security, and the remaining issues of the app to bank link are now being solved. Apps are secured as a central part of their native design, and the mobile security approach will render methods currently used by banks obsolete. The market is swiftly moving from ‘card present’ transactions to ‘full present’ transactions as users demand the security of real time operations. The new mobile paradigm involves transactions being processed in about 160 milliseconds, very significantly limiting attack scope compared with obsolete batch processes.
Crypto Currency Potential
John Manglaviti and Matt Nikel, developers of the consulting and business development group Cointropolis, emphasised the innovative approach that the Nxt crypto currency development team has taken to creating the Nxt crypto ecosystem as a 100% new ‘proof of stake’ build. They are, unsurprisingly, vocal advocates of the value and potential of crypto currencies, and the need to deliver a secure, user-friendly experience.
An important feature is the convertibility of Nxt with major currencies such as the US dollar (USD0, pound sterling (GBP), euro (EUR) and yen (JPY) as well as the popular digital currency Bitcoin. KYC and AML regulation remain challenges for the crypto currency industry. US regulators and accountants frequently disagree about compliance requirements and there is as yet no clarity on compliance requirements in the European Union (EU). These barriers must be overcome before mass market adoption becomes possible with Nxt, Bitcoin and other crypto currencies.