At our UNIFY event in London on June 16th, we heard many great speakers talk about the future of payments. Benny Nachman, our CEO discussed the inspiration behind Credorax and Moshe Selfin, our COO, unveiled the company’s exciting new product, the enhanced platform ePower 2.0. In addition to these and other thought leaders, we also had a panel discussion that focused on a few key issues that are influencing the payments industry.
The panel’s participants included:
• Moderator David Birch, Director of Innovation, Consult Hyperion
• Koen Vanpraet, Chief Commercial Officer, Credorax
• Kieran Hines , Practice Leader for Financial Services Technology at Ovum, a UK-based analyst house looking at telecoms, IT and the media
• Josh Floum, Chairman of the Board of Directors, Credorax, and former Executive VP and General Counsel, Visa
• Neira Jones, independent payments and digital innovation consultant
We are going to take the next two weeks on the Smart Acquiring Blog to explore some of the themes and issues discussed during the panel.
The panel focused on three broad streams that affect the future of payments: Regulation, Business and Technology. With that brief in mind, Neira opened the discussion with some thoughts on the Payment Services Directive 2. She’s actually very excited about it (as excited as someone can be about a regulatory document). Here’s why:
The Payment Services Directive 2 is actually rather exciting, believe it or not. It’s the first time ever that a payment services regulation has stopped concentrating on fraud, anti-money laundering, capital adequacy as it normally did in the PSD1 which we currently operate under in Europe.
Suddenly it has very noble aim, to promote innovation and competition in the various payments eco-systems. Now, there are various schools of thought that are saying it will stifle innovation or it will promote innovation.
But one very interesting thing for me, with my other hat of cyber security on, is that you’ve got a whole section in PSD about protecting consumers and organizations, but you also have a whole section on identity and authentication, which will promote competition in that space, undeniably, because we’ve had a monopoly from the card schemes, as David knows very well, in terms of 3D secure and liability shift. So suddenly the PSD2 is going to introduce competition to that method of authentication in the card payment eco-system by promoting new entrants.
So how will the PSD 2 affect cross-border payments in near term? Neira pointed out that the UK won’t comply until it comes into force. On the other hand, the UK is already doing cross-border business to countries that will comply more immediately, like Germany.
EMV, Mobile and Tokenization
So how is the US conversion to EMV coming along? According to Josh Floum:
The chip-in-pin movement in Europe is not likely to catch on very quickly in the US. There’s too many things entrenched with the mag stripe. So I think that what the US will do is go to the next authentication method beyond chip-in-pin, whatever that is and plan for that.
The moderator pointed out that “whatever that is” is probably mobile and tokenization. On the latter, this is what Kieran Hines had to say:
The most interesting aspect of tokenization from my perspective, is if you separate, in the cards business, the plastic from the credential, effectively what tokenization does is it really signals the beginning of the end for bits of plastic, because what you are doing is in effect, enabling that static pan to no longer be required in any format, and the token therefore can be used in any number of different areas, and solves some of the inherent security issues that we see, particularly in the card not present space.
And that comes back, to a great degree, to what merchants are looking for from payments. No merchant that we talked about, small-medium enterprises before, no merchants in the business of accepting payments are in the business of selling goods and selling services.
And so what they want is the ability to receive funds, in as easy and as cheap way as possible with a minimum fraud risk. And I think where tokenization starts to have a huge impact is enabling the dynamics of how those payment services are provisioned to that merchant base to change and fundamentally shift that debate.
At this point, the panel seemed to agree that PSD2 combined with mobile and tokenization will eventually create a substantially more secure marketplace than we currently have today. One would hope that this increased security would lead both merchants and consumers to have more trust in e-commerce environments.
Increased trust and security in e-commerce also opens up the potential to bring new payments schemes into the system. So here we can see a direct line between regulation and technology to innovation. This was actually the essence of our UNIFY event.
Come back next week for Part II of our UNIFY Panel discussion.