A panel at Money20/20 tackled some of the big questions in the payments industry, touching specifically on issues relating to cross-border commerce and who is providing value to both merchants and customers.
Moderated by Paul Alfing, of Ecommerce Europe, the panel included:
- Igal Rotem, Credorax – merchant acquiring bank
- Hank Boughner, GlobalPayments – merchant acquiring bank
- Anders la Cour, Saxo Payments – payments division of Saxo Bank
- Christoph Tutsch, ONPEX – white label payment technology for financial firms
All the participants have deep knowledge of payments, technology, and the challenges of cross-country operations. The firms are of varying size and operate in a range of countries, but each has a place in the value chain of making technology work to ease the payment process for clients.
Challenges to the current system: All-inclusive tech giants
Both inside and outside of Europe, big names are shepherding consumers through every step of a purchase inside their own domain. Examples include Amazon, Tencent, and Alibaba, where smaller merchants become part of the larger organization, and payments are attended to ‘in-house’. “If a big tech giant controls the whole infrastructure, how much room is there for other parties to operate?” asked Alfing.
Rotem agreed that large companies “can create their own network,” and this will have a significant impact on the market, but smaller businesses will still need to use other payment methods alongside with existing payment methods because they don’t have the same kind of infrastructure. “I can see a kind of tectonic shift. There will be the very large merchants, that may create this kind of internal ecosystem…and cross-border eventually will be dominated by some very large marketplaces.”
Rotem added that small merchants may eventually have no choice but to join up with a “giant” in order to be able to compete in the marketplace, but that each market will have its own needs. “There’s always going to be counters to the one or two folks controlling the entire ecosystem, and I think that’s kind of our perspective, especially given the number of countries we operate in.”
Local trust vs. cross-border standardization
For transactions taking place in a card-not-present space, trust is vital. According to Tutsch, understanding the local culture as it applies to payment methods lays the groundwork for this trust. The consumers also need to properly identify the merchants they are using.
But once you move from a local jurisdiction to cross-border commerce, does there need to be a standard payment scheme? Can one for Europe apply to Asia as well? Boughner explained the pros and cons: “Standardization is important, and it helps enhance the payment flow and helps enhance the customer experience. The difficulty [is] that standards tend to take on a life of their own,” and have a widely variable ease of adoption.
Approval rates, Regulation, and Security
Another major challenge in working “cross-border” is approval rates. There is a marked decline in approval rates as payments go from domestic to intra-continent to cross-continent. Rotem spoke of payment requests from certain regions being automatically rejected. From the point of view of the merchant, this is “catastrophic,” because a buyer has been turned away and presumably the loss of trust will have repercussions beyond the single attempted transaction.
Regulations in the payments industry are a fact of life. The panel members hope for quick implementation of regulations, keeping consumers and their information safe while offering opportunities for innovation. “We’re supporters of the regulatory environments; we see it in all different flavors,” said Boughner. “It will come in waves, and it will continue to evolve, and on balance that’s a good thing. We need to work in partnership with the innovation side and the regulation side.”
Security is a constant on everyone’s mind, and a few methods touched on during the panel include:
- Geo-location for identity authentication
- Two-factor (or more) identification / authentication
- Using social identities as a method of verification for online payments
Where will the next five or ten years lead us? Definitely to more interesting questions like those explored in this panel. To see the discussion in full, see our video.
To learn more about how Credorax can grow your business within and beyond your borders, contact us at: firstname.lastname@example.org.