From chatbots to instant payment solutions, Finance Monthly has heard from Ralf Ohlhausen, Business Development Director at PPRO Group, who gives his top 10 on the ever-changing payments sphere, the fintech disruptions of 2017, and the latest regulatory updates for the coming year.
- Usability of payment methods
Payment methods need to become more user-friendly to appeal to various platforms of commerce from the till point to online, taking differing devices into consideration in order to stay competitive. This is especially important for providers of e-commerce payment methods who need to come up with optimised user experience and facilitate the growing trend of mobile payments.
- Strong Customer Authentication (SCA)
SCA becomes a mandatory part of the Payment Services Directive 2 (PSD2), which will be implemented in the member states of the EU over the next two years. Unfortunately, the SCA’s increase in security will likely affect usability, which is completely contrary to what merchants and consumers want. New innovations around authentication methods may reduce the problem, but may also lead to more advanced concepts overall, making SCA obsolete.
Going forward, we will see increasing discrepancies between fast moving technology and slow moving regulatory changes - a difficult dilemma, which can only be overcome by fundamental changes in the regulatory approach. If you are impacted by SCA watch out for exemptions that might be granted and new authentication methods mitigating the adverse effect on usability.
- Mobile payments
There’s been some bad news for mobile-payment sceptics. According to the 2016 Visa Digital Payments Study, in just one year the number of European consumers using mobile payments has increased by 200%. Previous scepticism may have been prompted by the fact that it took mobile payments longer to take off than originally predicted. Bashing mobile-payments also became a favourite sport for some journalists. But that doesn’t change the fact that mobile has now reached its tipping point. And with companies such as Apple and Samsung now getting serious about mobile payments, it seems a fair bet that the pace of that change is about to accelerate.
ApplePay is now rolling out to most major markets. And it’s doing so, as it turns out, exactly as consumers are starting to accept mobile payments. Given how often Apple has got it right before, particularly in terms of user experience, there’s every reason to be optimistic this time too. That can only be a good thing both for mobile payments and for the alternative-payment market as a whole. On a more wide-ranging note, this is a lesson for all of us in the industry. New developments invariably go through the whole of the hype cycle — including what Gartner refers to as the “trough of disillusionment”, when everyone is pointing to early failures and disappointments and saying “it will never work.”
As an industry, we’ve got to get better at recognising this cycle for what it is. We need to stick with good ideas, even when they don’t seem to be fulfilling their early hype. Because good ideas don’t go away. And no one wants to be the late adopter when, suddenly, everything starts coming together at last.
- Instant Payments
The Euro Retail Payments Board (ERPB), a successor of the SEPA Council, is currently pushing very hard to make sure that SEPA is not falling behind the many national initiatives for implementing faster and even instant payments. The European Payments Council (EPC) just published their first rulebook for instant SEPA credit transfers (SCT Inst), which will bring down the crediting of the beneficiary’s account from one business day to a mere ten seconds. Similar instantaneous funds availability shall also come to SEPA Direct Debits, Cards and other payment methods. Implementation of SCT Inst will be optional for all the banks (at least for now) and may take some time, but the future of payments will be instant – just as it happened to messaging, the purchase of books or music and many other things of our daily lives already.
- Access to Account
January marks one year until the Second Payment Services Directive compliance deadline, which will bring the new concept of “Access to Account” (XS2A) into the EU. Licensed Third Party Providers (TPPs) will be granted access any bank account in the EU to provide payment or account information services to their customers. 2017 will see increasing competition to the additional layers of value-added services (VAS) presented to banking customers.
- Chatbots
At the beginning of 2016, internet giants rushed to incorporate an Application Programming Interface (API) into chat programs – also known as chatbots – for automated communication with customers. After a year of creating a firm presence in the UK, chatbots will become one of the biggest innovations in 2017 since the introduction of smartphones and it won’t take long until “chatbot payments” are the norm.
- Blockchain Technology
The underlying blockchain technology behind bitcoins will certainly make further headlines in 2017. Blockchain is a database where all bitcoin transactions are saved. It consists of a long chain of data blocks in which one or more transactions are being compiled, encrypted and securely stored. Transactions are very fast with blockchain, and although they are not made in real-time, they are very cheap. Ideas, where the blockchain technology might be used in the future, are only just being developed. Basically, however, it is already clear it could be beneficial for all transactions that are currently in need of a “trusted third party”. One example is smart contracts. Instead of solicitors, computers take over the contractual management, meaning that they are proofing all preconditions in live mode and are able to realise individual agreements automatically.
- Anti-Money Laundering
It has been much speculated whether the fifth Anti-money laundry directive (AML5) will actually come into play in 2017. If it does come in the form currently proposed by EU legislators, it will have a massive impact on e-money institutions. The already low limits for e-money usage without Know Your Customer (KYC) processes will be further decreased in a way e-money will lose its appeal over standard banking. That would through the baby out with the bathwater and could collapse the whole EMI industry.
- Peer-to-Peer (P2P) payment
Person-to-Person or Peer-to-Peer (P2P) payment solutions have been popping up across Europe and the rest of the World for quite some time, but we can expect 2017 to see the method to gain traction here in the UK. The European Retail Payments Board (ERPB) is working to facilitate the co-operation of existing and future P2P mobile payment solutions to ensure interoperability on a pan-European level. The vision is to provide any person with the ability to initiate a pan-European P2P mobile payment safely and securely. 2017 could finally see a standard brought into place which reaches a critical mass of people and enables P2P payments without the need for knowing lengthy bank account numbers.
- Cashier-free stores
Amazon recently unveiled plans to bring a chain of cashier-free stores to the UK next year. By using technology to track which items have been selected, the store will remove the need for products to be scanned or for customers to queue at a checkout as customers will be able to pay via smartphone as they exit the store. The introduction of such stores will accelerate the UK’s move towards a cashless and even encourage a card-less society in 2017.
