Trends in POS Payments
Do we see a divergence or convergence of Payment Technologies across Europe? Are Digital and physical POS converging at a higher rate?
As remote commerce grows in popularity, so does regulators’ and schemes’ incentive to push new legislation/standards to address the excess risk involved in this transactional environment. Two main variables from the transaction flow are being affected by these initiatives: Transaction messaging and Authentication.
Initiatives in transaction messages involve adopting secure communication standards, such as the ones adopted for CP environments i.e. Cryptograms.
Authentication is both being enforced and also evolving into easier and non-intrusive methods to validate account holders. This means interoperable standards that involve the digitization of payment instruments for use across multiple channels, adopting a convenient authentication method e.g. biometrics.
In this scenario, Authentication in CNP transactions becomes at least as secure as traditional Chip&PIN solutions in CP environments, and there will be no reason for the former to be more expensive than the latter.
With Authentication solved, we’ll move from a Card Present scenario to a Cardholder Present one, where location is no longer important: payments will transcend the physical world altogether. This trend will ultimately unlock new use cases, such as internet-connected devices and checkout-free stores, making the act of payment so frictionless that it becomes almost invisible.
What do you see as a key card acquiring trend in the upcoming 12 months?
The ongoing competition within the C2B payments industry is fierce and card acquiring has become increasingly commoditized—a race to the bottom that will ultimately reduce the Merchant Service Charge to little more than the sum of Interchange and Card Scheme Fees.
This competitive landscape and pressure over margins demand more differentiation and incremental footprint in the value chain.
We can expect to see more acquirers adding services around the commerce experience, especially helping SMBs to run their day-to-day operations through an integrated digital offer e.g. inventory; loyalty; issuing; booking; CMS; etc.
What do you see as key POS trends in the upcoming 12 months?
CP transactions are finally moving onto a new OS standard: Android. This means not only new hardware capabilities and platform model use cases, but also the transition to a reality where a complete bypass on hardware occurs, and any merchant will be able to accept card payments in their smartphones, using their NFC capabilities and secure protocols for PIN on Glass.
The push from card schemes, along with Apple’s acquisition of Mobeewave, are strong signs that a new distribution model for CP transactions will take place, reducing the adoption friction and consequently accelerating the cashless trend.
Companies and Trends to Watch and Follow
If you could share your three tips on the most promising:
- Merchant payments companies (rising stars) with high potential to change/shape the market and - Trends changing the payment landscape in the next 12 months,
What would they be?
I have my eyes on SaltPay, mostly because they’re executing on a key trend in the industry: integration. This means capitalizing on merchant data to efficiently unlock additional value around the entire commerce experience.
Switch Response to the New Paradigm
What are the things you have learned during the pandemic?
Resistance to change is an intrinsically human attitude. We tend to overvalue the opportunity cost in the face of uncertainty, and this evolutionary condition generates inertia. But then there are highly impacting external factors—as is the case with the latest pandemic—that leave us with no option but to look for alternatives, and technology was clearly one of them.
Within six months, we were forced to adopt different formats of communication, production, distribution, research, legislation, and this reality obviously extended to the public and business sectors.
The ironic thing about all of this is that most of the technology recently adopted at scale already existed, it was simply an imposition of context. As with any forced experience, there is plasticity in the adoption, that is, we will keep the habits that worked, and we will abandon the ones that produced results inferior to the previous ones.
How did your company respond to the pandemic situation, adapt to the changing commerce and payment acceptance across Europe? Adapted operating models, adjusted your portfolio, etc.?
Luckily, Switch was already operating heavily in the e-commerce space, so no major adjustments were needed. Apart from that, our CP projects’ deployments were mostly delayed due to shortages in hardware components and lockdown restrictions.
How does your company help merchants tackle the impacts of the Covid-19 crisis (late payments, insolvency, increase of fraud)?
We’ve been supporting merchants on their transition into an omnichannel offer, mostly by creating the means for an integrated customer database, one that allows for seamless and secure checkout experiences across multiple use cases.
On the way to finding the Next New Normal, what are your future plans?
The pandemic has been around for 1.5 years—and despite all the buzz around e-commerce—it has barely reached 20% of the global retail GMV. We strongly believe that in-store transactions are here to stay, and we’re preparing innovative products that capitalize on internet-connected devices to create new commerce experiences.
Strategy and Leadership in Challenging Times
The success and failure of a business depend entirely on leadership. How did you motivate and inspire your people in difficult times? How do you see the most important qualities and attributes of merchant payment leaders?
Crisis moments foster doubt and insecurity—give your team a sense of purpose and they will endure through the most difficult times.
What are the types of people needed for the future of this ecosystem?
The payments industry has been historically led by conservative people, and understandably so.
There’s a difference between supporting the transfer of text, video, or sound, and supporting transaction messages—the latter translate into financial exchanges, with all the inherent liability. Nonetheless, security can’t be an excuse not to innovate—we need to continue pushing technology forward to evolve value exchange—and that will only occur if leaders are willing to take risks.
What are the challenges of bringing talent across sectors and geographies?
In one word: culture. With the globalization of the workforce, there’s an increasing need to align incentives and orchestrate behaviors around a mission.
What are the new positions needed in the merchant payments ecosystem?
Definitely ones that really understand technology and its central role in shaping the future of the industry.
If there is one thing most companies learned in 2020/21 is that you can't plan for everything. What are the things to focus on when forecasting? What are the key inputs for forecasting?
I always try to plan for really short windows e.g. quarters, while staying true to Switch’s mission: to evolve value exchange.
The Acquiring Landscape
Today's acquiring market is far from easy, and the changing commerce landscape demands a new approach for acquirers. In your view, what do acquirers need to do to secure success?
As explained above, I think acquirers should look beyond the transaction itself, and focus on how they can support merchants throughout the entire commerce experience.
You can access here the Issue 91 from the POSitivity Magazine with this and more insights from payment experts.