The Merchant Payments Ecosystem conference is fast approaching, due to be held in Berlin from 18th to 20th February 2020. The organisers claim that “MPE provides the platform to inform and debate the payment landscape, providing insight into innovation and the industry trends, and succeeds in what other seminars don't: focusing a payment industry event not inwards on the industry itself but outwards on the customers, the merchants.”
With that in mind, we asked Nick Telford-Reed to take a look at the agenda and pick out a couple of topics and share his expert opinion on what is topical for each and what trends he expects to be covered at the conference.
1. The status quo of PSD2, SCA & GDPR
The trends: Expect to see discussions around a big push on Secure Remote Commerce (SRC), while MasterCard start to move forward on open banking with Visa making moves too. Both will need to push forward around 3DS2, mobile acceptance.
Secure Remote Commerce is essentially a reboot of the various scheme wallet initiatives we’ve seen over the last ten or more years. You may remember Visa Checkout or Mastercard Masterpass, but SRC provides a more sophisticated ecosystem and tighter integration with both 3D Secure and scheme Tokenisation.
SRC makes up the third ‘leg’ of the EMVco remote payment specifications. Although I don't believe this has yet been mandated by the schemes on acquirers and issuers, there is an inevitability about the upcoming implementation. Issuers, acquirers and merchants will all have to do significant work to support it, but it's difficult at the moment to see the business case unless it gets mandated (i.e. forced) on the ecosystem.
Mastercard have made a big push into payments directly from consumers' bank accounts (as opposed to card payments). They doubled down on this last year with the acquisition of NETS bank to bank division in Scandinavia. This demonstrates a confidence in the growth of this area, and I predict that more forward-looking e-commerce customers in Europe will soon be experimenting with the payment flows that allow consumers to pay directly from their bank accounts without using a card, if they haven’t started on this already.
3DS 2.0 should really have been implemented across the EU late last year to meet PSD2 SCA requirements but has been effectively put off with a confusing array of new deadlines depending on the country. The cost of implementation is high for Issuers, Acquirers and Merchants, and it's likely to have an effect on conversion rates for merchants too. Again, forward looking e-commerce merchants should be looking to work with issuers and their acquirers to become "trusted beneficiaries" so that they are partially exempt from the step-up authentication and the additional friction in the checkout experience.
2. Spotlight on Asia
The trends: Barcode and QR code payments, Alipay and WeChatPay move westwards and Visa sponsor the 2020 Olympics
This is an interesting topic that has been popping up at multiple payments conferences over the past year. As Asia’s buying power continues to grow and their preference for using home-grown platforms for payment remains unwavering, the west needs to start to consider accepting these methods, if only to satisfy the foreign customers. Using QR codes for payments is something that is increasingly common in Asia. EMVco have developed a standard for them now and merchants that have a lot of tourist traffic from Asia might want to experiment. Similarly, merchants with footfall from China in particular will need to think hard about supporting WeChatPay and AliPay as payment methods.
There’s a lot to learn from the Asian payment markets, where the pace of change is extreme, and a lot of innovation that can be implemented globally. With the 2020 Olympic being sponsored by Visa, I expect to see some innovative payment technology deployed at the Tokyo games, which could start to make waves in European and US markets.
3. Blockchain, cryptocurrencies & payments
The trends: Crypto will suffer tainted valuations as big institutions muscle in and regulation increases, powered by a convergence to bank to bank, the next Bitcoin halvening to control inflation, and market manipulation influenced by China’s dominance in the crypto market.
I have begun to wonder whether exchanges might start discounting the valuations of some holdings that are "tainted" by being associated with less salubrious/legitimate sources. In other words, a coin that is freshly minted might be worth more than a coin that is traceable back to a cluster/wallet known to be associated with (for example) criminal activity, reflecting the reduced attractiveness to bigger, more regulated entities of those coins.
I think that some big banks will really try to get into the crypto space this year, but principally as providers of banking services to crypto firms, or as investment assets or cross-border funding. I still see little sign of mainstream adoption for consumer payments.
The Bitcoin block reward halves this year [i.e. the amount that a miner receives for mining a block], which will probably cause turbulence in its price. Think we might see more noise about the degree to which the crypto space is essentially dominated by Chinese suppliers, but I don't know how that will play out. Payments companies might want to continue to experiment with Crypto, especially in the funds transfer domain.
It’s going to be interesting to see which of these topics rises to the top of the agenda at MPE, which tends to be quite POS and retail centric. I look forward to hearing from vendors about their plans to meet these challenges and from merchants on where they see their priorities.