3 powerful trends set to impact payments in 2019
The payments industry is undergoing rapid change due to technology disruption, the introduction of new business models and a changing regulatory environment. Many of these trends are interconnected and interdependent and will shape the future of payments. Here we look at three trends in each of these categories that are set to have a significant impact on the payments industry in 2019 and beyond. The three trends below are both significant and representative of regulatory, business and technological change.
- Open Banking (Regulatory)
- Context-Based Payments (Business Models)
- Omnichannel (Technology)
Regulatory Trend: Open Banking
Open Banking is new government legislation which removes the tight control banks have over the financial data of their customers. Open Banking regulations allow third parties such as Fintech’s to access customer financial data (with customer approval) through open API’s allowing them to develop new financial products and services using this data.
Europe is leading this change and has made regulations on open banking. On October 2015, the European Parliament adopted a Payment Services Directive, known as PSD2. PSD2 includes directives to support open banking.
In Australia, the Open Banking review process commenced on the 20th of July 2017 under the direction of the Australian Government. The review directed Mr Scott Farrell to recommend the most appropriate model for Open Banking in Australia. This review is complete with the review making 50 recommendations regarding the regulatory framework, the type of banking data in scope, privacy and security safeguards for customers, data transfer mechanisms and implementation issues. On the 9th of May 2018, these recommendations were agreed by the Australian government with the phased implementation of Open Banking is set to commence from July 2019.
Open banking will have a significant impact on payment processing applications due to the mandatory need to share the data and the open ecosystem that comes along with it. On the positive side, there will be many options such as startups, aggregators, AI providers and competitive banks for consumers to choose from.
While it increases the service choices and data control for the consumers, it will have a tremendous impact on security and privacy. So far banks control sensitive information with strict internal controls, roles and security systems in place. With that safe perimeter gone, banks now operate in a fluid environment. Some of the security issues that arise out of this are:
- Banking and payment systems need to be designed for sharing data and have to provide robust security implementations for the open API.
- Data will move through a complex network of apps; hence it needs to be adequately protected.
- There will be an increased need for tokenisation, masking and encryption that will be employed across the board to maintain data confidentiality.
- Privacy of the user data needs to be guarded stringently as well as exposure to any personally identifiable data.
- Compliance measures will become little more complicated and need to be handled carefully.
Business Model Trend: Context-Based Payments
Context-based payment is a new business model designed to remove the physical act of payment from the payment experience.
With context-based payments, the payment occurs in the background. The customer approves the payment but does not need to take out their wallet and hand over cash or a credit card. An excellent example of context-based payments is Uber. The customer doesn’t have to pay the driver; they merely exit the vehicle at the end of the trip.
These type of payments remove friction, making the shopping experience very smooth for customers. When applied to other business categories such as retail we can foresee the significant impact this will have on the customer experience.
A typical implementation within a retail environment would have the customer selecting items to purchase and then walking out without the need to take out a wallet, enter a PIN or inserting a card in Pos terminals.
In this situation, the customer would have an application of their phone which activates when they enter the store based on GPS or other geo-location technology. This application would contain their secured payment information and also record products that have been selected for purchase. These products can be entered by scanning barcodes or through other tracking methods with the payment triggered when the customer exits the store.
Many big platform companies such as Amazon with Amazon Go are already trialling technology and expect this trend expected to be the norm shortly.
As with every great digital invention, data security needs to be a key consideration. With the removal of manual authentication, there is an increased chance of hackers manipulating the system. This would necessitate mitigation measures such as
- Behavioural analytics of transaction to measure and manage risk.
- Strick mutual authentication controls between merchants and the apps.
- Measures to safeguard non-repudiation.
- Security compliance such as PCI DSS
Technology Trend: Omnichannel Technology
While we classify Omnichannel as a technology trend, it is far more than that. It is a combination of business model and technology.
Similar to context-based payments omnichannel technology aims at providing a seamless experience to consumers across different channels. It is an improvement over multichannel. Multichannel allows consumers to transact from multiple channels such as phone(voice), mobile(apps), Desktops (website, emails) and the call centre, omnichannel takes this a step further and allows customers to interact across different channels seamlessly with customer data being shared across all channels.
For example, a customer may receive a promotional discount email from an e-commerce website they have an account with, log-in to a website and add the promotional item to a shopping cart without completing the purchase. Later they may go to a shopping centre and where the e-commerce website has a retail storefront and remember they failed to complete the purchase.
The customer then decides to complete the purchase and access their online account using a mobile app and select to pick up the purchase in-store. The customer then walks into the store, confirms their details with the sales assistant and collects their discounted item. In this example, the customer data is shared across multiple sales channels from a web portal, to mobile app and then retail. This is the benefit of omnichannel.
In a multichannel environment, the same sharing of customer data would not have been possible with the customer potentially not able to pick up the item in-store due to a disconnect of data between online and retail.
IPSI is unique in its ability to provide advanced tokenisation and multi-bank connectivity in conjunction with custom designed web, mobile, IVR and call centre based payment channels, thereby delivering customer-centric multi-channel and Omnichannel solutions to Australian businesses.
The key to Omnichannel is the ability to identify the customer across all channels seamlessly. This requires sophisticated tokenisation and data exchange capability to ensure the protection of credit card data and ease of payment across different channels.
As with any payment systems, PCI DSS measures need to be applied across the channels and to manage the end to end exchange of sensitive credit card data. A combination of a specialised Omnichannel tokenisation and masking solution would help to manage this seamlessly.
The payments industry is undergoing rapid change to keep up with new technology and changes in customer expectations. Organisations with the ability to integrate with emerging technologies without the need for re-engineering or additional infrastructure costs will be best positioned to implement changes and benefit from their implementation. IPSI’s market-leading tokenisation capability provides multiple tokenisation options that can facilitate Omnichannel payments. In addition, IPSI can customise the customer payment experience across a range of channels including web, phone (IVR), mobile devices, call centre and web-enabled shop fronts.
To discuss how IPSI can help you to prepare for the future contact our team on 1300 975 630 or firstname.lastname@example.org