By Dale S. Laszig
DSL Direct LLC
At the close of a promising first quarter 2015, payments analysts are taking note of prevailing trends. The year has been called everything from the year of the consumer to the year of tokenization. Can the year live up to its many names? Which titles will come to fruition and make their mark on payments history?
As the year progresses, the industry cycles through its ensemble of winners and losers: merchant level salespeople hawking their wares, merchants bravely adopting new technology, and consumers opting in and out of an array of offers. Micro merchants and big-box retailers gather on a crowded playing field as the annual tradeshows begin.
This article discusses several developments predicted to make a big impact on payments in 2015.
At the National Retail Federation's 104th Annual Convention and Expo, mobile devices and apps were a common fixture at retailer, acquirer and vendor exhibits. Small, hand-held mobile devices were also used to record and broadcast many of the show's panels and speakers.
In his opening remarks at the show, NRF President and Chief Executive Officer Matthew Shay said, "We believe this is the greatest industry in the world, and we're proud to help you tell that story."
Mobile technologies and consumer mobility will continue to shape this story, as retailers leverage mobile technologies that enable them to interact with their customers in real time. In-app payments and loyalty products that can be easily stored and accessed on smartphones are driving this innovation and forcing many retailers to replace traditional POSs with new, interoperable models. The ability to connect and interact with smartphones is imperative. Consumer smartphones function like personal remote controls in a giant interactive movie starring consumers, merchants and brands.
Will 2015 be the year mobile wallets are embraced by merchants and consumers alike? To date, competing technologies, no universal standards and lack of consumer education have prevented them from storming the marketplace.
Mobile wallet brands Softcard, Google Wallet and Merchant Customer Exchange (MCX) continue to face challenges in launching their respective brands. A security breach at MCX while the digital wallet was in test mode raised additional concerns about mobile wallet security and protection of cardholder data.
David True, Managing Director at Broadly Curious Advisors, doesn't expect to see widespread use of mobile wallets in his lifetime. In a recent LinkedIn post, he wrote, "In the case of mobile wallets, particularly for in-store use, group think and love of technology blind us to questions such as 'who cares?'" He stated the answer is "not many," unless the solution provides incremental value, such as rewards for payment app usage, or solves a problem like pre-ordering a meal or hailing a taxi.
True sees more promise in the array of free, downloadable retail and brand apps available in Google Play and Apple iTunes stores, reasoning that most consumers shop at a few favorite retailers and don't need a large, digital wallet that aggregates numerous payment apps, including many that consumers would never, or hardly ever, use.
True noted that individual apps have marked differences from digital wallets. Not all apps are "specific to a merchant, and some don't require proximity to [a] payment terminal. Indeed, it is a stretch to call these wallets – they are more apps that include payments."
EMV (Europay, MasterCard and Visa) migration topped the conference agenda at the 8th annual Smart Card Alliance Payments Summit, held in early February 2015. The EMV Migration Forum estimates that U.S. issuers have already released 120 million chip cards to the public.
EMVCo, the global body formed to manage the EMV technology standard for global interoperability, is formulating a new set of standards for e-commerce and card-not-present (CNP) transactions. As part of that, EMVCo expects to release 3DSecure Version 2.0 in 2016.
3DSecure (3DS) stands for 3 Domain Security, a specification that supports authentication for payment card transactions that originate online. The technology protects the three different banks or "domains" of an e-commerce transaction: the issuing bank, acquiring bank and cardholder bank. In addition to protecting consumer information, 3DS 2.0 is expected to significantly improve and simplify the consumer interface.
Deborah Baxley, Principal at Capgemini and an active member at the SCA considers the new standards to be a sign that EMVCo is moving in the right direction by extending its mandate to cover not only brick and mortar but the increasing number of e-commerce and CNP transactions resulting from widespread use of mobile technologies.
"EMVCo's tokenization efforts and now 3-D Secure are recent examples of this extending focus," Baxley said. "It only makes sense, since as we lock up POS transactions with chips, tokens, NFC, etc., the fraudsters will move to the next most vulnerable channel and that's e-commerce and m-commerce. While 3-D Secure may not be the silver bullet we're looking for, it's a step in the right direction."
Experts consider point-to-point encryption and tokenization to be essential to protecting and securing electronic transactions and combating fraud.
The omnichannel experience is now a common theme among retailers, who are seeking to create a seamless experience for consumers that keeps them engaged and connected throughout the shopping journey as they navigate online, mobile, and brick-and-mortar environments.
While retailers may differ on the exact definition of omnichannel commerce, most would agree that emerging technologies are constantly creating new platforms for consumer engagement.
Technology blogger Noz Urbina came up with a list of 25 platforms that participate in the omnichannel universe. These include in-store digital; desktop web; augmented reality (smartphone/tablet app); local signage; user-generated content; sales staff; in-store promotion; promotional web; leaflet; brochure; product data sheet; retail circulars; billboard; kiosk (in-store digital); TV (traditional broadcast); TV (on-demand streaming); promotional event (sponsored third party); promotional event (brand organized); tech support/customer support; branded collateral (sponsored third party); product placement (TV, film, music videos); product packaging; in-store signage; shelf-space positioning; and social media (generally).
Urbina urged others to add to the list at http://list.ly/list/Zxi-all-the-channels-that-make-up-omnichannel. "If you think a channel is industry specific, please tag or note that in some way," Urbina wrote. "After we're done, we will collate this into an infographic for everyone to see the full breadth of what we mean when we say 'Omnichannel.'"
Let's join the conversation and make 2015 the year payments becomes an integral part of the omnichannel experience.
Dale S. Laszig, Staff Writer at The Green Sheet and Managing Director at DSL Direct LLC, is a payments industry journalist and content provider. She can be reached at firstname.lastname@example.org and on Twitter at @DSLdirect.
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