By Dale S. Laszig
Editor's Note: As part of our retrospective series, we are reprinting Dale Laszig's column on transformation in payment rails and transaction lifecycles published March 23, 2015, in issue 15:13:02.]
There was a time when the word "click" could have aptly described an electronic transaction. The simple and repetitive sound of a click evokes the primitive origins of payments. Each transaction was like a three-act play, beginning with an authorization request, followed by an inter-modem exchange and ending with an approval or decline.
Payments in those days were open-and-shut, nothing like today's fluid, seamless points of commerce. Present day transactions don't always have clearly defined beginnings and endings, don't always originate at the POS, and don't always end at checkout. Many don't even use the established payment rails. This article discusses several notable developments shaping payments today.
Bryan Sory, co-founder and chief executive officer of Qwyvr LLC, noted the irony of credit cards, the original cash killers, facing attacks from competing payment schemes. "Plastic cards are a dead technology – the world just hasn't realized it yet," he said. "The real problem today in payments is that data moves at the speed of click, but value does not."
Sory and his partner, Dave Whitmer, observed that bitcoin and other digital currencies were being commoditized, with little to offer beyond being low-cost replacements for cash and credit. This spurred them to form the Qwyvr network, which they described as a digital replacement for cash that offers real-time gross settlement – a system that does not and will not process cards and moves value at the same speed as data. "At Qwyvr, our goal is to hasten the end of plastic through a combination of software, hardware and a unique cash management system," Sory said.
A nano second was once the average life expectancy of a click. Compare that to the ways in which digital transactions come alive in the omnichannel world. Each transaction has the potential to become an interactive conversation, not only between a POS device and financial host, but also a real-time exchange involving consumers, merchants, acquirers and brands. Mobile payments have blurred the lines between online and in-store payments, as growing numbers of consumers simultaneously shop online and in stores, sharing their experiences with their social networks while deciding whether to buy online or in the store.
An expanding array of options has extended payment transaction life expectancy. Here are some examples:
And after the sale, consumers can choose from a range of payment options; change card type; combine points, coupons and discounts; and more. Retailers initially pushed back against showrooming, concerned that consumers would use their stores to view products and then buy them elsewhere. Target Corp. even produced a unique set of bar codes to disguise its products, making it difficult for customers to compare retail offerings and prices.
Today, most retailers see that showrooming is driving traffic to their stores and have become more comfortable with the practice. Many encourage consumers to show them competitive offers so they can match a price or sweeten a deal.
An arrow connecting a POS device to a financial host used to represent a typical transaction's journey. Dynamic currency conversion and optimized gateway routing have made transactions more open-ended and complex.Nathan Jackson is vice president of Business Development in the European region for Zooz Mobile Ltd., a New York-based technology provider that connects merchants to multiple payment acquirers and financial institutions. The company's leveraging of advanced analytics can assess each transaction and route it to the best possible financial host, Jackson said.
He called omnichannel commerce "the big want" driving payments innovation, as retailers and technology partners strive to deliver a consistent brand experience to consumers across multiple devices and channels. In this environment, he foresees an expanded role for gateways and an opportunity for acquirers to become more specialized by focusing on specific verticals and incorporating value-added solutions into their product mix. "Gateways intermediate to improve the ecosystem, increase acceptance rates, minimize fraud and apply agile technology to information inside the transaction," Jackson said. "The expanding role of gateways may initially commoditize what acquirers do, but it will also help them focus on what they're good at doing."
Another major development in transaction technology is that credit cards are becoming smarter. Most countries with sufficient infrastructure have already fully implemented EMV smart-card technology. Now, in preparation for the October 2015 liability shift, many large and small U.S. merchants are upgrading their systems to employ EMV-enabled POS equipment.
Increasing numbers of U.S. consumers are receiving chip-enabled credit cards, as well. The new technology will create a different in-store and online payment experience, beginning with the transaction itself. The smart card is widely considered a more secure method of payment due to a two-factor authentication process and built-in microprocessing chip that protects cardholder data.
EMVCo, the global body collectively owned by AmEx, Discover Financial Services, JCB International Credit Card Co. Ltd., MasterCard, UnionPay and Visa, is developing a more secure standard for e-commerce transactions. EMV 3DS 2.0, originally developed by Visa, is slated for release in 2016. 3DS stands for Three Domain Secure: the issuing, acquiring and cardholder bank domains of a transaction.
EMVCo executive committee chair Tac Watanabe said 3DS will be simplified and interoperable, "enabling the merchant to offer a better, more streamlined authentication experience across different devices and channels."
Comparing yesterday's clicks to today's seamless transactions can bring recent payment innovations into sharp relief. Every paradigm shift in payments can be found in the DNA of a single payment transaction.
There's no doubt the payments ecosystem has progressed from clicks into intelligent and interactive points of commerce. Merchant level salespeople will continue to play an important role in this new environment as they help their merchant customers create secure, compliant, agile processing platforms. 
Dale S. Laszig, senior staff writer at The Green Sheet and founder and CEO at DSL Direct LLC, is a payments industry journalist and content strategist. Connect via email dale@dsldirectllc.com, LinkedIn www.linkedin.com/in/dalelaszig/ and Twitter https://twitter.com/DSLdirect.
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