By Dale S. Laszig
For decades, the payments industry has modeled the way to digital transformation in merchant services. Mobile, digital and cloud-based innovations have created faster, simpler and more secure commerce methods. This series spotlights payments leaders who are continuing to innovate during the COVID-19 pandemic to not only mitigate its economic aftermath but also set the stage for realizing the full potential of digital commerce.
Part 1 explored best practices employed in response to the pandemic. Part 2 recounted the changing role of hardware in payments. This final installment delves into disruptive approaches to merchant acquiring, card issuance, software design and processing infrastructures.
In a keynote presentation at the August 2020, Mobile Payments Conference, Vaduvur Bharghavan, CEO at Ondot Systems, explained how technology companies have raised the bar for credit card issuers. "New tech is disrupting the payments business," he said. "Since Apple launched Apple Card, a steady drumbeat of tech providers, like Google and Samsung, Venmo and Square, have come up with different types of solutions."
In addition to giving consumers and card issuers more ways to engage, new solutions have democratized card issuing and challenged its very definition, Bharghavan noted. Ondot's recent Harris Poll found even before the COVID-19 outbreak, three out of 10 Americans would have considered leaving their banks for a technology company that provided a better card experience.
"This was the first time we've seen the card experience as a primary driver, with two out of three Americans 55 or younger considering getting a payment card from a tech company," Bharghavan said. "Among younger Americans, one of the most interesting data points in our Harris poll is that consumers are even willing to share data in order to get card management services."
Eugene DeSilva, general manager of PayVus at Aliaswire, agreed that payment card issuing is no longer the exclusive province of card brands and financial institutions. Aliaswire combined card issuing with merchant acquiring in a patented solution called PayVus, a radical departure from the traditional merchant onboarding process, he stated. "Imagine you're a small business owner and you sign up for merchant acquiring to accept cards and at the same time you have the ability to get a business credit card," DeSilva said. "Our PayVus platform can approve new customers in as little as four minutes, providing business owners with the same kind of automation and instant gratification they get as consumers."
The PayVus platform provides a traditional line of credit and split-settles a portion of daily merchant processing to the PayVus card, DeSilva noted. This combination boosts a merchant's purchasing power and pays residuals to channel partners based on the merchant's card usage. ISOs and acquirers can use these residuals to offset and reduce merchant processing fees, which gives them the ability to sell at or below interchange rates, he added.
"Most small businesses fail because they can't manage the cash flow," DeSilva said. "Our channel partners provide them a tool that helps them manage cash flow in by accepting a card and manage cash flow out by using a card."
DeSilva believes instant issuance of physical cards, virtual cards and other payment methods, as well as instant payment acceptance, are table stakes in the current payments sphere. "What's different about the industry today is that we have begun looking at payments holistically," he said. "Combining issuing and acquiring enables people to accept payments on one end and use payments on the other end."
Bharghavan also believes that new tech has enhanced the user experience, and community banks and credit unions must adapt to retain and attract tech-savvy customers. An Ondot ebook, The Ultimate Guide to Card Modernization, published in September 2020, summarized the five requirements of card modernization:
"Customer stickiness and customer choice are imperatives for providing digital-first banking," Bharghavan said. "Engage users in moments that matter, whether they are checking their credit limit, managing spend or reporting a lost or stolen card. When cardholders lose a card or receive a new one, they should be able to instantly transfer their preferences to the new card."
A 2020 Mobile Payments Conference panel on rewriting the payments playbook and moderated by Dale Laszig, senior staff writer at The Green Sheet, explored new digital commerce models. Panelists included Eugene DeSilva, general manager of PayVus at Aliaswire; Robert Downton, vice president, sales, North America at Advanced Mobile Payment Inc.; and Royce Hall, director of business development at Level 12.
Hall pointed out that people want online and in-app ordering to be easy, smooth and seamless. "They expect to open a bank account or obtain a mortgage from the comfort of their homes, without ever seeing a representative," he said. "At Level 12, we build software that does that, the integrations and the automations that make those things possible."
Each time a new piece of software is added to an existing solution, it enriches the payments ecosystem, and when fintechs integrate micro functionalities into bigger solutions, they create a smoother, faster, more secure payments infrastructure, Hall stated. As the industry changes, so does the user experience: people become accustomed to instant commerce, powered by real-time reporting, real-time data and real-time peer-to-peer payments, he added.
Hall further noted that security is critical in the digital-first world. When you're dealing with billions of dollars, you have to make transactions secure, he said, adding that Level 12 is working on projects such as secure remote commerce, to facilitate faster, more secure digital transactions.
AMP's Downton agreed that security is a big issue, as is certifying new products, which can be a long and tedious process for manufacturers. "The ability to use common kernels and platforms helps us get devices to market faster," he said. "That's clearly our focus right now, being nimble in getting things to market as technology keeps changing."
The need for interoperability is reflected by efforts of EMVCo, the PCI Security Standards Council and nexo. These global bodies continuously evolve and update their unified approaches to payment security, transaction processing and software design.
Emmanuel Haydont is co-founder and CEO at Amadis, a payment software and consulting company that integrated nexo standards into its Arkos software platform. Amadis deployed the open source, ISO20022-based framework in Europe and recently launched in North America. "We came from this industry and saw the need for normalization and standardization," Haydont said. "Our mission is to restructure the payments industry."
Haydont noted that Arkos software works independently of processors and device platforms, unlike integrated software that is tightly linked to a device. Arkos software uses nexo standards, which enable any form factor to participate in payment acceptance. This combined interoperable interface and protocol breeds innovation, accelerates certifications, reduces costs and gets products to market faster across the globe, he added.
As commerce steadily migrates from point of sale to points of interaction, industry game-changers will continue to challenge traditional assumptions about hardware, software and acquiring itself. And merchants, consumers and service providers will continue to find new ways to transact in the digital world, where a spirit of collaboration is helping us feel more at home. 
Dale S. Laszig, senior staff writer at The Green Sheet and managing director at DSL Direct LLC, is a payments industry journalist and content development specialist. She can be reached at dale@dsldirectllc.com and on Twitter at @DSLdirect.
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