By Dale S. Laszig
In the multilayered payments sphere, four pillars have held true from early prototypes to present-day methodologies. Part 1 of this series, published in this magazine on Jan. 10, 2022, issue 22:01:01, addressed the first two pillars of digital commerce, security and intelligence. This article shares expert perspectives on the third and fourth pillars, agility and transparency, and their likely near-term impact on next-generation digital commerce.
The Electronic Transactions Association's 2022 Legislative and Regulatory Policy Priorities, comprising three documents published Jan. 7, calls upon U.S. and Canadian lawmakers to craft policies that support innovation as the industry strives to make payments safe, secure, and financially inclusive. The documents dovetail with pillars three and four and describe "innovative, dynamic, competitive and highly regulated" initiatives as follows:
Jeremy Nicholds, CEO at Judopay, expects mobile devices to become the dominant method of commerce in the post-pandemic world. "Our lives are undeniably becoming more digital, and mobile devices are fast becoming our personal remote controls," he said. "The ongoing pandemic is an acknowledged accelerant towards digital, and mobile commerce has been a major beneficiary."
Citing security, speed and ease of use as prerequisites for mobile commerce, Nicholds noted the last few years have seen significant changes in payments with e-wallets, account-to-account payments and digital currency gaining traction. We're likely to see even greater change going forward with CBDCs taking shape, hence the need to be agile to respond and anticipate market demands, he stated.
Adrian Talapan, CEO and co-founder at Fee Navigator, agreed agility is essential to every aspect of commerce, from individual transactions to service delivery to new product launches. "When your competitors can move faster than you, you lose," he said. "Today's technology and I-want-it-now demand impatience continue to accelerate all supply chains, sales and feedback loops."
Talapan added that native digital commerce places stress on an organization's ability to adapt and compete, and without the aid of real-time or near real-time insights, organizations will have difficulty competing with tech-enabled companies that continually align operational strategies and resources with their well-informed demand curves.
Achieving agility begins by trusting machines, Talapan noted. "While one would expect that technology is the rate-limiting step in delivering real-time analytics, we believe that humans are the real bottlenecks," he said. "Change is hard, and it's difficult for most people and organizations to operate at breakneck speed, especially when overwhelmed by the amount of information available."
The data gold rush has left humans awash in extraneous data, and instead of getting mired in minute data points, humans could delegate sorting and decisioning to AIs, Talapan stated, adding, Why not allow smart digital assistants to perform A/B testing, using automated, real-time analytics? These always-on AIs can continuously adjust product inventories in real time to meet projected demands while their human partners keep their fingers on the pulse, he added.
"Do you fully trust the machine to make the right decisions, especially if it's an AI neural net whose model, while performant, cannot be explained or modeled using traditional mathematics?" Talapan asked. "We believe organizations that strike the right balance between human control and AI-powered computer automation will ultimately win."
Roy Ng, CEO at Bond, predicted agile service providers will continue to take market share from traditional financial institutions in 2022. "Neobanks and modern fintech solutions have radically disrupted old models and paradigms and are providing long-overdue access to core banking services to underserved communities such as creators, LGBT, Black and Hispanic communities," he said.
Citing data from Morning Consult and Fair Isaac Corp., Ng noted that nearly 25 percent of the U.S. population is underbanked, 10 percent are unbanked, and 53 million do not qualify for affordable terms on auto or home loans. These citizens, he said, need fast, affordable access to financial services, especially now, following the pandemic's acceleration of income inequality.
Marco Margiotta, CEO and co-founder at Payfare, foresees real-time payments playing a larger role in the gig economy. "Real-time payments tools help to ensure that every worker in the gig economy can become an empowered entrepreneur with dignity and financial security," he said. "Bank accounts can also be costly for low-balance clients, leading them to turn to predatory check cashers and payday lenders to fill the gaps."
Gig workers face inconsistent demand for their services and shoulder high costs for vehicle fuel, maintenance and insurance, Margiotta stated, noting that they pay fees to get their earnings from third-party payment processors or use traditional bank accounts that have slow transfers. Having flexibility and control of their earnings would help their businesses grow, he added.
Ng envisions embedded finance proliferating this year beyond the boundaries of banks and big tech. "2022 is the year brands wake up to the power of their customers' financial data and start to introduce their first embedded financial products," he said. "Traditionally, banks and credit card companies have had unbridled access to their customers' spending habits and patterns, while a store manager may only know what their customers are purchasing at their own company."
Ng further noted that Apple Card provides rich insights into customer purchases, even non-Apple products and services, and this is why embedded finance may reach $7 trillion by 2030, as more companies embed financial services within core offerings.
Mark Gazit, CEO at ThetaRay, warned of escalating financial crimes in 2022, including money laundering and terrorist organization funding. "The ability to move money between countries is very important for terrorist funding and other criminal activities, but by shutting down cross-border transactions entirely, banks are also hurting innocent people in these regions," he said. "We need to find a middle ground."
AI-powered fraud prevention, detection and monitoring can improve transparency, Gazit stated. "Perpetrators use AI for wide-scale, automated attacks," he said. "We have an obligation to create even stronger AI-based systems to protect ourselves."
Brandon Spear, CEO at TreviPay, proposed that data personalization and omnichannel access will be key to B2B commerce in 2022. "Business buyers who require a variety of payment options, including net terms, are beginning to expect that their purchases be transacted and trackable with the ease and convenience of an Uber transaction," he said.
"B2B merchants that meet these digital expectations in the new normal may establish stickiness and loyalty with customers, and could enjoy cost savings, increased revenue potential and better cash flow."
Spear pointed out that organizations must make customer financial data, such as available store credit and open invoices, accessible in a variety of ways in virtual commerce, physical stores, online and on mobile apps. Adding data, such as purchase order numbers, to invoices and supporting integrations into procure-to-pay and enterprise resource planning platforms are also critical in helping digitize accounts receivable, he added.
Allen Kopelman, CEO and co-founder of Nationwide Payment Systems, expects electronic payments, payment portals and billing links in invoices will replace checks in the B2B sector in 2022. "Companies will embrace electronic payments for many reasons," he said. "First, to improve cash flow, second, to stop waiting to get paid, and third, to get paid 24-7."
Companies will see that paying a small fee to collect revenue earlier is healthier than waiting for a check to arrive in the mail, Kopelman stated, adding he expects to see more payment facilitators in 2022. "Payfacs enable independent software vendors to board customers and give them merchant accounts instantly," he said.
Dan DeMers, CEO and co-founder at Cinchy, believes "dataware" will deepen integrations in 2022. "It's long past time to make data integration irrelevant—and in the process, slash operating costs, eliminate new data silos, enable better collaboration, and make it easier for companies to deliver the digital solutions needed for modern operations," he said.
Dataware, which DeMers described as the successor to hardware and software, builds on the Canadian Zero-Copy Integration standard. The autonomous platform combines operational data fabric, automated data management, domain-centric data governance and no-code design, and Cinchy's dataware solution eliminates copy-based data integration and supports meaningful data ownership, he stated.
Eyal Sivan, head of open banking at Axway, expects open banking to scale in North America in 2022, as the United States and Canada balance market-driven efforts with regulatory oversight.
"Expect the coming year to see momentum build on this front, with government and industry finding a way to join hands in an effort to catch up to their peers in Europe, the UK and Australia, as well as to prevent being overtaken by Brazil, the Middle East and Africa," he said, noting that North American open banking will be more mature than today by the end of 2022.
Sivan further stated that open banking is evolving vertically into open finance and horizontally into open data, citing, for example, Australia's Consumer Data Right standard supports openness in banking and other verticals, including an open energy standard. Expect discussions in the coming year to lean into these ideas, he added.
Talapan expects to see more complex industry-specific fee structures in 2022. "Fee Navigator analyzes thousands of statements representing a very wide range of ISOs, pricing structures and specific terminology," he said. "While many [service providers] speak of transparency, we see fees added on top of interchange and dues and assessments; we see the same fee category ranging from $1.95 to $295 per month, as well as an ever-growing mountain of custom fees."
Intelligent AI platforms can capture all this variety, and Fee Navigator uses crowd intelligence and AI to help the user community maintain an accurate, up-to-date picture of what's happening in the industry, Talapan noted.
Ng hopes to see more transparency in buy now, pay later (BNPL) offers and predicted 2022 will be the year of BNPL reckoning fueled by a growing number of defaults. Credit scores for defaulting consumers will take a hit, putting added pressure on the underbanked and limiting credit and borrowing options such as obtaining a car loan or mortgage, he stated.
"The rise of buy now, default later will trigger fintech companies to start adopting better consumer guardrails on BNPL, like spending limits based on a more holistic view of a consumer's finances," Ng said. "We also expect to see brands start to offer more savings and investing features for their customers and communities so BNPL defaults are mitigated."
As payments evolve, core concepts of security, intelligence, agility and transparency become self-evident to stakeholders, noted Kyle McCann, director of business development at VizyPay. "Industry giants have established practices, and as companies move to full disclosure with partners, this forces new players to follow suit or be left out," he said. "Things that seem small, such as support wait times, easily understandable pricing and inviting reviews, have always been key factors in how we do business and measure success." 
Dale S. Laszig, senior staff writer at The Green Sheet and managing director at DSL Direct LLC, is a payments industry journalist and content strategist. Connect via email dale@dsldirectllc.com, LinkedIn www.linkedin.com/in/dalelaszig/www.linkedin.com/in/dalelaszig/ and Twitter @DSLdirect.
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