When we look forward to 2021, it is no surprise that COVID-19 is the dominant factor. So far as the merchant payments world is concerned, the shape of the post-pandemic new normal transaction environment must be the key strategic consideration for stakeholders and I am desperately keen to hear the variety of informed opinion on this topic that I have come to expect at Merchant Payments Ecosystem every year. At Consult Hyperion we like to contribute to these conversations by providing a useful framework for discussion: our annual “Live 5”, our yearly set of suggestions for strategic focus. This year, we choose to look at the key issue of pandemic transformation and its impact of on the three key domains where our clients operate: Payment, Identity and Transit, together with (as is traditional!) a suggestion as to a technology that the POS world may not be thinking about but probably should be.
Pandemic Pressure and the Contact-Free Future
The trend to cashless-ness accelerated through the pandemic and has given a huge boost to contact-less payments across sectors and regions. Consumers now demand contact-less payments, and merchants have responded, advertising their acceptance. But contact-less was only the start: the pandemic has accelerated the trend toward contact-free commerce. We’ve seen alternative contact-free mechanisms (appear, with pubs and restaurants teaching us to scan QR codes to access menus, place orders, etc. Once we add the ability to integrate payments, we arrive in a truly different place where the physical and online worlds merge. We’ve talked many times before about shifting from check-out to check-in models of retailing and it seems that the pandemic is driving a great many organisations to make the transition: when retailers ask customers to check-in, so they know who the customers are, they can actually deliver much better, personalised services.
Integrated Transport and Access
I can remember a number of discussions about the disproportionate role of transit in bringing new transactions modes to the mainstream at past MPE events. 2021 is going to be about access to transportation, as the world escapes the grip of the pandemic, using any mode a person feels most comfortable with. This will facilitate integrated access to transportation; with public transit authorities looking to integrate with private offerings (such as micro-mobility services, bike and scooter share schemes and ride sharing). We’ve seen the rise of apps such as the Transit Citymapper app, and agencies will expose APIs to enable access to their transportation services through the mobile. In this push for access, it is important that operators ensure they provide contact-free access for all their riders, which means bringing pre-paid and perhaps even the first digital currency solutions into mass markets.
Instant Payment in Action
Instant payment technology allows for a whole set of interesting possibilities. In Europe, PSD2 with its API requirements for instant payments from account and account information access, has focused on creating an alternative to card payments and there was great discussion about this with respect to the European Payment Initiative, EPI, at the MPE Summer School and this opened up many questions in my mind. Do instant payments mean change at the retail level in 2021? At physical POS or online only? How will the acquirers and PSPs manage these transactions?
But perhaps that’s not the first big opportunity. Bill payments built on the Request to Pay infrastructures of the UK, and EU, could completely revolutionise the ability for consumers and businesses to manage the subscription and direct debit payments, upon which much commerce is based.
Beyond that, lots of other interesting things are happening. SWIFT is looking to extend services into transaction management while RTGS Global wants to revolutionise counterparty banking. TIPS should improve the real-time flow of funds in the Eurozone while initiatives like P27 in the Nordics will allow cross-border, real-time, cross-currency transactions. Once available, banks and fintechs can genuinely innovate on top of these services.
The pandemic has demonstrated, clearly, the importance of digital identity. As governments and businesses have been forced to provide their services remotely, digital identity has been a key enabler. But there have also been issues. The widely reported fraud that around government pay-outs provides a stark illustration of the lack of effective digital identity in many places.
That’s not to say that digital identity solutions don’t exist. Take mobile onboarding for example. There are dozens of companies offering solutions, but it can be difficult to gauge how good each one is. To get that assurance, we need rules and a way of showing that solutions follow those rules.
This topic of rule setting, or more broadly governance, is one that our customers are increasingly talking about and we think will be a major area of concern through the next year. If governance is about rule setting and enforcement, the question is who should set the rules? In the UK, the government is trying to lead the way with its new IAX framework expected early in 2021. The EU is redoubling its efforts to see pan-European digital identity in place to enable the new economy.
There may be a wild card here though: the pandemic push for vaccination credentials and test certificates opens up a new vector for digital identity into the retail environment in 2021. It’s time for stakeholders to take a serious look at the new business opportunities around digital identity.
Gazing further out, new technologies (well technically not so new), such as Ultra-Wideband (UWB), are becoming mainstream with their inclusion in Apple’s iPhone 11 Pro and the Samsung Galaxy Note. UWB facilitates very accurate location of devices at room scale, in a way that is far more reliable than that offered by Bluetooth. UWB will enhance the mobile face-to-face retail and P2P payments experience due to its accuracy in determining relative orientation. Imagine if instead of scanning a QR code or fumbling to type an email address, you simply point your device toward a retail terminal or a friend’s phone, tap on your phone and you’re done.
So there you have it. In 2021, the vanguard of embedded financial services will be built on instant payment infrastructure that will spill into the delivery of identity with robust governance. Consumers will experience a shift to in-app payments and contact-free environments. And as technology continues to evolve and become mainstream, micro-location will facilitate integrated access in transit, and across all domains. The Consult Hyperion team look forward to discussing all of these issues and more at MPE 2021, so e-see you there!
Hi David your books are thought provoking and your commentaries on the world of cryptocurrency and digital payments is insightful. I first entered the City in 1983 and have seen ( and been part of the profound changes that have taken place). I entered brave new world of cryptocurrencies in earnest 3 years ago when some investors took my mental musings and rants about the lack of usefulness of cryptocurrency seriously and put a large sum of money down and said ‘build it’. That’s what me and my team have done. The thesis was to tame the bitcoin volatility – ie hedge it. We now have done this and integrated into a unique trading and payments platform. Launching in the covid period we quickly were invited to demo to a few of the largest payment companies who were rather flattering about what they saw.. I wonder how your opinions of the market direction would change once you factored in that hedging of the coin, token or Cryptocurrency is now possible? I would love to hear from you. Regards Rikky