Earlier this year we were delighted to be part of the Consult Hyperion webinar on Request to Pay. A common thread in post-event conversations that followed was an interest in the parallel developments of the UK and European flavours of Request to Pay and how they might work together. With the launch of the European version on June 15th, we thought it an ideal time to signpost the bigger differences.
The Bank of England and the UK Treasury have announced a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential British CBDC. But how could a digital Pound actually work? As it happens, this is something that Consult Hyperion knows rather a lot about. Apart from our work on the first British central bank digital currency (Mondex) back in the 1990s, our work on the first population-scale mobile money scheme (M-PESA) in the 2000s and our work on the most transformational contactless payment roll-out (Transport for London) in the 2010s, our practical experience across implementation platforms means that we understand the architectural options better than anyone.
For the third year running, my colleague Gary Munro facilitated a thought-provoking debate around the use of mobile phones and tablets as contactless payment terminals during last week’s virtual Merchant Payments Ecosystem (MPE) conference. For the last three years, Gary and his panellists have tracked the progress of the SoftPOS technology and standards. The three key messages that I took away from this year’s conversation were that:
This weekend marks an anniversary. Although Consult Hyperion’s romance with smart cards had started many years before that, it will be fifteen years on Sunday that chip and PIN went live in the UK. I remember St. Valentine’s Day 2006 as if it was yesterday!
A couple of weeks ago I wrote a piece for our friends at Smartex; ‘Brexit and the UK Finance’s proposed £100 contactless limit’. Perhaps a title more worthy of grabbing readers would be ‘Will Brexit make stealing bank cards attractive again?’
The pandemic has accelerated consumer behaviour that has been teetering for the last decade. The desire for contact-free (and therefore contactless) transactions, has meant a significant trend in consumers becoming comfortable with tapping their cards and perhaps more interestingly, their phones (devices/wearables). We’ve seen merchants switch from hand scribbled ‘cash only’ signs, to ‘please use cards (devices etc) wherever possible’. Some stores have completely rejected cash altogether.
At this time of year my colleague, Dave Birch looks forward, his annual “Live Five” started as a bit of fun, but over the years has become a thought provoking look at what might impact our industry in the coming year, if you haven’t read it yet, please follow this link.
As we come to the holiday season, we know that we will be bombarded with reviews of 2020 on television, in our newspapers and online. A conversation with some colleagues about how long they had worked in the payments industry, prompted my own review when I realised that on the 8th December, I clocked up 40 years in the industry, how technology has changed our lives in that time.
I recently had the pleasure of “attending” the LendIt Fintech – Europe 2020 virtual event. Now, much of the content covered banking services for Small and Medium Enterprises (SMEs), an area that personally I’m not particularly familiar with, but one that is gaining more focus in the news of late. One thing that struck me was the potential disruption of traditional business banking brought about by open banking.
As Consult Hyperion, and as many other analysts, predicted, Covid-19 has driven the adoption and use of contact-free technology at the point of service. A recent survey funded by the National Retail Foundation, found that no-touch payments have increased for 69 percent of US retailers surveyed, since January 2020. In May, Mastercard reported that 78% of all their transactions across Europe were contactless.
Fraudsters are always looking for ways to take advantage of potential weaknesses or even inexperience in new payment devices. A recent news story promoted a man in the middle attack in which two phones are used to transfer and manipulate the transaction message between a stolen contactless card and the point of sale terminal.
The Use of Contact-free is Accelerating
At Consult Hyperion, we have already seen the pandemic accelerate the adoption of contact-free payments in the face to face environment as customers have become wary of catching COVID by touching shared devices, such as self-service terminals and PIN pads. The use of personal devices for payments is hardly new but the attraction of an in-app/in-store version of mobile payments, whereby the consumer uses an app on their own device to interact with the retailer or service provider and pay for services, has just increased dramatically. Solutions for parking (RingGo) and for restaurants (like the Wahaca app, powered by Judopay) were already demonstrating the benefits of such an approach for customers and businesses before COVID struck.
The ongoing COVID-19 crisis has been ruthlessly exposing fragile business models and weak balance sheets across a whole range of industries but perhaps never more so than in the travel business. In fairness, no one could have anticipated a global, government dictated total shutdown and no business models could ever be flexible enough to support such an improbable scenario. Still, it’s become clear that many travel industry companies are effectively broke and that the payments model they rely on is broken. Going forward we need a better and more sustainable approach to payments in the industry.
Most travel industry payments rely on payments cards so it’s worth starting by recapping on how most card payment models work. When a cardholder makes a payment to a merchant – either in store or, increasingly, on-line, this is routed to the merchant’s card acquirer. The acquirer has a direct relationship with the merchant in the same way that a card issuer has a direct relationship with cardholders and the acquirer will route the payment request to the relevant issuer – usually by sending the request to a payment scheme who uses the card number to identify the correct issuer. If the issuer approves the transaction then the response is routed back through the same path and the purchase completed. This is no different from any other card payment, although there are hidden complexities where the merchant is an online travel agent sourcing flights, hotels, etc from multiple underlying vendors. However, that’s a detail.