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!
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.
It’s that time of year again: where’s it’s traditional to take stock and look to the future. At Consult Hyperion, we do that through our ‘Live 5’ process; where we look at major trends in business, technology and consumer attitudes and project them onto our areas of business focus, with twists of our own. This is more than a marketing exercise. It informs our advisory services, but also sets our own strategy, for example by determining what technologies are investigated, and protypes built, by our Hyperlab unit.
For most of us 2020 isn’t going to be a year to linger fondly in the memory. It’s been a monumental slog in the face of grim news and little cheer but from a payments perspective we’ve seen an unsurprising surge in interest in all things payment related.
People have moved from cash to electronic payments – contactless transaction numbers have soared. People moved from face to face purchases to online. And, there’s been a ton of stress on payment systems as people have demanded refunds for holidays and flights they couldn’t take due to various travel restrictions. It’s been a year like never before.
We can expect this to be exacerbated over what will likely be an extended Black Friday and Christmas holiday shopping period. Online payments are expected to grow even though economies are in recession. For us in Europe it’s the last hurrah before PSD2 requirements on strong customer authentication come into force on January 1st. Merchants and payment companies will be well staffed on News Year Eve as they wait and see how the systems will hold up, and what sort of abandonment figures they’ll see as puzzled customers are presented with confusing authentication screens. We can probably expect a flood of concerned calls about phishing which are actually Strong Customer Authentication requests.
This is the third of three blogs about technologies to support contact-free use of public transport.
The radio again – I hear that the Transport Minister for England had just reported that there have been fewer than 400 fines for people failed to wear face covering on public transport. More than 115,000 travellers have been stopped and reminded that face coverings are mandatory, and 9,500 people prevented from travelling.
This is the second of three blogs about technologies to support contact-free use of public transport.
Public transport operators have been making great efforts to make public transport safe during the pandemic. TfL recently launched a new app that makes it easier for passengers to plan their travel and avoid routes where they might come close to large numbers of people. There are claims that the rate of uptake of contactless by passengers has increased significantly since the pandemic and the demand for contact-free transactions on public transport. Visa recently offered a graph relating to global public transport contactless transactions. However, it is not clear what the actual contactless usage is since they are hidden behind month-on-month percentage increases which look enormous when the previous months had fallen off the proverbial cliff.
Early on in the pandemic my colleagues at Consult Hyperion and I did a lot of research to explore how it might impact our customers and our customers’ customers, just as I am sure every other organisation in the payments sector did. We looked at a lot of speculative forecasts, we looked at research and analysis from quite a wide range of organisations in the financial sector and beyond, we spoke to a number of people in the industry and we took part in a fair few discussions and debates on the topic. As a result of this, we identified a number of strategic areas where stakeholders in the payment space should be developing or at least preparing their strategies and where they should be planning for some changes to take them through and beyond the COVID-19 crisis.
Who’d have thought that the humble barcode – reimagined in 3D – would have posed a genuine threat to the global behemoths that are the international card payments schemes? And, of all the times, why now? Well, as always, there’s no single answer. We’re seeing multiple trends coalescing to drive uptake of QR code initiated payments, but the announcement by PayPal that they’re rolling their solution out to all CVS stores is perhaps a critical moment:
PayPal and InComm on Thursday (July 30) unveiled a QR code payment system that will enable touchless checkouts by PayPal and Venmo users with their mobile phones at brick-and-mortar stores.
It’s not so much that it makes QR codes mainstream, it’s more that it validates the point that they’re a perfectly viable way of making in-store payments, and then tying it to a e-comm type payment method: now that’s replicable. Four things are coming together to drive the adoption of QR codes:
- Smartphones: The widespread availability of smartphones makes them a perfect solution for retail payments. If everyone has one then creating a pervasive alternative to card payments is possible.
- Connectivity: In fact it’s not absolutely necessary to always have mobile data connectivity to allow QR code based payments, but I helps managing the risk. And even where mobile data isn’t available a lot of mainstream retail chains are providing in store WiFi or Bluetooth capability.
- COVID-19: Suddenly contact-free payments are the way to go – and QR Code initiated payments are a guaranteed way of ensuring that payments can be made without touching merchant equipment.
- Integrated retail experiences – “omnichannel”: Merchants with a good omnichannel experience are having a better crisis because the ability to order and pay on one channel and fulfil on another is critical. Increasingly merchant POS estates have API based access to backend systems which can be used to access QR code authorisation or approval channels.
The pay-by-app model, we’ve been touting for years is actually, finally, coming to fruition. Lots of individual merchants – and probably every major supermarket chain in the world – has its own app that allows QR code based payments. Those apps allow a range of other functions to be integrated, including scanning, checkout, automated loyalty redemption and real-time customer data analytics. The ability to make the customer relationship sticky is attractive and with the average supermarket basket value increasing as customers shop bigger and less often ensuring that you’re the retail destination of choice is critical.
Behind this, however, is another change – and one that the PayPal deal with CVS lays bare. There is nothing that forces one of these QR code initiated payment apps to use payment cards as the means of transaction. Sure, they’ll be there as a backup but any API-based payment solution – and there are hundreds, if not thousands – can be integrated. As direct to account payment APIs, such as the PSD2 payment initiation API that’s mandated in Europe, become more widespread, it will be possible to go direct to the payment account in order to authorise payments.
This trend has other, major implications for other aspects of payments such as settlement and refunds but, as we can see from our own clients, a lot of thought and effort is going into resolving those issues. For retailers who can see lower cost of payments, reduced fraud, significant reductions in the cost of handling chargebacks and faster settlement this is a win-win-win-win situation.
As you might surmise, here at Consult Hyperion, we are heavily involved in all aspects of this change. From helping to develop and secure the apps, to advising on the business and governance models, through to designing and developing the solutions, and providing regulatory advice. We’re leaders in the field. If you’re interested come back to the future with us, QR codes are coming…